One of Ballarat's top accounting firms will have to pay millions in damages to two of its former clients, after the Supreme Court ruled it breached its confidentiality obligations for financial gain.
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On January 25, the Supreme Court handed down its judgement in the civil court matter between excavation consortium Porter Group and the firm Mulcahy and Co Accounting Services over the purchase of a Ballarat truck and trailer-body building business, Chris' Body Building, known as CBB.
The founder and former managing director of Porter Group, Timothy Porter, and former Porter Group chief financial officer Christopher Conheady brought Mulcahy and Co director James Mulcahy to court in 2021, alleging the accounting firm had breached their fiduciary duties by purchasing CBB out from under Porter Group for a third entity, BFMM Investments Pty Ltd, a third defendant.
It comes after Mr Porter and Mr Conheady first approached Mulcahy on June 29, 2017, seeking advice regarding the purchase of a controlling interest in CBB.
At a Supreme Court hearing in September 2021, findings against Mulcahy and Co were handed down, with Justice Jim Delany stating the accounting firm's director had engaged in a plan of "a dishonest and fraudulent design" - he found breaches in confidentiality obligations and that the Mulcahy parties "owed fiduciary dues" and breaches of those duties, while BFMM "knowlingly assisted the Mulcahy parties in breach of fiduciary duty".
At last week's hearing, Justice Delany made clear his judgement for damages.
Mr Porter is entitled to an order that the Mulcahy parties pay $4,832,445.50 in damages to him for breach of contract.
Mr Conheady is also entitled to $4,832,445.50 from the Mulcahy parties in damages for breach of contract (or alternatively the same amount by way of equitable compensation or an account of profits from Mr Mulcahy of $702,000).
As against BFMM, Conheady was also found entitled to an account of profits and legal fees of $11,862,693.
Justice Delany said in his reasons Mr Porter and Mr Conheady had their opportunity to buy an interest in CBB "usurped" by Mulcahy and Co through BFMM's purchase of a 70 per cent stake of CBB.
The $4.8 million figure in expectation damages for breach of contract was calculated based on the assumption that Porter and Conheady would have purchased an 80 per cent share in CBB if their offer was finalised.
Throughout the hearing, Conheady gave evidence of his agreement with CBB owner Chris Debono for the purchase of an 80 per cent share in CBB for $9.6 million, with Debono retaining a 10 per cent share.
The matter was adjourned until February 23, 2024, for the parties to provide their responses to the figures, including disagreements and possible arithmetic errors.
As some of the remedies sought and awarded are inconsistent with each other, Mr Conheady has until February 16, 2024 to elect between them.
Mulcahy have said they will appeal the decision when final orders have been made.
UPDATE: An earlier version of this article incorrectly reported that Mr Conheady was entitled to receive two amounts of $4,832,445.50 from the Mulcahy parties, rather than just one. It also failed to note that Mr Conheady is required to elect between the inconsistent remedies he pursued. Further, the previous headline incorrectly suggested that final orders had been made by the court. We apologise for the errors.
