Friendly societies – not that friendly?
In Update 108 of Robson's Annotated Corporations Legislation, David Birch revises and updates annotations to Ch 9 of the Corporations Act 2001 (Cth). He cites and discusses over 90 Australian court judgments not previously cited in the service, including the High Court appeal of Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 92 ALJR 918;  HCA 43 (Ancient Order of Foresters).
The decision provides an instructive example of the concept of "profits" under s 1317H and its interaction with the equitable remedy of account of profits.
Section 1317H of the Corporations Act 2001 (Cth) enables a court to grant compensation to a company that has suffered loss or damage because of the breach of a civil penalty provision.
Foresters and Lifeplan were in competition in the funeral planning business. Two Lifeplan employees approached Foresters with a plan to divert Lifeplan's business to Foresters. The strategy was successful.
At first instance, the trial judge found the employees had breached their fiduciary and statutory duties and that Foresters had knowingly assisted in some of those breaches. The primary judge ordered an account of profits against the former employees, but declined to order any account of profits against Foresters, neither in equity nor under s 1317H.
The Full Federal Court supplemented the orders of the primary judge with an order that Foresters account to Lifeplan and to FPM (the other applicant) for profits, both in equity and under s 1317H.
The High Court of Australia dismissed an appeal from the Full Federal Court that there was a sufficient causal connection between the profits and Foresters’ participating in the breaches. Further, the High Court also ordered Foresters to account to Lifeplan for profits in equity for the total capital value of Foresters' funeral products business.
The High Court held Foresters' funeral products business was developed on the basis of the breaches of fiduciary duties and was an ongoing business with a capital value. That capital value was determined by reference to the net present value of its expected net cash flows over the ensuing 10 years.
The matter is discussed extensively in Robson's Annotated Corporations Legislation among the annotations to s 1317H of the Corporations Act 2001 (Cth) at [1317H.15] Concepts: Damage includes profits, published in Update 108, April 2019.