** This article was written at the request of, and was subsequently published in, the UK journal: Trusts and Estates Law & Tax Journal, September 2012, volume 139.
The recent Australian case of Grimaldi v Chameleon Mining NL (No 2) was essentially a case of those in a fiduciary position failing comprehensively to uphold the standards required of them by their duties and position, diverting funds and shares to benefit themselves/their own companies, and taking secret commissions, according to the Court’s findings.
The significance of this case is for its authoritative pronouncement by the Full Federal Court of Australia, including renowned jurist Justice Paul Finn, on a range of important issues of equity law in Australia. Those issues are canvassed below. First, for an overview of the facts, as found by the Court.
Chameleon had sued Mr Grimaldi, as well as several of its appointed directors including a Mr Barnes, for breach of their fiduciary duties to the company and alleged contraventions of the directors’ duties provisions of the Australian companies legislation (notably ss 181 and 182 of the Corporations Act 2001 (Cth)). Chameleon claimed Mr Grimaldi was a de facto director of Chameleon or an “officer” of the company, and hence owed duties to it. Mr Grimaldi’s own company Murchison Metals Ltd also benefitted from his dealings. Murchison was sued by Chameleon under both limbs of Barnes v Addy, as having knowingly assisted Mr Grimaldi in his breaches of duty, and knowingly received benefits thereby. A company then named Winterfall Pty Ltd (later Crosslands Resources Ltd) was also sued under the first Barnes v Addy limb for knowing receipt. Two key transactions were at the centre of the controversy.
(i) The Cadetta Transaction, including the secret commission – 5 million Chameleon shares diverted to Murchison
The first, the “Cadetta Transaction”, involved the acquisition by Chameleon negotiated for it by Mr Barnes and Mr Grimaldi of some gold mining tenements, in consideration for an issue by Chameleon of 13 million of its shares. After the sale, by way of what was held to have been a “secret” commission to Mr Grimaldi, the vendor of the tenements transferred 5 million of the Chameleon shares it had received as the purchase price for the tenements to Mr Grimaldi’s company Murchison. Murchison provided no consideration for the issue of those shares. Immediately after the transfer of shares to Murchison, Mr Grimaldi had Murchison sell them and pay the proceeds of that sale to the company Winterfall.
(ii) The Transactions to Assist Winterfall buy the Iron Jack Tenements, including the misappropriation of Chameleon’s funds, and the “spotters fee” for Grimaldi and Barnes for introducing Murchison to Winterfall
The second transaction was really a series of dealings. The company Winterfall had contracted to buy the Iron Jack Tenements, but it ran out of money to pay the second instalment of the purchase price. Mr Barnes and Mr Grimaldi suggested Murchison acquire an interest in the project. Murchison and Winterfall signed Heads of Agreement under which Murchison would pay Winterfall $350,000 to help Winterfall pay the Iron Jack Vendors, plus Murchison would later effect a “reverse takeover” of Winterfall. Mr Grimaldi and Mr Barnes also negotiated a “spotter’s fee” for themselves for introducing Murchison to Winterfall, in the form of 10 million shares in Winterfall (which they later exchanged for 10 million shares and 12 million options in Murchison).
Thus Murchison needed $350,000 by a set deadline, but Murchison too was short of sufficient liquid funds. Mr Grimaldi turned to Chameleon for cash. Mr Grimaldi urged Chameleon to make a share placement in June/July 2004 to raise capital, ostensibly for exploration of a gold mine. At this time Chameleon itself had little cash, however nearly half of the capital raised – $152,750 – was provided in two cheques drawn by Mr Barnes and paid to the Iron Jack Vendors. It was found that the principal Winterfall director Mr Zuks knew that 40% of Murchison’s payment obligation was made with these cheques from Chameleon. This was held to be a misappropriation of Chameleon’s funds from the capital raising. At least some of the rest was paid by Murchison to Winterfall, using funds it had raised from the above-mentioned sale of its shares in Chameleon. In the end, Winterfall completed its purchase of the Iron Jack Tenements and Murchison completed its reverse takeover of Winterfall.
Upon reading the judgment, one can see how Mr Barnes and Mr Grimaldi were working hard to “do deals” and find pragmatic, sometimes creative means to achieve the commercial outcomes they had in sight. However, put in simple terms, the Court found that as a minimum they went too far in disregarding which corporate entity was paying, and which corporate entity was benefitting. They lost sight of their separate duties to the individual companies including to act in that company’s best interests, and the interests of the shareholders of that company. Going further than that, the Court made a positive finding of dishonesty on their parts. They also had regard to their own self-interest and what benefit or “cut” they could take themselves for achieving the deals, without disclosure, contrary to law. The findings show that Mr Barnes and Mr Grimaldi did very well out of the deals. Chameleon, however, did not.
The judgment is very long and complex, and addresses many legal issues. I will now discuss two of the main issues of Australian equity law that the Full Federal Court pronounced upon – (1) directors’ fiduciary duties, including the Australian position on secret commissions and bribes, and (2) third party liability, including both limbs of Barnes v Addy. I will also briefly address the issue of equitable relief. I will leave to one side the corporations law and numerous other issues, including the question of what qualifies one as a “de facto director” in Australia. (To read further about the latter, see my paper at http://www.carrieromesievers.wordpress.com/2012/03/27/de-facto-directors-and-officers-grimaldi-v-chameleon-mining-nl/)
1. Directors’ Fiduciary Duties
(i) Conflict of Interest and Misuse of Position Duties
As the Full Federal Court observed, broadly, a person is in a fiduciary position vis a vis another, when he or she has undertaken to perform a function or assume a responsibility to that other, as would reasonably entitle the other person to expect that the fiduciary will act in that other’s interest to the exclusion of the fiduciary’s own interest or that of a third party. Company directors are an obvious example.
The two key duties of the obligation of loyalty imposed upon a fiduciary are that of conflict of interest, and misuse of position. Both were brought into play in this case. The two overlap. As the Full Federal Court observed, the agent who successfully solicits or extracts a secret commission will characteristically transgress both the conflict of interest and the misuse of position proscriptions.
In relation to conflict of interest, the notion is that a fiduciary ought be precluded from being swayed by considerations of personal interest. In practice, it means that any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty – or even a significant possibility of such a conflict – is appropriated from the fiduciary to the benefit of the person to whom the duty was owed. 
In relation to misuse of position, the notion is to preclude the fiduciary from actually misusing her position for her personal advantage. In practice, the fiduciary is required to account for any benefit or gain obtained or received by reason or by use of her fiduciary position or of opportunity or knowledge resulting from it.
(ii) Secret Commissions and Bribes – Is Lister v Stubbs “dead” in Australia?
The bribes/secret commissions rules are an accepted sub-set of the general principles relating to conflict of duty and interest and misuse of a fiduciary position. Secret commissions are commonly paid by way of gift. However they may also be seen to have been earned by the fiduciary for services rendered to the payer, notwithstanding that the fiduciary is acting in the matter at the same time for her or his principal. Put simply, “[an] agent must not take remuneration from the other side without both disclosure to and consent of his principal”.
In a lengthy discussion, all of which would appear to be mere obiter dicta, the Full Federal Court concluded forcefully that Lister v Stubbs should not be followed in Australia. In other words, a secret commission or bribe received by a fiduciary from a third party ought be treated as impressed with a trust in favour of the principal/beneficiary.
In 1890, the UK decision of Lister v Stubbs carved money bribes and secret commissions out of the usual consequences where a fiduciary receives a benefit in breach of fiduciary duty, of a Keech v Sandford constructive trust (see below). Lindley LJ held in that case that the agent could not keep the money and was liable to account in equity for the bribe received from the moment of receipt. However this liability to account was as a debtor in equity, rather than as a constructive trustee. This meant that the principal could not claim any proprietary interest in the bribe and could not trace into investments made using it. To allow otherwise, said Lindley LJ, would involve “confounding ownership with obligation”.
The Full Court doubted the soundness of the Lister v Stubbs line of authorities, and noted it has been controversial. It was recently reaffirmed in UK in 2011 in Sinclair Investments. However it is not followed in Singapore. The Privy Council on appeal from New Zealand in 1993 in Attorney-General for Hong Kong v Reid disapproved Lister, and held that a bribe and the property from time to time representing the bribe are held on a constructive trust for the person injured.
Their Honours concluded that despite the UK’s adherence to Lister v Stubbs, the weight of Australian High Court decision and judicial opinion in the century since it was decided “preordain our rejection of it”. Australian law, in accepting a proprietary remedy for bribes and secret commissions matches New Zealand law (Reid), Singapore (Sumitomo Bank), US jurisdictions (Carter) and Canada. However, the Court observed that Australian law departs from the law as stated in Reid in one important respect: Reid has the constructive trust arising the moment the bribe is received. In Australia, the constructive trust in this setting is a discretionary remedy, and may for instance not arise until the time of court order.
(iii) Liability to Account for Breach of Fiduciary Duty
A fiduciary’s liability to account to the beneficiary for breach of either of the above duties is a personal remedy. The basic rule is that, like a trustee, she must restore to the beneficiary either the assets which have been lost by reason of the breach, or give compensation for such loss. Traditionally, Courts of Equity did not award damages but, acting in personam, ordered the defaulting trustee (or fiduciary) to restore the assets. If specific restitution of the trust property was not possible, then the liability of the trustee (or fiduciary) was to pay sufficient compensation to the beneficiary to put it back to what it would have been had the breach not been committed.
Thus a beneficiary’s claim against a trustee or fiduciary for breach is a personal claim. It does not entitle him to priority over the fiduciary’s general creditors unless he can trace the lost trust property into its product and establish a proprietary interest in the proceeds. That point is expanded upon below.
This liability to account for benefit or profit can be effected by a variety of forms of relief, including –
(1) Constructive Trust – At the beneficiary’s election and subject to considerations of “appropriateness”, the fiduciary may be ordered to hold on constructive trust any property or benefit derived in breach of fiduciary duty to the extent that property or benefit remains extant or can be traced in the fiduciary’s hands. This species of liability is conventionally regarded as deriving from the decision in the 1726 English case of Keech v Sandford. The constructive trust issue was of some importance in the Grimaldi appeal;
(2) Equitable compensation – If the property or benefit is lost and untraceable, or if the beneficiary prefers, a defaulting fiduciary will be liable to pay equitable compensation to a beneficiary for the loss inflicted upon it, the object being to restore the beneficiary to the position in which he or she would have been had there been no breach. Compound interest is ordinarily applied to an award of equitable compensation, at either “the trustee’s” or the “mercantile” rate, with or without periodic rests;
(3) Account of profits – The wrongdoing fiduciary can be held liable in an in personam claim to account for profits he or she derived which are attributable to the breach of duty. The complexities and limitations of this form of account arose acutely in the Murchison and Winterfall appeals.
In relation to the grant of equitable relief generally, the Full Federal Court spoke at length about the remedial nature of equitable relief in Australia, and how it is fashioned to fit the nature of the case and the particular facts, to do “what is practically just”. In many cases, their Honours suggested, the remedy that is most appropriate will self-select absent unusual circumstances, and they discussed the Australian remedial constructive trust, as distinct from cases where the facts give rise to an “institutional” constructive trust.
They observed that in fiduciary cases in particular, the relief given often needs to be more finely calibrated, with the consequence that relief in the nature of a constructive trust can be expected to be given more guardedly, to avoid essentially “over-compensating” a plaintiff.
2. Third Party Liability in Australia – Barnes v Addy Liabilities for Knowing Receipt and Knowing Assistance
In 1874 Lord Selborne made his now famous remark in Barnes v Addy as to the liability of third parties for the breaches of duty of others in two types of cases. What he actually said was this –
“[S]trangers are not to be made constructive trustees…unless [they] receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees.”
The Court observed that the extent of discord both within and between common law jurisdictions as to what this means is “marked to the point of being Babel-like.” Their Honours noted that it is long-recognised that Barnes v Addy liabilities expose the third party to personal, to in personam, liabilities.
Liability for both knowing receipt and knowing assistance turns on what the third party knew or had reason to know of the circumstances constituting the breach of trust/fiduciary duty (recipient liability) or the “dishonest and fraudulent design” of the wrongdoer (assistance liability). The extent of knowledge required to trigger liability has also generated a great deal of controversy, however the position in Australia, at least, appears to have become clearer.
(i) Knowing Assistance – the “Second Limb”
The position in relation to what will trigger knowing assistance liability in Australia has been more or less settled since the 2007 High Court decision in Farah Constructions Pty Ltd v Say-Dee Pty Ltd. There must be a “dishonest and fraudulent design” on the part of the principal wrongdoer. This can include not only breaches of trust but also breaches of fiduciary duty, so long as it is dishonest and fraudulent. In terms of the level of knowledge/notice on the part of the third party required to trigger knowing assistance liability, the High Court in Farah has indicated beyond question that “knowledge/notice” falling within the first 4 Baden categories, but not the 5th, represent Australian law. (See below as to these categories.)
(ii) Knowing Receipt – the “First Limb”
The question of when knowing recipient liability will arise has not been easy to answer. This is yet another area where there has been much controversy and inconsistent judgments across the Commonwealth, but where the position appears to be becoming more settled in Australia.
In some cases, courts have analysed recipient liability essentially in property law terms and as such, as being concerned either with rights of priority to property, or else with unjust enrichment/an obligation of restitution, arising from the circumstances of receipt of property. Their Honours observed that the latter explanation of recipient liability may have some sway in certain jurisdictions, notably Canada, possibly New Zealand.
However their Honours observe that courts have still for the most part shown little appetite in receipt cases – and appropriately so, according to their Honours – for strict liability coupled with a change of position defence. Their Honours conclude that the liability itself would seem to remain “fault” based, the level of fault turning on the particular level of knowledge of the breach of trust/breach of fiduciary duty required. (As to which, see below.)
(iii) The Level of Knowledge Required to Trigger Knowing Receipt or Knowing Assistance Liability – the Baden Categories
Their Honours bemoaned the excessive use of categories on this issue, and how it “tends to invite formulae to solve problems”. However they set out the 5 so-called “Baden categories” of knowledge and notice, put forward by Peter Gibson J in 1993 in Baden v Societe Generale pour Favouriser le Developpment du Commerce et de l’Industrie en France SA, being –
(i) “Actual” knowledge,
(ii) The willful shutting of eyes to the obvious,
(iii) Willfully and recklessly failing to make such inquiries as an honest and reasonable man would make,
(iv) Knowledge of circumstances which would indicate the facts to an honest and reasonable man; and
(v) Knowledge of circumstances which would put an honest reasonable man on inquiry (that is, constructive notice as traditionally understood).
The Baden categories have been controversial over the years, but were considered by the High Court of Australia in 2007 in Farah v Say-Dee as assisting analysis with regards to the second limb of Barnes v Addy (knowing assistance).
For knowing receipt, the position as to knowledge/notice is more complex. Their Honours acknowledged that the orthodox view in Australia had been that there was a different level of knowledge/notice required between the two liabilities of knowing receipt and knowing assistance, with constructive notice (so including even category (v)) sufficing to trigger knowing receipt liability.
However, the Full Federal Court said that the weight of authority in Australia over the past 20 years now appears to draw no distinction between the two types of liability in this respect. They endorsed this position; that the knowledge/notice required should be the same for both limbs. Thus this judgment stands as authority for the proposition that for the purposes of both knowing assistance and knowing receipt liability, knowledge/notice falling within the first 4 categories, but not the 5th, represents Australian law. Their Honours noted that both impose a personal liability to account. That liability in both cases, they say, arises as a matter of conscience, not of property.
The Full Federal Court concluded that the trial judge got it right in finding that knowledge falling within category (iv) was sufficient to impose liability for knowing receipt upon both Murchison and Winterfall.
(iv) Brief Comments on the Liability to Account for Knowing Receipt
Interesting questions arise as to how the liability to account is to be effected, where it is essentially “shared” between a wrongdoing fiduciary plus one or more third party participants in the wrongdoing or recipients of the benefit. In Australia, unless the third party is the fiduciary’s corporate alter ego, the Court observed that the fiduciary and the third party will ordinarily be only severally liable for the profits each makes in consequence of the breach of duty or trust in which it participated/was a recipient. Each is not responsible for the other’s profits.
As a practical matter, a company’s personal remedies of an account of profits or compensation in equity are the remedies most commonly given in misuse of corporate property cases, as the recipient frequently no longer holds traceable proceeds of the property received. Here, that is what was ordered with respect to Winterfall and Murchison regarding the misappropriated funds, rather than the imposition of a constructive trust, as this was seen as most appropriate in all the circumstances of the case, one of which was the small proportion such a small amount of funds ($152,750) contributed to the enormous costs of both acquisition and development of an asset such as a high-revenue iron ore mining project.
(v) Property Law Claim vs Knowing Receipt Claim
It is important to note certain brief but significant remarks made by the Court in discussing Chameleon’s claim to a proportionate interest in the Winterfall shares acquired by Murchison in the reverse takeover, based on the misappropriated cheques.
Their Honours indicated that in Australia, the question of whether a claimant has a subsisting equitable proprietary interest in trust property in the hands of a third party, or its traceable product, is a matter of orthodox property law and the rules of tracing and following, to establish the locus of a claimant’s own property rights. Their Honours quoted from Lord Browne-Wilkinson in Foskett v McKeown as to the rules establishing equitable proprietary interests being part of property law, and that simply because they are equitable, it is a fundamental error to think they are in some way discretionary. It is a question of “hard-nosed property rights”.
Their Honours accepted that claiming a subsisting equitable proprietary interest involves recovering what is or was one’s own property in the hands of a third party, and asserted this is a separate claim to that brought against a knowing recipient, where a claimant seeks to ascribe personal liability to a third party to account for benefits or profits improperly acquired and, through the medium of a constructive trust restore the trust assets, or else obtain compensation for their loss. They say the two are “separate and distinct liability[ies]”. Earlier in the judgment, they noted that the need to distinguish a claim to priority in property in the hands of a third party on the one hand, from a Barnes v Addy claim on the other was “rightly emphasized” by Megarry VC in Re Montagu’s Settlement Trusts when he said: “The former is concerned with the question whether a person takes property subject to or free from some equity. The latter is concerned with whether or not a person is to have imposed upon him the personal burdens and obligations of [constructive] trusteeship.”
As noted above, the proper doctrinal analysis to be ascribed to knowing receipt liability, and the extent of the field it covers, has been a highly contentious issue amongst the judiciary and academia. If the position as explained by the Full Federal Court reflects the current position in Australia, it would appear to be a point of divergence from the line of earlier English and Canadian authorities which had suggested that a Barnes v Addy knowing receipt claim is precisely the former – a claim concerned with rights of priority to property (as to which, see the discussion above). It also means that subject to the particular facts of a case of misdirected corporate funds or property received by a third party, a claimant in Australia may be well-advised to plead an orthodox property law claim separately from a claim to relief based upon the knowing receipt limb of Barnes v Addy. Although as the Court noted – with disapproval – as Australian law now stands, if a director acting within his or her authority disposes of corporate property in breach of fiduciary duty or in an abuse of power, the company will not be able to bring a proprietary claim against the recipient (as distinct from a personal one) unless and until the transaction itself has been avoided.
Conclusion – The Result
In the end, the Court agreed with the judge at first instance that Mr Grimaldi, although not an appointed board member, clearly owed Chameleon fiduciary duties in acting on behalf of Chameleon, and breached them. The Full Court agreed with the trial judge’s finding that Mr Grimaldi (and Barnes) had acted dishonestly in the conduct described. He was held liable in respect of (a) the secret commission of 5 million Chameleon shares he obtained for his company Murchison as part of the Cadetta Transaction; (b) the misappropriation of Chameleon’s funds (the two cheques) to help pay the Iron Jack Vendors for Murchison and Winterfall; and (c) the “spotters fee” he negotiated to receive as part of the Murchison-Winterfall deal following successful acquisition of the Iron Jack tenements.
Mr Grimaldi’s appeal to the Full Federal Court was wholly unsuccessful, and accordingly the relief ordered by the trial judge Jacobson J, stood: Mr Grimaldi was (a) held liable to account to Chameleon for the benefits received from his secret commission of 5 million Chameleon shares and, at Chameleon’s election, liable to make equitable compensation for the receipt of that commission; (b) held liable to account for the profits obtained by him through investment of the misappropriated funds, plus at Chameleon’s election, he was liable for equitable compensationfor the diverted funds with compound interest from 28 July 2004; and (c) held liable to account in specie for such Murchison shares as he held, or continued to have under his control for his own benefit. He was also liable to account for the value of or profits derived from the balance of the 10 million Murchison shares and options (whether retained by a nominee or sold).
Murchison was held liable under both the knowing receipt and knowing assistance limbs of Barnes v Addy, with respect to (a) the secret commission (5 million Chameleon shares) and (b) the misappropriated funds. Plus at Chameleon’s election, Murchison like Mr Grimaldi was liable for equitable compensationfor the loss of Chameleon’s misdirected funds with interest from 28 July 2004 to the date of judgment at mercantile rates, compounded on monthly rests. Murchison successfully resisted Chameleon’s appeal as to whether it was also liable with respect to (c) the Winterfall shares – the Full Court held that Murchison was not.
Winterfall was held liable under the knowing receipt limb, with respect to (b) Chameleon’s misappropriated funds. Chameleon claimed it was entitled to the imposition of a constructive trust on the cheques Winterfall received (to Murchison’s benefit) and to trace their proceeds into the tenements. The Court found that Chameleon was not entitled to it as a matter of property law, and declined to order it as relief for Winterfall’s established Barnes v Addy knowing recipient liability, on the grounds that it was inappropriate in all the circumstances (see above). However, Winterfall did improperly benefit from that receipt in its acquisition of the tenements. At first instance both Murchison and Winterfall were ordered to account for profits – the income received by them as a consequence of the investment of Chameleon’s funds in the Iron Jack Project from July 2004 to date, as a personal remedy. A referee was to be appointed to carry out the taking of accounts.
The Full Court set aside the accounts ordered by the trial judge against both Murchison and Winterfall, on the bases that that ordered against Winterfall was misconceived, and that Murchison was not to be accountable for benefit derived by Winterfall. Also, the Full Court disagreed with the trial judge on the issue of future income stream, holding that Chameleon was entitled to relief as to the expected future earnings which would be the product of the income stream (Murchison) or the tenements (Winterfall). Their Honours indicated they would remit the issue of how the account of profits was to be effected to the court at first instance for further consideration in light of their Honours’ reasons.
In the last paragraph of the judgment, their Honours directed Chameleon to prepare and file draft minutes of order to give effect to their reasons. However, their Honours then added on a further sentence, noting that consent orders had been provided to the Court when judgment was to be pronounced, so that in lieu of the above direction, they would make those consent orders. It would appear that Chameleon, Murchison and Winterfall reached a settlement on the cusp of receiving judgment. In any event, accordingly, the Court ordered that in the proceeding as between Chameleon, Murchison and Winterfall, the parties had leave to discontinue their appeals without liability as to costs.
On 19 March 2012 Mr Grimaldi lodged an application for special leave to appeal to the High Court of Australia. It is expected that that application will be heard in about the middle of the year and if special leave is granted, the appeal proper will probably be heard later this year. As only Mr Grimaldi has sought leave to appeal, the Full Federal Court’s judgment on such issues as third party liability and accounts of profits, as well as the range of subsidiary issues considered, will not be subject to re-consideration by the High Court on the appeal. However if special leave is granted, it may be anticipated that the High Court may be asked to consider issues such as de facto directors and breach of duty, equitable remedies (at least with regards to the primary wrongdoer) and, if they take the view that the “spotters fee” is properly seen as a secret commission, perhaps even Lister v Stubbs and the position in Australia on secret commissions/bribes.
Barrister at Law
27 May 2012
**Update: The High Court later denied Mr Grimaldi special leave to appeal this decision on 17 August 2012. The key grounds upon which special leave was refused are summarised here.
 Grimaldi v Chameleon Mining NL (No 2)  FCAFC 6 (“Grimaldi”).
 In its unanimous judgment.
 Mr Barnes compromised the claim against him shortly before closing addresses at first instance, hence the appeal judgment concerned only Mr Grimaldi. (See [13-14] of the first instance decision Chameleon Mining NL v Murchison Metals Ltd  FCA 1129 (“Chameleon Mining”).)
 The evidence showed that Chameleon effectively overpaid for the Cadetta tenements by 5 million shares, which the vendor of the tenements then diverted to Murchison at Mr Grimaldi’s direction as his commission for the deal. See the first instance decision Chameleon Mining at [401-402], [461-468], ,  and . See also the Full Federal Court appeal decision Grimaldi at [197-209].
 And, some would suggest, creditors.
 See Chameleon Mining at  and ; and Grimaldi at [408-410]. Neither Mr Grimaldi nor Mr Barnes went into the witness box to assert that he was acting honestly, noted the trial judge Jacobson J.
 Grimaldi at ; Hospital Products Ltd v United States Surgical Corporation  HCA 64; (1984) 156 CLR 41 at 96-97; News Limited v Australian Rugby Football League Ltd  FCA 1256; (1996) 64 FCR 410 at 538-541.
 Grimaldi at .
 Grimaldi at .
 See Chan v Zacharia  HCA 36; (1984) 154 CLR 178 at 198-199; Grimaldi at .
 Ibid. See also Breen v Williams (1996) 186 CLR 71 at 113.
 Grimaldi at ; Shipway v Broadwood  1 QB 369 at 373; Dal Pont, Law of Agency, 2nd ed, 2008 at [12.7].
 Grimaldi at .
 Rhodes v Macalister (1923) 29 Com Cas 19 at 27; Grimaldi at .
 At , their Honours remarked that their discussion of Lister v Stubbs was of “some length” even though they had concluded that the 10 million Winterfall/Murchison shares Grimaldi and Barnes obtained after the Iron Jack Tenement acquisition was not a secret commission vis a vis Chameleon, but rather an undisclosed personal interest in the making of the advance of the two cheques. The question of whether the earlier secret commission they received of the 5 million Chameleon shares as part of the Cadetta transaction could be impressed with a constructive trust did not arise on the judgment.
 Lister & Co v Stubbs (1890) 45 Ch D 1.
 Ibid, at 15.
 Grimaldi at [569-572].
 Grimaldi at .
 Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd  4 All ER 335.
 See Sumitomo Bank Ltd v Kartika Ratna Thahir  1 SLR 735 (Sing).
  UKPC 2;  1 AC 324.
 And Metropolitan Bank v Heiron (1880) 5 Ex D 319.
 A-G for Hong Kong v Reid, at 336.
 Grimaldi at . They referred in particular to observations of the majority in Furs Ltd v Tomkies  HCA 3; (1936) 54 CLR 583, joint judgment in Keith Henry & Co Pty Ltd v Stuart Walker & Co Pty Ltd  HCA 33; (1958) 100 CLR 352 at 350, observations of Mason J in Hospital Products Ltd v United States Surgical Corporation  HCA 64; (1984) 156 CLR 41 at 107-8, and Deane J in Chan v Zacharia  HCA 36; (1984) 154 CLR 178 at 198-199.
 United States v Carter  USSC 115; 217 US 286 (1910).
 Grimaldi at . Although in Canada the position appeared to remain uncertain for some time despite the considerable liberalization of the constructive trust as a remedy in Soulos v Korkontzilas (1997) 146 DLR (4th) 214. The British Columbia Court of Appeal recently accepted and applied Reid’s case: (Insurance Corporation of BC v Lo (2006) 278 DLR (4th) 148).
 Grimaldi at .
 Target Holdings Ltd v Redferns  AC 421 per Lord Browne-Wilkinson at 434; See also Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd  EWHC 1614 (Ch) per Lewison J at .
 Foskett v McKeown  UKHL 29;  1 AC 102 per Lord Millett at 130.
 See also . At , their Honours distilled some well-accepted principles from the decided authorities as to how the liability will be effected, and whether liability is several or joint and several where several parties are involved in or had the requisite knowledge of the wrongdoing.. See the authorities there cited for each proposition. See also [534-5]. See also Bass Brewers Ltd v Appleby  2 BCLC 700 at 710-11; Dubai Aluminium Co Ltd v Salaam  UKHL 48;  2 AC 366 at ; and see generally Lindley & Banks on Partnership, 26-38 ff (19th ed).
 As discussed elsewhere in this paper, in this case the Full Federal Court held this remedy to be discretionary in Australia, and refused to grant it for a range of reasons.
 So pronounced the Full Federal Court in Grimaldi at .
  EngR 954; (1726) Sel Cas Ch 61; 25 ER 223. See also Keith Henry & Co Pty Ltd v Stuart Walker & Co Pty Ltd  HCA 33; (1958) 100 CLR 342 at 350; Grimaldi at . In the 1936 Australian case of Furs Ltd v Tomkies  HCA 3; (1936) 54 CLR 583 at 592 it was put this way: “An undisclosed profit which a director so derives from the execution of his fiduciary duties belongs in equity to the company. It is no answer to the application of the rule that the profit is of a kind which the company could not itself have obtained, or that no loss is caused to the company by the gain of the director. It is a principle resting upon the impossibility of allowing the conflict of duty and interest which is involved in the pursuit of private advantage in the course of dealing in a fiduciary capacity with the affairs of the company”. See also Keith Henry & Co at 350; Hospital Products at 107-110 per Mason J; Chan v Zacharia at 198-199 per Deane J; Grimaldi at .
 Grimaldi at .
 See eg O’Halloran v R T Thomas & Family Pty Ltd  NSWSC 596; (1998) 45 NSWLR 262 at 272-279; Grimaldi at .
 See the first instance decision Chameleon Mining at -; See also Grimaldi at .
 Warman International Ltd v Dwyer  HCA 18; (1995) 182 CLR 544; Grimaldi at .
 Grimaldi at .
 Grimaldi at [503-511]. Remedial flexibility in the granting of equitable relief in Australia has long been a favoured view of his Honour Finn J. Their Honours discussed cases like Bathurst City Council v PWC Properties Pty Ltd  HCA 59; (1998) 195 CLR 566 at , Giumelli v Giumelli  HCA 10; (1999) 196 CLR 101 at  (an equitable estoppel case). They noted that in John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd  HCA 19; (2010) 241 CLR 1 at [128-129] (alleged breach of fiduciary duty case), the High Court had reiterated that “A constructive ought not to be imposed if there are other orders capable of doing full justice…”.
 As Giumelli v Giumelli illustrates; Grimaldi at .
 Grimaldi at . In Warman, as quoted in Grimaldi,the comment was that the liability to account for profits ought not go too far, such that it is “transformed into a vehicle for the unjust enrichment of the plaintiff”. The author has preferred to avoid using the expression “unjust enrichment” here, to avoid confusing the issue.
 Barnes v Addy (1874) LR 9 Ch App 244.
 Grimaldi at . For a survey see Anaian-Cooper, “The Liability of Third Parties for Breaches of Trust or Fiduciary Duty: A Comparative Look at Five Themes Across Four Jurisdictions”, in Weaver and Cragie, Banker and Customer, vol 5, 25-1701.
 Grimaldi at ; See eg Lewin, Law of Trusts, 1026-1029 (9th ed, 1891); Ashburner, Principles of Equity, 187-200 (1901) where the difference between the proprietary and the personal remedy is emphasized; and contemporary references: Ford and Lee, Principles of the Law of Trusts, [22.10440) ff; Dietrich and ridge, “’The Receipt of What?’: Questions Concerning Third Party Recipient Liability in Equity and Unjust Enrichment”  MelbULawRw 3; (2007) 31 Melb UL Rev 47 at 51-55.
 Grimaldi at .
 Farah Constructions Pty Ltd v Say-Dee Pty Ltd  HCA 22; (2007) 230 CLR 89 (“Farah”).
 This is established for Australia in Consul Developments Pty Ltd v DPC Estates Pty Ltd  HCA 8; (1975) 132 CLR 373(at 397-398; see Farah at [179-181]).
 Grimaldi at .
 Grimaldi at ; See Agip (Africa) Ltd v Jackson  1 Ch 265 at 292-293; Citadel General Assurance Co v Lloyds Bank Canada (1997) 152 DLR (4th) 411 at [45-51].
 Citadel General, ibid; Royal Brunei Airlines Sdn Bhd v Tan  UKPC 4;  2 AC 378 at 386 (“[R]ecipient liability is based on restitution; accessory liability is not”).
 Equiticorp Industries Group Ltd v The Crown  2 NZLR 481 at 632-633.
 See Citadel General, at ; but cf Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group Ltd  3 VR 16 at 105. Note the latter was roundly rejected by the High Court in Farah.
 Grimaldi at . Their Honours said that, for example, the currently accepted law in England is that: “…liability for “knowing receipt” depends on the defendant having sufficient knowledge of the circumstances as to make it “unconscionable” for him to retain the benefit or pay it away for his own purposes.” See Grimaldi at ; see Charter plc v City Index Ltd  Ch 313 at 321; Bank of Credit and Commerce International (Overseas) Ltd v Akindele  Ch 437 at 448 and 455.
 Grimaldi at [259-260]; Jacobs’ at . They observed that this question has “become bedeviled by an obsessive refinement of the distinctions between degrees of knowledge and notice”.
  1 WLR 509 at .
 Farah at [174-175]. Consul supports categories (i) (ii) and (iii) as being sufficient to trigger liability (see Farah at , Consul at 398, 412, 376-77]), and indicates (iv) suffices (see Farah 176, Consul ibid too]. Regarding (v), in Consul Stephen J held it would not suffice, Gibbs J left open the possibility that it could, Barwick CJ agreed with Stephen J. Thus Consul supports the proposition that circumstances falling within the first 4 categories are sufficient for the second limb. An instance where they have been approved as useful in the UK is: Bank of Credit and Commerce International (Overseas) Ltd v Akindele  Ch 437 per Nourse LJ at 454.
 Grimaldi at ; Millett J in Agip (Africa) Ltd v Jackson at 292-293.
 Grimaldi at .
 Grimaldi at .
 Grimaldi at [267-269].
 The Court cautioned about the easy assumption that because trustees, partners, directors etc may be jointly and severally liable for losses occasioned by their breaches of trust or of fiduciary duty, the same is true for benefits and profits made in consequence of wrongs in which they may have knowingly participated. Joint and several liability for benefits and profits is the exception, not the rule. Grimaldi at ; see eg In re Oxford Benefit Building and Investment Society (1887) 35 Ch D 502; In re National Funds Assurance Co (No 2) (1878) 10 Ch D 118 (directors);at . See also Grimaldi at [519-529] in relation to apportionment of liability, and the alternative of giving just allowances in the UK and Australia.
 Grimaldi at ; See generally Warman International Ltd v Dwyer  HCA 18; (1995) 182 CLR 544 at 569.
 Grimaldi at . See Michael Wilson & Partners Ltd v Nicholls  HCA 48; (2011) 282 ALR 685 at . A contrary view obtains in Canada, where there is authority suggesting that liability for profits is joint and several. See Canada Safety Ltd v Thompson  3 DLR 295 at 323; D’Amore v MacDonald (1973) 32 DLR (3d) 543 at 549; Macdonald v Hauer (1976) 72 DLR (3d) 110 at 130. That Canadian view has been criticized as “penal”, the Full Federal Court of Australia here agreeing with that criticism.
 Grimaldi at . See also ; see Mitchell and Watterson, “Remedies for Knowing Receipt” in Mitchell (ed), Constructive and Resulting Trusts, 132 ff (2010); see also Morlea Professional Services Pty Ltd v Richard Walter Pty Ltd  FCA 1820; (1999) 96 FLR 217 at [75-76]. Note their Honours remark at  that as Australian law now stands, even if the third party recipient falls within the knowing receipt limb of Barnes v Addy, the company will not ordinarily be able to bring a proprietary claim against the recipient as distinct from a personal one, unless and until the transaction itself has been avoided. This is because the transaction will have been only voidable, not void, where a director disposes of corporate property within his authority but not in the company’s interests. However note that the Full Federal Court queried whether this legal position ought be retained.
 In the hundreds of millions of dollars. See Grimaldi at [672-681]. Their Honours also pointed to many other factors, including the enhancement of the value of the Project by investors (properly considered as interested third parties), the enterprise, expertise and risk-taking to which Chameleon did not contribute or assume, which again added considerable value to the Project.
 Grimaldi at [697-700]. See als [251-252].
  UKHL 29;  1 AC 102 at 109. Lewison J endorsed that recently in Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd  EWHC 1614 (Ch) at , noting that the courts of England and Wales do not recognize a remedial constructive trust, as opposed to an institutional constructive trust.
 Ibid, per Lord Browne-Wilkinson.
 Grimaldi at [697-700].
 Grimaldi at .
  1 Ch 264 at 272-273.
 Grimaldi at .
 And see footnote 51 above.
 Indeed their Honours expressly observed at  that a proprietary claim against a third party to make specific restitution to the “true owner” of trust property (or its traceable proceeds) as remains in his or her hands, is potentially available also to be made in Barnes v Addy knowing receipt cases, though is a separate and distinct liability.
 Grimaldi at  and [277-281]; See Daly v Sydney Stock Exchange  HCA 25; (1986) 160 CLR 371; Hancock Family Memorial Foundation Ltd v Porteus (2000) 22 WAR 193 at [173-206]. Note that the transaction is only voidable in such a case; it is void if the director acted beyond his or her authority.
 Grimaldi at . See too the Court’s in-depth discussion of the law on de facto directors and its application to this case, at [28-143]. Note that Mr Grimaldi was also found to have breached the statutory directors duties at ss 181 and 182 of the Corporations Act 2001 (Cth).
 Grimaldi at [408-410]. Neither Mr Grimaldi or Mr Barnes gave evidence, which told against them in a number of respects. See also the first instance decision Chameleon Mining at  and .
 As already mentioned, the “spotters fee” comprised 10 million Winterfall shares, later exchanged for 10 million shares and 12 million options in Murchison (post reverse-takeover).
 Grimaldi at .
 See the first instance decision – Chameleon Mining at  and .
 See the first instance decision – Chameleon Mining at .
 Ibid at ; See also Grimaldi at [750-754].
 Grimaldi at . This was also an area where Mr Grimaldi’s failure to give evidence told against him. Jacobson J at first instance found that in assessing what benefit Mr Grimaldi received or the quantum of compensation he should pay, his Honour was entitled to assume against Mr Grimaldi, as a wrongdoer, that he shared in the benefits flowing from the issue of the 10 million shares – see Chameleon Mining at .
 Murchison was also found liable for adding and abetting Mr Barnes’ contraventions of ss 181 and 182 of the Corporations Act 2001 (Cth), pursuant to s 79 of that Act: at .
 Ibid at ; See also Grimaldi at [750-754].
 Grimaldi at [689-696], including the discussion as to where the line is drawn between when a director’s knowledge will, and will not, be imputed to the company in such circumstances.
 There was some ambiguity in the judgment at first instance about whether Winterfall’s liability flowed from the misdirected cheques only. By grouping Murchison and Winterfall together in some passages, it appears to suggest that Winterfall was also liable with respect to the Cadetta transaction, although that is surprising. The Full Federal Court’s judgment only discusses Winterfall’s liability in terms of those cheques – see [662-682].
 Grimaldi at [668-682].
 Grimaldi at [668-669]. See also [560-567].
 See also footnote 68.
 See the first instance decision – Chameleon Mining at .
 Grimaldi at [737-739].
 Grimaldi at [740-744].
 Grimaldi at .
 Disclosed on the Federal Court portal.