Alford v Ebbage

[2003] QSC 294

SUPREME COURT OF QUEENSLAND

CITATION:

Alford & Ors v Ebbage & Ors [2003] QSC 294

PARTIES:

ANTHONY JAMES ALFORD
(first plaintiff)
DARIO PTY LTD ACN 051 964 697
(second plaintiff)
A E HOLDINGS PTY LTD ACN 010 697 266
(third plaintiff)
A E FINANCE CO PTY LTD ACN 010 766 775
(fourth plaintiff)
IPA (QLD) PTY LTD ACN 074 450 089
(fifth plaintiff)
ALFORD EBBAGE SERVICES PTY LTD
ACN 059 651 286
(sixth plaintiff)
A E GROUP PTY LTD ACN 059 315 178
(seventh plaintiff)

v

RAYMOND JOSEPH EBBAGE for himself and as
executor of the estate of PAUL GERRARD EBBAGE deceased
(first defendant)
HPM INVESTMENTS PTY LTD ACN 083 664 680
(second defendant)
ADVANCED ENGINE TECHNOLOGY PTY LTD
ACN 063 092 759
(third defendant)
STEVEN CHARLES MANTHEY
(fourth defendant)
OX2 INTELLECTUAL PROPERTY INC
(fifth defendant)
OX2 ENGINE (DISTRIBUTION) LIMITED
(sixth defendant)
EQUITY HOLDINGS INC
(seventh defendant)
SOUTHPAC NOMINEES INC
(eighth defendant)
MACRO MANAGEMENT GROUP INC
(ninth defendant)
BRENDA MARY MANTHEY
(tenth defendant)
GREEN FIT N.Z. LIMITED ACN 088 084 673
(eleventh defendant)
MOTOR CITY INC
(twelfth defendant)

EBBCO OFFICE SERVICES PTY LTD
ACN 053 769 789
(thirteenth defendant)

FILE NO:

SC 3677 of 2000

DIVISION:

Trial

PROCEEDING:

Claim

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

8 September 2003

DELIVERED AT:

Brisbane

HEARING DATES:

21, 22, 23, 24, 25, 28, 29, 30, 31 October; 1, 4, 5, 6, 11, 12, 13, 14, 15, 18, 19, 20, 21, 22, 27, 28, 29 November 2002.

JUDGE:

Atkinson J

ORDER:

Judgment is given for the defendants

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – OFFER AND ACCEPTANCE – AGREEMENT CONTEMPLATING EXECUTION OF FORMAL DOCUMENT – WHETHER CONCLUDED CONTRACT – where no executed written agreement – where evidence of oral agreement given only by the plaintiff – where the plaintiff was unreliable witness – where documentary evidence equivocal – whether contractual agreement entered into

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – MATTERS NOT GIVING RISE TO BINDING CONTRACT – STATEMENTS OF INTENTION, NEGOTIATIONS AND INVITATIONS TO TREAT – INFORMAL CONTRACT – where alleged joint venture agreement – where numerous proposed agreements drafted – where evidence as to alleged oral agreements unreliable and not supported by independent evidence – where written agreements executed – where plaintiff not a party to the written agreements – where plaintiff alleges written agreements executed secretly with intention to deprive him of his interest – where evidence the plaintiff knew of the executed agreements to which he was not a party and in which he did not have an interest – whether alleged joint venture agreement existed

EQUITY – FIDUCIARY OBLIGATIONS – GENERAL PRINCIPLES – JOINT VENTURE AGREEMENT – where plaintiff alleges property of alleged joint venture held on trust in respect of his interest – whether property of joint venture vehicle dealt with in breach of fiduciary obligations
CONTRACT – GENERAL CONTRACTUAL PRINCIPLES – OFFER AND ACCEPTANCE – CONTRACT IMPLIED FROM CONDUCT OF PARTIES –  where no executed written agreement – where alleged payments made by the plaintiffs’ interests to the defendants’ interests as loans – where alleged accountancy services provided by the plaintiffs’ interests for the defendants’ interests in respect of which fees were owing – where plaintiffs’ version of events uncorroborated – where allegation accountancy fees remained owing not supported by documentary and independent evidence – where an accounting required to reconcile loan payments made – where no such accounting sought in the proceedings

Allcard v Skinner [1886-90] All ER 90, cited
Australian Broadcasting Commission v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540, cited
Geroff & Ors v CAPD Enterprises Pty Ltd & Ors [2003] QCA 187, cited
G Scammell and Nephew Ltd v H C and J G Ouston [1941] AC 251, cited
Natural Extracts Pty Ltd v Stotter; G G Jay Investments Pty Ltd v Doveka Pty Ltd (1997) 24 ACSR 110, NG 3192 and 3238 of 1992, 16 May 1997, cited
Nelson v Larholt [1948] 1 KB 339, cited
Orr v Ford (1989) 167 CLR 316, cited
Summergreene v Parker (1950) CLR 304, cited
Thorby & Ors v Goldberg & Ors (1964) 112 CLR 597, cited

COUNSEL:

W Sofronoff QC, with D A Savage SC and M Hoch, for the plaintiffs
E Goodwin (sol) for the first, second and ninth defendants
J A Griffin QC, with J H Bryson for the third, fourth, tenth and twelfth defendants
G M Egan for the eleventh defendant
No appearance for the thirteenth defendant

SOLICITORS:

J F Connors & Associates (Southport) for the plaintiffs
Minter Ellison Lawyers (Brisbane) for the first, second and ninth defendants
Johnston Lawyers (Burleigh Heads) for the third, fourth, tenth and twelfth defendants
Rostron Carlyle Solicitors (Brisbane) for the eleventh defendant
No appearance for the thirteenth defendant

Introduction

1. Anthony James Alford, the first plaintiff, commonly known as Tony Alford and Paul Gerrard Ebbage were both accountants who practised at the Gold Coast.  Steven Charles Manthey, the fourth defendant, was a motor mechanic and inventor who also lived and worked on the Gold Coast.  This matter involves the determination of the legal relationships and liabilities which existed between these three men and the many companies under the control of one or more of them in the years from 1993 until Mr Ebbage’s unexpected death on 2 December 1998 and the present consequences of any such relationship.

1. Mr Alford, the first plaintiff, was represented at trial by Mr Sofronoff QC, Mr Savage SC, and Ms Hoch, instructed by a solicitor, Mr J F Connors.  That team of lawyers also represented the second to seventh plaintiffs, Dario Pty Ltd (“Dario”), A E Holdings Pty Ltd (“AEH”), A E Finance Co Pty Ltd (“AEF”), IPA (Qld) Pty Ltd (“IPA”), Alford Ebbage Services Pty Ltd (“AES”) and A E Group Pty Ltd (“AEG”), which were all companies associated with or under the control of Mr Alford. 

1. At the commencement of the trial, the plaintiffs’ action was against twelve defendants.  The first defendant was Raymond Joseph Ebbage (“Mr Ebbage Snr”) who was a party to the action in his own right and as executor of the estate of his son, Paul Ebbage.  Mr Ebbage Snr was represented by Mr Goodwin, a solicitor from Minter Ellison.  Minter Ellison also acted for the second defendant, HPM Investments Pty Ltd (“HPM”), and the ninth defendant, Macro Management Group Inc (“Macro Management”).  Mr Griffin QC, with Mr Bryson, (instructed by a solicitor, M Johnston) acted for the fourth defendant, Steven Charles Manthey, the tenth defendant, Mr Manthey’s wife, Brenda Mary Manthey, and companies under Mr Manthey’s control,  the third defendant, Advanced Engine Technology Pty Ltd (“AET”) and the twelfth defendant, Motor City Inc (“Motor City”).  Mr Egan of counsel instructed by a solicitor, Mr Rostron, acted for the eleventh defendant, Green Fit NZ Limited (“Green Fit”).  The thirteenth defendant, Ebbco Office Services Pty Ltd (“EOS”), whose directors were Mr Alford, Mr Ebbage’s ex-wife, Susan Ebbage, and Mr Ebbage Snr, was unable to give effective instructions and was joined so that it was bound by the judgment.

1. From time to time, it will be convenient to refer to the plaintiffs as the Alford interests, the first, second and ninth defendants as the Ebbage interests, the third, fourth, tenth and twelfth defendants as the Manthey interests, and the eleventh defendant as Green Fit.

1. At the commencement of the trial, the plaintiffs identified three claims which they made against the defendants.  Against the Ebbage interests, they claimed $170,000 as a debt owing by Mr Ebbage to Mr Alford in respect of the agreement they entered into when they formed an accountancy partnership together.  In the fifth amended statement of claim (which, unless otherwise indicated, will be referred to as the “statement of claim”), the plaintiffs claimed that the debt with interest was in fact $416,714.47.  The second claim was for the repayment of moneys advanced by one or more of the plaintiff companies to AET.  The third claim involved an accounting for and a tracing of what was asserted by the plaintiffs to be a 25 per cent interest in a joint venture entered into between the Alford, Ebbage and Manthey interests.  If the third claim were to be successful, then the plaintiffs asserted an interest in the assets and profits of the joint venture wherever they might be traced.  It can been seen that the first claim involved the accountancy partnership between Mr Alford and Mr Ebbage, while the latter claims involved a business carried on in partnership between Mr Ebbage and Mr Manthey in which Mr Alford said he had an interest and to which he said he, or companies associated with him, had lent money.

1. As this was a managed case, much of the evidence-in-chief was in the form of affidavits with the opportunity for the other parties to orally cross-examine each deponent.[1]  In addition, a bundle of documents initially containing some 64 volumes of documents was tendered by the plaintiff at the commencement of the trial.  During the trial, many other documents and a videotape were tendered, some of the documents being added to the bundle.   

   [1]This process tends to induce a certain caution in a trial judge since affidavits almost invariably reflect the more nuanced and sophisticated legal thinking of a party’s legal representatives: see the views expressed by Heerey J in “Storytelling, Postmodernism and the Law” (2000) 74 ALJ 681 at 689.  As His Honour has subsequently written in a paper entitled “Aesthetics, Culture and the Whole Damn Thing” delivered to the International Conference of Law and Literature Association of Australia: Mediating Law: Theory, Production, Culture held at the Law School, University of Melbourne, 29 November – 1 December 2002: “More importantly, the Court loses the truth-revealing benefit of the witness having to give, in the isolation of the witness box, an account unprompted by leading questions”.  The cross-examination certainly assisted in hearing the authentic voices of the witnesses and determining matters in dispute.

1. Within the bundle of documents were depositions taken from a number of persons in the course of litigation in New Mexico in the United States involving some of the parties to this action, particularly those which represented the Ebbage interests and those that represented the Manthey interests, about cognate subject matter (“the New Mexico litigation”).  The New Mexico litigation was eventually settled prior to the trial of this action on terms acceptable to the parties.  Also in evidence were transcripts and tapes of a telephone call between Mr Manthey and Mr Alford on 2 September 1999, which was secretly taped by Mr Alford, and of a meeting in July 2000 in the boardroom of Mr Alford’s Southport practice which was secretly videotaped by Mr Alford.  At the end of the trial, any document in the bundle which was not referred to during the evidence or submissions, was, pursuant to an intimation given at the commencement of the trial and a ruling made at the end of the trial, removed from the bundle by the parties.  A number of other documents which might have been useful were not retained or were destroyed before the litigation commenced.

1. Although a large number of documents were referred to at trial, two significant features made determination of the matters in dispute more difficult.  The first was the death of Mr Ebbage in December 1998.  His oral evidence as to the course of events would have been of great assistance in determining the history of the matter and the precise nature of the legal relationship between the parties.  The second, and necessarily related, difficulty arose from the fact that the plaintiffs were unable to point to important contractual arrangements being made in writing, but rather relied on agreements said to have been made orally, often with or in the presence of Mr Ebbage.

The accountancy partnership between Tony Alford and Paul Ebbage

1. The business, professional and personal relationship between Mr Alford and Mr Ebbage commenced in the early 1980s.  Because of the death of Mr Ebbage, inevitably the source of much of the evidence about their relationship was Mr Alford.  Some of his evidence about these matters was uncontentious.  Other evidence required a careful assessment of his credibility.

1. Mr Alford is an accountant and a member of the Australian Society of Certified Practising Accountants and the Taxation Institute of Australia.  At the time of trial, he was a director of A E Operations Pty Ltd (“AEO”) trading under the firm name or style of “Alfords Accountants & Business Advisers”.

1. Mr Alford commenced employment on the Gold Coast in 1984 at an accounting firm in which Mr Ebbage held a 10 per cent interest as a partner.  Until 1 January 1987, Mr Alford did not have a practising certificate and was not a registered accountant.

1. In 1986, Mr Ebbage purchased an accountancy practice at Beaudesert (“the Beaudesert practice”) and established an accountancy practice at 17 Short Street, Southport (“the Southport practice”) known as PG Ebbage & Co.  Mr Alford was employed at the Southport practice on a salary together with a 40 per cent profit share.  Susan Ebbage, who was married to Mr Ebbage, worked as a receptionist at the Southport practice although she separated from her husband towards the end of 1986.  There were subsequent reconciliations and separations.

1. In March 1987, Mr Alford purchased a 40 per cent interest in the Southport practice for which he said he paid $30,000 plus moneys owing to him.  Although a draft partnership deed was drawn up by a firm of solicitors, no written partnership agreement was ever executed.  The service entity established for the Southport practice was a trustee company, Whitewell Pty Ltd (“Whitewell”) as trustee of the unit trust, PG Ebbage & Co Management Trust (“PGEMT”).  Whitewell was subsequently renamed AEH.  The unit holders of PGEMT were Ashtead Trust No 1 (controlled by Mr Ebbage) which held 60 per cent of the units and Highgain Trust No 1 (controlled by Mr Alford) which held 40 per cent of the units.  The partnership was dissolved on 28 February 1989 after various disagreements between Mr Alford and Mr Ebbage.  A draft deed of dissolution prepared by solicitors was, once again, never executed.

1. This pattern by Mr Alford of not executing written agreements about important practice matters has apparently continued to this day.  Alicia Atkinson gave evidence that the contractual arrangements showing the equity of herself and others in the present accountancy practice of Mr Alford, Alford’s Accountants and Business Advisers, have not been reduced to writing.  There are a number of possible explanations for, and consequences of, this state of affairs.  Perhaps, as Mrs Atkinson asserted, there is a high degree of mutual trust meaning that it is not necessary to record agreements in writing.  On the other hand, the omission to record agreements in writing apparently removes the requirement which would apply to a written contract to pay stamp duty.  If there is a dispute as to the terms of the contract, each party may assert what it says are the terms of the contract.  This uncertainty may suit those who are less scrupulous with the truth.  It was, according to Mr Alford’s evidence, rare for an important business agreement with a third party not to be reduced to writing, if not immediately by formal written agreement, at least by note or letter confirming the agreement.

1. On 10 February 1988, Cravdon Pty Ltd, which was equally owned by entities controlled by Mr Alford and Mr Ebbage, purchased an investment property at Woodroffe Avenue, Main Beach (“the Woodroffe Avenue property”).  Mr Alford asserted that Mr Ebbage failed to honour his obligations and so in April 1991, Mr Alford arranged to purchase the Woodroffe Avenue property.  However, the property was sold at a loss before that agreement was finalised.  Mr Alford asserted that no formal documentation or agreement was contemplated or prepared between himself and Mr Ebbage in respect of the Woodroffe Avenue property.

1. Mr Alford agreed to pay Mr Ebbage $30,000 to purchase his interest in the Southport practice.  The client fee base of the Southport practice was then, according to Mr Alford, in excess of $420,000.  In February 1989, Mr Alford borrowed money from Esanda Finance Corporation Ltd (“Esanda Finance”) to finance his purchase of the Southport practice and to run the practice.  This was Esanda Finance Professional Equity Facility account no 464037864 in favour of Mr Alford (the “Esanda Finance Facility”).  Esanda Finance required the production of a partnership dissolution agreement as a  condition of providing finance.  Mr Alford agreed with Mr Ebbage that Mr Alford would instruct solicitors to draw up a formal partnership dissolution agreement, but as I have already noted, it was never executed. Esanda Finance was, however, prepared to accept a written confirmation and acknowledgment from Mr Ebbage that the unencumbered ownership in the Southport practice had been transferred to Mr Alford.

1. From 1 March 1989, Mr Alford owned and operated the Southport practice as a sole trader under the business name, “Alfords”.  Cranot Pty Ltd (“Cranot”) acted as the service provider to the Southport practice, as trustee of the Cranot Trust No 3, a trust under Mr Alford’s control.  Mr Ebbage retained certain clients whom he had introduced to the Southport practice and was provided with an office and telephone at the offices of the Southport practice.  The business name, PG Ebbage & Co, was transferred to Mr Alford.  Mr Alford deposed that the fee base of the Southport practice increased substantially over the following three years and that in March 1992, it was his intention to reduce the number of clients and increase the services offered to the remaining clients.  By this time, he said, Mr Ebbage was no longer using his office at the Southport practice.  Mr Ebbage had in the meantime invested in a trawling venture through a company called Exocal Pty Ltd (“Exocal”).  He borrowed $1,075,626.80 from Esanda Finance on 3 December 1990 for that purpose.  That debt was paid in full by 22 September 1998.

1. On 28 July 1992, Crayfield Pty Ltd (“Crayfield”), a company associated with Mr Ebbage’s parents, loaned $155,000 to Tunleigh Pty Ltd (“Tunleigh”), a company associated with Mr Ebbage.  On 5 October 1992, Crayfield lent a further $300,000 to Tunleigh.

1. In October 1992, Bronzebay Pty Ltd, a company controlled by Mr Alford, purchased property at Hicks Street, Southport and he relocated the Southport practice to that address.  In the same month, Mr Alford commenced using office space rented by Stephen Diamond (“Mr Stephen Diamond”), a solicitor trading as Diamonds Solicitors at Nerang.  In January 1993, Mr Alford formally opened an accountancy practice at 30 Price Street, Nerang, trading as Alfords (“the Nerang practice”) and engaged staff.  The office was in a partitioned area of Mr Diamond’s office.

1. During February and March 1993, Mr Alford and Mr Ebbage negotiated to renew their partnership in the various accountancy practices.  Mr Alford gave evidence that an oral agreement was reached whereby they intended to avoid any “adverse capital gains tax or stamp duty consequences”.  They agreed to conduct the practices under the business name Alford Ebbage (the “AE practice”).  The individual practices would trade as Alford Ebbage Beaudesert (the “Beaudesert practice”), Alford Ebbage Southport (the “Southport practice”) and Alford Ebbage Nerang (the “Nerang practice”).  The ownership of the Southport practice would remain with Mr Alford; ownership of the Beaudesert practice would remain with Mr Ebbage; and the Nerang practice would be owned by AEH, a company jointly owned by Mr Alford and Mr Ebbage or entities controlled by or associated with them.   AEH was to own the Nerang practice as trustee for the AE Holdings Trust No 3 (“AEH Trust No 3”).  It was further agreed that only new clients of the Nerang practice would be considered part of the goodwill of the Nerang practice.  Clients who transferred from the Southport practice or the Beaudesert practice would not be considered part of the goodwill of the Nerang practice.  As part of the agreement, Mr Ebbage paid Mr Alford to reimburse him for his costs in setting up the Nerang practice.  The agreement was to operate with regard to the Nerang practice from 1 April 1993 and with regard to the Southport and Beaudesert practices from 1 July 1993.  As partners they had fiduciary duties to each other.

1. The trading company which conducted the Southport practice was AEG; the trading company which conducted the Nerang practice was AEO formerly known as AE Nerang Pty Ltd; and the trading company which conducted the Beaudesert practice was AE Beaudesert Pty Ltd (“AEB”).

1. Mr Alford and Mr Ebbage agreed to share equally in the expenses and profits of the three practices.  A complex business structure was to be put in place where separate operating companies would be set up to operate each practice, a service company structure would be set up, and another company would purchase any new plant, equipment, furniture and fittings for the practice.  The structure would be implemented by discretionary trusts.  Mrs Atkinson, who had commenced working for Mr Alford as a bookkeeper in 1991, was instructed to draw up the necessary trust deeds.

1. AEH was a trustee of six trusts.  The shareholders of AEH were Dario, as trustee of the Dario Management Trust which represented Mr Alford’s interest, and EOS, as trustee of the Ebbco Holdings Trust, which represented Mr Ebbage’s interest.  Mr Alford and Mr Ebbage were the sole directors. 

1. AE Holdings Trust No 1 (“AEH Trust No 1”) was to receive operators’ fees in respect of the Southport practice.  According to Mrs Atkinson, whose evidence on these matters was uncontroversial, those fees were to be paid by the practice trading entity, Alford Ebbage Pty Ltd (“AE”).  The trust would then distribute the operators fees received by it to Mr Alford and/or specified beneficiaries nominated under the trust.  The income assessable in the hands of Mr Alford as beneficiary was to be set off against the expense of the interest payments made to Esanda Finance giving rise potentially to a tax neutral position. 

1. The second trust was AE Holdings Trust No 2 (“AEH Trust No 2”) which was to receive operators’ fees in respect of the Nerang practice.  Those fees were to be paid by the practice trading entity, AE.  However, the expenses of the Nerang practice exceeded the fees generated by it and a decision was made by Mr Alford and Mr Ebbage to cease operations at the Nerang practice in mid-1994. 

1. The third trust was to be AEH Trust No 3 which was to receive operators’ fees in respect of the Beaudesert practice.  Those fees were again to be paid by the practice trading entity, AE.  The trust would then distribute the operators fees received to Mr Ebbage and/or specified beneficiaries nominated under the trust.  The income which was assessable in the hands of Mr Ebbage as beneficiary was to be set off against the expense of interest payments to Esanda Finance and Crayfield giving rise potentially to a tax neutral position.

1. AE Holdings Trust No 4 (“AEH Trust No 4”) was to receive fees from AE for that company’s hire of equipment used in the operation of the respective practices.  It was intended that the trust remit hire fees received by it to Cranot,  the owner of the business equipment used at the Southport practice (prior to 1 March 1993) and to EOS (the owner of the equipment used at the Beaudesert practice prior to 1 March 1993).  AEH Trust No 4 purchased all unencumbered assets acquired by the AE practice after 1 March 1993.

1. Mrs Atkinson says that although she was the settlor of the AE Holdings Trust No 5 (“AEH Trust No 5”), she was not aware of its intended purpose at the time the trust was settled.  Mr Alford, however, deposed that a principal purpose of the AEH Trust No 5 was to own assets of the AE practice and any other assets acquired jointly between Mr Ebbage and himself or entities associated with their respective families.  As was admitted in the pleadings, AEH Trust No 5 was a discretionary trust of which the beneficiaries were Dario and EOS both for themselves and as trustees respectively of the Dario Practice Trust and the Ebbco Trust.  Dario was related to Mr Alford (as that term is used in the Corporations Law) in that Mr Alford was, and Mr Alford’s father is, a director and shareholder of Dario.  Beneficiaries of the Dario Practice Trust included corporations related to Mr Alford and members of his family.  EOS was related to Mr Ebbage (as that term is used in the Corporations Law) in that Mrs Ebbage and Mr Ebbage Snr were the directors and shareholders of that company.  Beneficiaries of the Ebbco Trust included Mr Ebbage, corporations related to Mr Ebbage and members of Mr Ebbage’s family.  It was controlled by Mr Ebbage.  Mr Alford and Mr Ebbage jointly held the power to remove and appoint the trustee.

1. Mrs Atkinson gave evidence that AE Holdings Trust No 6 (“AEH Trust No 6”) was established to accommodate joint share trading by Mr Alford and Mr Ebbage, both in their own right and for and on behalf of clients of the AE practice.

1. In spite of the structure that was set up, Mrs Atkinson says that AEH Trust No 4 was the only trust to receive operators’ fees based on financial accounts prepared by Mr Ebbage. 

1. Other trusts which were established included the AE Service Trust, the trustee of which was AES.  This trust was settled for the express purpose of providing staff and facilities to each of the trading entities generating fees from the Southport, Nerang and Beaudesert practices. 

1. EOS was the trustee for two trusts: the Ebbco Trust and the Ebbco Holdings Trust.  Mrs Atkinson said that the Ebbco Trust was settled by her on instructions from Mr Ebbage for the express purpose of distributing surplus income received by each of the AEH trusts between Mr Ebbage and Mr Alford through companies and/or trusts associated with them.  It was for this express purpose, Mrs Atkinson says, that Dario, in its own right and in its capacity as trustee, was nominated as a specified primary beneficiary under the trust in addition to Professional Practice Group Pty Ltd (“PPG”) again, in its own right and in its capacity as trustee.  The Ebbco Trust was, however, a discretionary trust.

1. Mrs Atkinson also gave evidence that the Ebbco Holdings Trust was settled by her on instructions from Mr Ebbage for the express purpose of holding shares in joint corporate structures as between Mr Ebbage and Mr Alford or companies and/or trusts associated with each of them.  Mrs Atkinson says that she recalls that the trust was used by Mr Ebbage to acquire shares in Split Cycle Technology Ltd (“SCT Ltd”).  However, this was Mr Ebbage’s own interest in SCT Ltd and not one he shared with Mr Alford.  In cross-examination, Mrs Atkinson conceded that at time of creation of the Ebbco Trust and the Ebbco Holdings Trust, she was unaware of the differences between them.  The purpose of both of them was to hold assets and distribute income to Mr Ebbage and persons and companies associated with him.

1. The PPG Trust was settled by Mrs Atkinson, again on instructions from Mr Ebbage, for the express purpose of sharing (on behalf of Mr Ebbage) the joint exploitation of the fee base generated by the AE practice with the Dario Practice Trust, the trust established for the benefit of Mr Alford and his family.

1. The instructions were given to Mrs Atkinson by Mr Ebbage on 2 April 1993.  He instructed her to establish the Ebbco Trust and the Ebbco Holdings Trust with EOS as their trustee and the PPG Trust with PPG as the trustee.  The appointee was to be Tunleigh.  The specified beneficiaries were to be Mr Ebbage, Mrs Ebbage, Mr and Mrs Ebbage Snr, Gordon Rolinson, Gladys Rolinson and each of the children of the above, as well as Harcroft No 3 Pty Ltd as trustee of the PGE Trust, Greyvil Pty Ltd, Greyvil Pty Ltd as trustee for the Greyvil Trust No 1, Ashtead Pty Ltd, Exocal, Adleigh Contractors Pty Ltd, PPG as trustee for the PPG Trust, EOS as trustee for the Ebbco Trust, EOS as trustee for Ebbco Holdings Trust, Dario as trustee for the Dario Practice Trust;  in addition there was a general clause. 

1. The directors of AES, the service company for the AE practice, were Mr Alford and Mr Ebbage.  Its shareholders were EOS and Dario to represent the interests of Mr Ebbage and Mr Alford respectively.  Its first annual return for the financial year ended 30 June 1993 was filed with the Australian Securities Commission (now “ASIC”) by Mr Ebbage.  The annual return for the year ended 30 June 1995 was filed by Mr Alford.

1. Both Mr Alford and Mrs Atkinson gave evidence that Mr Ebbage was responsible for the administration of the AE practice.  Those responsibilities included, but were not limited to, the co-ordination and authorisation of all payments to creditors, the preparation of all compliance matters, all communications with the Australian Taxation Office and financiers of the AE practice, and the preparation of all associated financial reports and/or statements.  Mrs Atkinson said that he was assisted by the practice administrator, Julianne Kliese, until September 1993.  Working under Mr Ebbage’s supervision with regard to the administration of the AE practice were Michelle North, Shannon White, Michelle Leeming, Amanda Alford, Mrs Ebbage and Geoff Hayes.  Damien Peters was, from his employment in early 1994, under the supervision of Karl Farmer but was directed by Mr Ebbage in respect of matters involving or concerning AET.  Mrs Atkinson says that Mr Alford was not involved in the administration of the AE practice, being responsible for the provision of advices to clients and the development of the AE practice and its client base.

The Crayfield loans

1. On 31 August 1993, Crayfield lent $25,000 to AES.  On 7 July 1994, AEF repaid $10,000 to Crayfield.  AEF was the internal and external finance company of the AE practice.  On 25 August 1994, Crayfield lent AEF $49,700.32.  Bobray Pty Ltd (“Bobray”), a company associated with Mr Ebbage Snr, lent a further $20,299.68 to AEF.  Subsequently, the debt owed by AEF to Bobray was transferred to Crayfield so that Crayfield became the creditor.  On 28 October 1994, Crayfield lent $30,000 to AEF.  The total amount of money lent by Crayfield to Alford Ebbage entities was $125,000 of which $10,000 had been repaid.  On 30 June 1995, Mr Ebbage consolidated all moneys owed to Crayfield as being owed by him.

The Esanda Finance Facility

1. One of the matters in dispute in these proceedings was who was responsible for repaying Mr Alford’s Esanda Finance Facility.  Mr Alford’s liability under the Esanda Finance Facility had increased to $199,819 by 22 March 1993.  Mrs Atkinson gave evidence, to which I have already referred, that the payments to Esanda Finance were to be offset against Mr Alford’s income from the Southport practice after he recommenced his partnership with Mr Ebbage.  Mr Ebbage had his own liability to Esanda Finance under another facility.

1. In the affidavit evidence on which Mr Alford relied at trial, he said that Mr Ebbage told him that the Beaudesert practice generated fees of approximately $500,000 per annum in March 1993.  Mr Alford deposed that the Southport practice generated fees in excess of $1,000,000 per year.  Mr Alford said they discussed and agreed upon a position which would recognise and compensate for the disparate quantum of fees between the Southport practice and the Beaudesert practice as at the inception of the AE practice.  However it appeared that Mr Alford’s sworn assertion that the Southport practice generated fees in excess of $1,000,000 a year as at March 1993 was incorrect.  Mr Alford’s tax return for the financial year ending 30 June 1993 included a trading and profit and loss statement which shows professional fees received of $486,638.39.  When expenses are deducted it appeared that he operated at a loss for the year of $10,173.37.  The fees received for the previous financial year, ending 30 June 1992, were shown as $502,265.57.  In that year, his operating loss was even greater, at $144,104.55.

1. In attempting to explain his sworn assertion that the “Southport practice generated fees in excess of $1,000,000 per year” as at March 1993, Mr Alford pointed to a reconciliation of income to 30 June 1993 which revealed net profit of $317,053.11.  This was calculated on an accruals basis including debtors and work in progress but did not show gross fees of $1,000,000 per year.  He said in evidence that he had not disclosed any document which showed that the fees received by the Southport practice in the year to March 1993 were $1,000,000.  He then asserted under cross-examination that he said that the fees were $1,000,000 because that was the agreement between Mr Ebbage and himself.  Mr Alford’s sworn statement about the fees generated by the Southport practice is, in my view, not true.  It reflects very poorly on his credit as a witness.  When asked by me why he said it, if it was not true, he then asserted that if he said it was $1,000,000, then it was $1,000,000.  His attempted explanations put him in an even poorer light as a witness.

1. Mrs Atkinson was recalled by the plaintiffs to support Mr Alford’s assertion that the Southport practice generated fees in excess of $1,000,000 per year as at March 1993.  Mrs Atkinson annexed as Exhibit 5 to an affidavit sworn 14 November 2002, what was said to be a debtors’ listing for the accountancy practice operated by Mr Alford as at 31 March 1993, totalling $561,891.61.  This exhibit in fact included debts dated April, May, June, July, August, September, November, December 1993 and July 1994.  The debtors’ listing was prepared by her in late 1994 to determine, she said, the payments received by the AE practice in respect of the debtors of Alfords.  She asserted that the debtors’ listing showed that the total debtors for the Alfords practice as at 31 March 1993 were $561,891.61.  In her affidavit, she said that the date listed next to each debtor was the last date on which a payment was received on the debtor file according to the office costing records.  In her oral evidence, however, she said that the date column featured the date the last entry on that file was made, whether that be when the bill was raised or a payment received or any other entry on the file.

1. There was, as Mrs Atkinson conceded in cross-examination, no way of determining when the debts accrued, whether in 1989, 1990, 1991, 1992 or 1993.  All that Exhibit 5 revealed was that a particular debt accrued at some time prior to the date appearing beside the debt.  A number of the entries had dates prior to 1992 so could not support a contention that they showed the fees generated in the year to March 1993.  Others may well have accrued, in whole or in part, prior to the year before March 1993.  There was no way of telling.

1. Only $184,357.23 was estimated not to be doubtful debts.

1. Even if it could be said that AE practice had generated unpaid debt of $561,891.61 prior to March 1993, this figure could not simply be added to any other figure which was produced to say that the Southport practice generated fees in excess of $1,000,000 per year as at March 1993.

1. In spite of Mrs Atkinson’s further evidence, Mr Alford’s evidence to that effect remained untrue.

1. Mr Alford gave evidence that Mr Ebbage agreed that Mr Alford’s indebtedness to Esanda Finance in the sum of $200,000 would be paid by Mr Ebbage from his profit share of the AE practice.  Mr Alford said the manner in which the repayment was to be effected needed to achieve the following:-

(1)The Esanda Finance indebtedness was to be funded from Mr Ebbage’s profit share from the AE practice, which would, except for this arrangement, be to Mr Ebbage’s benefit;

(2)There was to be no disparity between the profit share entitlements payable to Mr Ebbage or to Mr Alford solely as a consequence of the payments to be made by Mr Ebbage to Esanda Finance;

(3)The profit sharing entitlement was to be, from inception, formalised as an equal entitlement as between Mr Ebbage and Mr Alford obviating the requirement to make some future adjustment to profit share entitlements upon full payment of the Esanda Finance debt by Mr Ebbage;

(4)Any arrangement should leave neither Mr Ebbage nor Mr Alford in a position different from that which would have prevailed had Mr Ebbage simply made a cash payment to Mr Alford;

(5)Mr Ebbage was to pay interest at a rate equivalent to the interest charged on Mr Alford’s Esanda Finance Facility, thus ensuring that Mr Alford was not placed in a financially disadvantageous position compared to an immediate cash settlement.

1. Mr Alford said that ultimately it was agreed between Mr Ebbage and himself that the profit share entitlement would be equal as between themselves except to the extent that the first $400,000 of profit share entitlements and benefits owing to Mr Ebbage would be paid to Mr Alford, thus resulting in an approximate after tax net payment to Esanda Finance of $200,000.  Mr Alford could not, when first asked about it in cross-examination, remember the date on which that agreement was reached, although he later said that it was around 20 to 24 March 1993, at the conclusion of that year’s Indy Car Race.  The agreement was never documented whether by written contract or minutes of meeting.  Some undated notes were made by Mr Alford which said in part, “take on 400,000 or $200,000”.  This note was by itself equivocal.

1. Mr Alford said it was agreed that interest payable on the Esanda Finance Facility would be paid from Mr Ebbage’s entitlement to profits from the AE practice.  If Mr Ebbage’s profit share did not reach $400,000, then he was not liable to make the payment to Esanda Finance of Mr Alford’s debt.  He said in cross-examination that Mr Ebbage’s liability was absolutely contingent on his profit share reaching $400,000.  As the profit and loss statements for their partnership has not been finalised, Mr Alford was unable to say whether Mr Ebbage’s profit share had reached $400,000.  Later, Mr Alford asserted that the repayment was not absolutely conditional on Mr Ebbage receiving $400,000 profit share.  If Mr Ebbage received only $300,000 profit share, then according to this later evidence, he was to use that to repay Mr Alford’s Esanda Finance Facility.

1. Another reason for Mrs Atkinson being recalled by the plaintiffs was in an endeavour to show that Mr Ebbage had in fact received a profit share in excess of $400,000.  There were a number of problems with that evidence.  Firstly, Mrs Atkinson gave evidence as to payments made or attributed by Mr Ebbage or companies associated with him in the 1993/1994, 1994/1995, 1995/1996 financial years.  These, she said, amounted to $863,008.31.  It could not be said, however, that this figure represented Mr Ebbage’s profit share from the partnership.  They were simply payments or liabilities attributed to Mr Ebbage rather than profit share.

1. Secondly, a number of the payments attributed to Mr Ebbage were controversial.  For example, Mrs Atkinson attributed the interest of $60,521.92 paid on Mr Alford’s Esanda Finance Facility as a benefit received by Mr Ebbage.  She did this on Mr Alford’s instructions.  She gave evidence that half the fees billed to AET to 29 February 1996 were attributed to Mr Ebbage.  This was said to be an amount of $43,572.52.  The reconciliation statement on which she relied did not mention the division by 50 per cent under this item.  As will be seen later in the discussion under the claim made as Schedule B to the Statement of Claim, $87,145.04 (being $43,572.52 x 2) was not in fact the amount of billed fees which had not been paid.  A further problem in regarding this amount as Mr Ebbage’s profit share was that not only were the moneys said not to have been received, but also that no allowance had been made for what expenses, if any, would be taken out of them.

1. Mrs Atkinson included as part of Mr Ebbage’s profit share $109,000.30 which was said to be a consultancy to Morecabs.  Apart from asserting that Morecabs was a business operated as a joint venture between Mr Alford and Mr Ebbage, Mrs Atkinson said that she did not know the content of the joint venture and was “not aware of the arrangements with Morecabs”.  This was 50 per cent of a payment apparently made to Morecabs for what is described as a consultancy by Morecabs.  On what basis that payment could be regarded as Mr Ebbage’s profit share, Mrs Atkinson was unable to explain.

1. $68,702.03 was attributed as a benefit received by Mr Ebbage from 1993 to 1996.  This was said to be “operators fees (Kent Lyon)”.  Mrs Atkinson explained that Kent Lyon Shields was a former name of the Beaudesert practice and these were an expense of the Beaudesert practice.  It was difficult to see how this could be regarded as profit share.

1. Wages paid to Mr and Mrs Ebbage were undifferentiated in the schedule provided by Mrs Atkinson.  Mrs Ebbage was in fact actually employed at the practice and did work for the benefit of the partnership for which she received remuneration.  This was not a profit share of Mr Ebbage.  Neither were wages paid to Mr Ebbage which were an expense of the practice and would, therefore, according to Mrs Atkinson’s oral evidence have been deducted from gross income before profit share was calculated.  Superannuation was in the same category.  The total attributed to wages and superannuation was $214,407.80.

1. With regard to consultancy fees, $86,688.40 was attributed as a benefit to Mr Ebbage in 1994/1995.  The first item listed under that total in the Profit and Loss Adjustments for that year[2]  is $12,500 paid to Esanda Finance by AES (on behalf of Cranot) on 2 May 1995.  That was, Mrs Atkinson said, a payment of capital on Mr Alford’s loan to Esanda.  $25,300 paid by Cranot to Esanda on 15 March 1995 was also attributed as a consultancy paid to the benefit of Mr Ebbage.  In fact, that was also a payment made by a company associated with Mr Alford towards the principal owing on Mr Alford’s Esanda Finance Facility.  Their attribution as a benefit to Mr Ebbage by Mrs Atkinson when these statements were drawn up in November 2002 was therefore, based on a controversial assumption which depended on a finding by this court that there was the arrangement with regard to the repayment of Mr Alford’s Esanda Finance Facility by Mr Ebbage which was contended for the statement of claim.  An additional problem was that Mrs Atkinson was unable to say why that payment appeared under the heading “Consultancy – Ebbage”.  She said that was “just where it’s landed, basically”.  That was clearly an inaccurate description of these items.  If they had in fact been consultancy fees, they would have been an expense which was to be deducted from the gross profit.  She explained that these were draft profit and loss statements but nevertheless she could not explain why, as a person accustomed to preparing profit and loss statements, she has placed these items under consultancy fees.  At first it appeared that the explanation probably lay in the haste with which these profit and loss statements were prepared but Mrs Atkinson’s evidence revealed that the explanation in fact lay in the forensic use intended to be made of them by the plaintiffs.  The attribution to Mr Ebbage was based solely on what Mr Alford told Mrs Atkinson.  He told her that it was a consultancy.  She entered it as such.  The effect was to falsely inflate what was said to be Mr Ebbage’s profit share.

   [2]See Exhibit 64

1. A number of other entries under the heading “Consultancy – Ebbage” were entitled “MR2 Lease”, “Fuel” and “M2 Rego”.  These payments were for a car used by Mrs Ebbage partly for work and partly for personal purposes.  To the extent that the use was work related, those payments would be an expense deducted from the gross income before profit was determined.  It was not possible for Mrs Atkinson to say how much of the $9,185.40 attributed to the MR2 motor vehicle was for business and how much was personal use and therefore how much would be a business expense which would not form part of Mr Ebbage’s profit share. 

1. The same problems applied in relation to other years and to the vehicle used by Mr Ebbage for both business and personal purposes.  In 1993/1994, $9,523.21 was attributed to the vehicle used by Mr Ebbage.  That others in the business appeared to use it is suggested by a number of entries for fuel put in by other employees.  Indeed under another heading of “Associated - Consultancy (Ebbage)”, $26.59 was attributed to a payment of fuel by Mr Alford on an Amex card.  Mrs Atkinson was not “100 per cent sure” what that related to.  In 1994/1995, $18,372.48 was attributed to Mr Ebbage’s vehicle.  In 1995/1996, $73,916.96 was attributed to “Associated - Consultancy (Ebbage)”, most of which appeared to be payment for Mr Ebbage’s vehicle or payment of Mr Alford’s Esanda Finance Facility by companies associated with Mr Alford.

1. Mrs Atkinson also attributed $1,330.66 in 1993/1994 and $1,450 in 1994/1995 in advertising to the benefit of Mr Ebbage although this was a fully deductible expense of the practice.

1. A number of movements in loans were noted and added or subtracted but Mrs Atkinson conceded in cross-examination that none of the loan entries would have been taken into account in calculating profit and loss.

1. It was simply not possible for me to be satisfied on the balance of probabilities that Mr Ebbage had in fact received a profit share of in excess of $400,000.  This was an elaborate construction designed solely, and unsuccessfully, to bolster Mr Alford’s credibility.

Documentation of the accountancy partnership

1. Mr Alford asserted that, given their previous lax attendance upon formal documentation of agreements between them, it was agreed that the structure adopted for the AE practice would be formally documented with all the associated agreements, companies, trusts and the like being attended to.  Mr Alford said Mr Ebbage was charged with the responsibility of documenting the AE practice arrangements as well as incorporating the necessary companies, amending existing company shareholdings, directorships, settling trusts, attending to minutes, consents, authorities, bank records and the like.  He said that Mr Ebbage completed this task in late April 1993 and completed the necessary company and trust requirements.  A meeting of Mr Alford and Mr Ebbage as directors of AE on 5 April 1993 noted the completion of the PPG Trust, associated, as Mr Alford said in his evidence, with him, and the Ebbco Trust and Ebbco Holdings Trust, associated with Mr Ebbage. 

1. Solicitors were engaged to finalise draft agreements prepared by Mr Ebbage.  Mr Alford said that he gave instructions himself to Michael King, who was at that time a partner of McLaughlins, the law firm that they then used.

1. Mr Alford said the agreement with Mr Ebbage that Mr Ebbage would pay Mr Alford’s Esanda Finance Facility was recorded in notes which are no longer in Mr Alford’s possession.  There was, as I have said, no executed written agreement. 

1. Minutes of a management meeting of AE Pty Ltd held at the Southport practice on 30 March 1993 refer to a number of matters including the $200,000 owing on the Esanda Finance Facility for the Southport practice and $200,000 owing to Crayfield in respect of the Beaudesert practice.  No mention is made of Mr Ebbage’s having responsibility for the repayment of the Esanda Finance Facility.

1. Mr Alford asserted that, at the time of the inception of the AE practice, his Esanda Finance Facility was being serviced on an interest-only basis.  Discussions had been held with officers of Esanda Finance and Mr Alford with a view to formalising a debt reduction programme.  Mr Alford said that his relationship with Esanda Finance was excellent.  Mr Alford also said that Mr Ebbage had an outstanding loan facility with Esanda Finance in the amount of $100,000, and that Mr Ebbage’s relationship with Esanda Finance was very strained.  Mr Alford said his own relationship with Esanda Finance became difficult after November 1993 when various arrangements and undertakings to repay principal amounts of the Esanda Finance Facility were made but not honoured.  Mr Alford said that Esanda Finance placed pressure on him to repay the Esanda Finance Facility “after forming the view that the earnings or profits of the Southport practice were being shared with [Mr Ebbage]”.

1. Mr Alford said that his indebtedness to Esanda Finance was never fully discharged by Mr Ebbage.  Mr Alford gave evidence that Mr Ebbage endeavoured to sell the Beaudesert practice in late 1995 and agreed to use the proceeds from the sale of the Beaudesert practice to settle, wholly or substantially, the Esanda Finance Facility.  Mr Alford said that Mr Ebbage did not honour this commitment and that the balance of the outstanding liability under the Esanda Finance Facility was paid by Mr Alford.  He said that all payments to Esanda Finance were made by Cranot or other companies associated with Mr Alford’s family and funded from the AE practice, except for one payment of $30,000 made by Mr Ebbage immediately after the sale of the Beaudesert practice in January 1996.

Sale of the Beaudesert practice

1. Mr Ebbage sold the Beaudesert practice by contract dated 15 December 1995 to Karric Pty Ltd (“Karric”) and Alise Pty Ltd (“Alise”) (“the Beaudesert sale contract”).  Karric was a company under the control of Richard Gillow who had been an employee of AE at the Beaudesert practice from the time the AE practice commenced in 1993 and of AES from 1 July 1994.  Alise was controlled by Alan Teese.  The sale price was $348,000, made up of $30,000 for plant and equipment and $318,000 for goodwill.  The sale settled on 2 January 1996.  The negotiations for the sale of the Beaudesert practice took place from early 1995.  Mr Gillow and Mr Teese retained a Brisbane firm of solicitors who drew up a draft contract.  Further negotiations ensued and towards the end of 1995 Mr Alford negotiated with Mr Gillow and Mr Teese over the terms of the contract.  A new contract was drawn up by another firm of solicitors.

1. On 3 January 1996, Mr Ebbage received into his bank account the proceeds of the sale of the Beaudesert practice.  On 8 January 1996, Mr Ebbage paid $300,000 to Crayfield and $30,000 to Cranot.  On 11 January 1996, Mr Ebbage paid a further $17,500 to Cranot.  Both payments to Cranot were recorded as a loan.

1. The accountancy partnership between Mr Alford and Mr Ebbage was severed in January 1996 with the sale of the Beaudesert practice.  Mr Alford asserted in cross-examination that it was then that $400,000 became immediately payable by Mr Ebbage in respect of the Esanda Finance Facility even though that had not been a term of the original agreement but was, Mr Alford said, agreed by Mr Ebbage in mid-1995 when he decided to sell the Beaudesert practice.

1. Thereafter Mr Ebbage received $600 per week which was subsequently reduced to $346 per week until about June 1998.  In addition, $3,000 per month was paid on the mortgage on Mr Ebbage’s principal place of residence at Monaro Drive, Bonogin and sundry debts were paid.  Mr Alford said these moneys were paid from the income generated by the Southport practice.  He said he agreed to pay these moneys because of what he described as his equal interest in AET and his understanding that Mr Ebbage would act in his best interests in relation to his management of AET.  This agreement was not verified in writing.  Another, more likely explanation was that this was part of the financial settlement between them at the termination of the partnership, the responsibility for run-off matters, the maintenance of goodwill of the Southport practice and the payments received by the Beaudesert practice for work in progress which had not been purchased by the new owners.

1. Mr Alford said that Mr Ebbage told him the reason that he did not pay more to discharge the Esanda Finance Facility was that he was obliged to repay debts owed to his father, Mr Ebbage Snr.  Yet it appears from the affidavit filed by Mr Alford in these proceedings that he had a power of attorney to act on behalf of Mr Ebbage during the negotiations and anticipated settlement of the transaction and so had the capacity to direct payment of moneys received.  Mr Alford executed the sale contract of the Beaudesert practice for Mr Ebbage under his power of attorney.  Mr Alford’s role in the sale of the Beaudesert practice was confirmed by Mr Gillow.

1. Mr Alford asserted that the failure by Mr Ebbage to discharge undertakings to make partial repayments of the principal under Mr Alford’s Esanda Finance Facility as well as Mr Ebbage’s failure to discharge undertakings with respect to his own finance facility with Esanda Finance, irretrievably damaged Mr Alford’s relationship with Esanda Finance.  However, that is a self-serving version of the true reasons for the deterioration in Mr Alford’s relationship with Esanda Finance. 

1. Esanda Finance was clearly increasingly unhappy that its debtor, Mr Alford, was not making repayments of capital owed by him.  He had not assigned the debt and its repayment so of course he remained personally liable for repayment of the debt.  Mr Alford said in his affidavit that he was outraged that Mr Ebbage put his own financial needs and that of his estranged wife above the need to repay Mr Alford’s debt to Esanda Finance.  Mr Alford asserted that Mr Ebbage took far in excess of 50 per cent of the profits from the AE practice and “did not sacrifice any or very little of his profit share to accommodate the $400,000 profit share payment to which [he] was entitled”.

1. Mrs Atkinson gave evidence as to her reconstruction of the Esanda Finance Facility and its repayment history as well as by whom the debt was to be paid.  Her affidavit showed that she did not discuss the liability for repayment of the Esanda Finance Facility at the time.  It appeared that the only source of her information, other than contemporaneous documents, which speak for themselves, was Mr Alford and so her evidence on that matter added nothing to his.  For example, she said that she was told by Mr Alford that Mr Ebbage had assumed liability for repayment of the loan and had agreed that the principal would be repaid from the sale of the Beaudesert practice in 1996.  But it appeared from cross-examination that she was not told this information at that time, but rather subsequently, once this litigation had commenced.  As such, her evidence was no more than a repetition of the self-serving statements made to her by Mr Alford and cannot make his case any stronger. 

1. This matter points to a difficulty in relying on Mrs Atkinson’s evidence.  She was first employed by Mr Alford as a young book-keeper in 1991.  He effectively took her into partnership with him and two others before she was even a qualified accountant.  She only graduated with a Bachelor of Business in April 2001 and at the time of trial had not yet achieved her professional qualification as an accountant.  She was, perhaps understandably, very loyal to him and accepted what he told her in the preparation for this litigation without question.  Her trust in him was shown by the fact that the joint venture in the accountancy practice in which she believes herself or her corporate vehicle to be a party remains undocumented.  She was unable to say which entity held Mr Alford’s interest in this joint venture.  During her evidence, she appeared reasonably intelligent but somewhat naïve and relatively unsophisticated compared, in particular, to Mr Alford and his associates such as Mr Diamond.  Her lack of concern about being a party to such an oral agreement where she does not even know the identity of one of the joint venturers was, in the context of this litigation, indicative of her trusting, loyal but unsophisticated and naïve nature.  The lack of objectivity in her evidence often undermined its utility.

1. Mrs Atkinson conceded that she did not distinguish in her affidavit, which constituted her evidence-in-chief at the trial, between what she knew at the time of events or transactions she described and what she was told by Mr Alford after the death of Mr Ebbage or in preparation for the trial of this matter.

The history of the Esanda Finance Facility

1. The contemporaneous documents in evidence showed that Mr Alford borrowed money from Esanda Finance.  The account number was 464037864.  The loan was secured by a Bill of Sale 01009/89 which was renewed as 780/94 in respect of property described as “leases, personal property, goods, chattels, effects, furniture, fittings, plant and equipment, goodwill, bookdebts and all assets and undertakings of the business known as ‘Alfords’ ”.  The loan was also secured by a company charge BC891617 (renewed as 276345) over the same property.  It was due for repayment on 11 October 1993.

1. The records of the AE practice showed that Grant Ferguson (“Mr Ferguson”) from Esanda Finance phoned on 18 October 1993 about the debt which was by then due for repayment.  On 19 January 1994, Mr Alford wrote to Mr White, the State Manager, Commercial Finance of Esanda Finance, complaining that he had been given verbal assurances by employees of Esanda Finance that his expired Finance Facility would be extended without further security, but that this had later been contradicted by a letter of 24 November 1993 from Mr Kling of Esanda Finance.  Mr Alford said that he had asked Mr Ferguson if he could extend the interest-only loan for 12 months and thereafter convert to a principal and interest loan for seven years.  Mr Ferguson said he was not confident that another period of interest-only loan would be approved.  Mr Alford said that nonetheless he assumed that approval had been granted.  However, he was contacted by another employee of Esanda Finance, Ms Jenkins, who told him that additional security would be required if Esanda Finance was to consider extending the loan at all.  Mr Alford told her that he had assumed that the loan had been renewed because of the length of time in which he had not been told anything to the contrary.

1. Mr Alford said in the letter that subsequently, on 2 November 1993, he received advice from Mr Kling confirming that the advance had been extended for a further six months on an interest-only basis, and that upon expiry of the six months, a further extension would be on a principal and interest basis for which freehold security might be required.  However, Mr Alford said he received a letter from Mr Kling dated 24 November 1993 which in no way correlated with his interim advice of 2 November 1993.  Mr Alford went on to assure Esanda Finance that his association with Mr Ebbage had no effect on his income or upon the security that Esanda Finance had.  He said that:

“It appears Esanda has some concern with Mr Ebbage, however, I fail to see what this concern has to do with my facility.  As previously stated my conduct should be under review not that of a person who in real terms has no authority over the practice known as Alfords which is Esanda’s prime security.”

These representations to Esanda Finance as to his relationship with Mr Ebbage make no mention at all of the agreement that he asserted in this matter that he had made with Mr Ebbage that Mr Ebbage was in fact responsible for the repayment of Mr Alford’s Esanda Finance Facility.  His contemporaneous statements to Esanda Finance were inconsistent with what his assertions were during the trial of this matter.

1. In order to further convince Esanda Finance of his capacity to repay moneys owing to Esanda, Mr Alford asserted that “Gross Fees for the years ended 30/6/92 and 30/6/93 were approximately $700,000 and $600,000 respectively”.  He said that his maintainable fee base could be assumed to be $500,000.  This of course contradicts the evidence which he gave in this court that as at March 1993 the Southport practice generated fees in excess of $1,000,000 per year.  As I have said previously, that evidence was patently untrue.  When faced with this further contradiction of his evidence, Mr Alford said that what he and Mr Ebbage did was sit down with a list of clients and place against each of those clients the estimated fee base that would be generated in a year.  However, he said the document evidencing that had not been discovered as it was “totally irrelevant”.

1. On 26 May 1994, Craig Camm, Manager, Professional Equity Finance from Esanda Finance, wrote to Mr Alford saying that the Finance Facility had expired on 11 October 1993 and the subsequent delay in renegotiating the facility was unsatisfactory and that Mr Alford’s reluctance to return his numerous telephone calls was most disappointing.  Mr Camm called for certain information to be provided by 3 June 1994 including up-to-date trading results to 31 March 1994 for the practice and its service company; an updated statement of position; latest cash flow forecast or budget for the practice to 30 June 1995; the signed Privacy Act agreement; and his intended repayment arrangement with regard to the facility.

1. Everything within the AE practice was not going smoothly.  In June/July 1994, the Nerang practice of the AE practice was closed down.  Both Mr Alford and Mr Ebbage were concerned with other matters.  Mr Alford was considering a move to the United Kingdom.  Mr Ebbage was preoccupied with AET. 

1. On 4 October 1994, a Notice of Exercise of Power of Sale under the Bill of Sale was given to Mr Alford because of his default in repaying the principal of $199,819 which was due on 11 October 1993, together with interest.  The total sum owing as at 29 September 1994 was $202,674.74.  On 6 October 1994, Esanda Finance served a Notice of Exercise of Power of Sale on AEH, formerly Whitewell, pursuant to the company charge.   On 10 October 1994, Mr Alford and Mr Ebbage considered the debts owed by each of them and the AE practice and a debt reduction programme.  A note prepared showed that Mr Ebbage personally owed $1,155,000 and Mr Alford owed $970,000.  In addition, they jointly owed $2,897,000.  The $200,000 owed under the Esanda Finance Facility was part of Mr Alford’s personal liabilities.  There was no suggestion that that liability had been taken on by Mr Ebbage or was a joint liability.  The method proposed for repayment of the Esanda Finance Facility was the sale of SCT Ltd shares. 

1. On 4 January 1995, Mr Alford wrote to Mr Camm at Esanda Finance submitting a repayment proposal showing an immediate payment of $25,000, further payments of $25,000 at the end of January, February and March with payments of $50,000 at the end of June 1995 and December 1995.  In that letter he says, “I confirm that the above repayments will be sourced from the sale of public company shares”.  That statement does not tend to support his claim in these proceedings that the repayments were to be made by Mr Ebbage.  On the same date, Mr Alford sent a cheque to Esanda Finance for $25,000; while it is signed by him the cheque is from Cranot as trustee for Cranot Trust No 3.  In evidence, Mr Alford said that, contrary to the representation in his letter to Esanda Finance, those funds came from AEF or AES but not from the sale of SCT Ltd shares.  He was unable to say what the ultimate source of that money was.

1. There were file notes of various telephone calls between Mr Alford and Mr Camm with regard to the Esanda Finance Facility in January, February, and August 1995.  A file note on 30 January 1995 recorded:-

“1.AJA rang Rick Mayne and instructed him to sell $150,000 worth of SC shares at any cost.

2.Sell Charter Pacific shares and options prior to 28/2/95.

3.Get $25,000 of [sic] Reid for 30 days – AJA to put funds in Cranot name and draw Esanda cheque from Cranot P/L 1/2/95.”

That file note appears to be in Mr Ebbage’s handwriting.  Mrs Atkinson asserted that the SCT Ltd shares belonged to Mr Ebbage but provided no basis for this assumption.  The fact that Mr Alford instructed their sale suggests that, on the contrary, they belonged to him.  She said that the Charter Pacific shares belonged to both Mr Alford and Mr Ebbage, but, even if that were true, and there was no objective evidence as to its truth, it is equivocal as to whether Mr Ebbage had taken on the responsibility for repayment of Mr Alford’s Esanda Finance Facility.

1. The balance sheet and the annual trial balance for Mr Alford drawn up on 16 July 1996 for the financial year ending 30 June 1996 showed the Esanda Finance Facility of $200,000 as a liability of Mr Alford’s.  It made no mention of the $400,000 or any other figure said to be owing to Mr Alford from Mr Ebbage.

1. A file note apparently in Mr Ebbage’s handwriting on 3 August 1995 recorded:-

“CC [Craig Camm] - Advises
 AJA – Lack of co-operation

-  has had a gutful of AJA’s promises

-  treated with total disdain
           -  had only just provided 94 F/State

- he had been given unconditional promises on numerous occasions for financial statements and letters

-  sure that PE had nothing to do with S/port practice

-fees had deteriorated in ’94 and they were concerned with their security.

There was no way Esanda wanted the loan or any part of it on their books.  IT MUST BE PAID OUT.
CC had copped a lot of flack internally about how AJA loan had been conducted.
AJA to ring CC by 11^th August to discuss payout.  Esanda may give extra time eg. 2 weeks to 1 month to pay out loan.”

1. A long file note dated 15 August 1995, apparently in Mr Alford’s handwriting, of a telephone conversation with Mr Camm did say, inter alia, “association with PGE is still basically the problem”.  It is possible that that comment by Mr Alford may suggest some support for his assertions that the Esanda Finance Facility was repayable by Mr Ebbage and that his association with Mr Ebbage was the source of his problems with Esanda Finance.  However, it is more consistent with his asserting to Esanda Finance that the source of his problem with repayment of the loan was his association with Mr Ebbage.  His failure to repay moneys well overdue would, of course, require him to give some explanation.  His behaviour before and after this date showed that Mr Alford made various promises and representations about repayment which he did not keep. 

1. Nothing in the documentary evidence suggests that he informed Esanda Finance what he now asserts, that Mr Ebbage was contractually bound, by an agreement he made with Mr Alford, to repay Mr Alford’s Esanda Finance Facility.

1. On 17 August 1995, Mr Alford on behalf of Cranot, wrote to Mr Camm at Esanda Finance with a repayment proposal which would result in a balance at 30 December 1995 of $50,000 which would be paid on 31 December 1995.  He confirmed that the progressive payments which were outlined would be primarily funded from practice cash flow and that the final payment on 31 December 1995 would, to a large extent, be reliant on proceeds from asset disposal.  On 25 October 1995, Terry Simpson of Esanda Finance telephoned and Mr Alford told him that he still expected to be able to pay the remainder owing on 31 December 1995.

1. On 21 December 1995, Mr Alford told Esanda Finance that settlement of the sale of the AE practice would occur on 30 January 1996, that an amount of $30,000 would be paid by 3 January 1996 with the balance on 31 January 1996.  On 8 January 1996, Mr Alford sent a cheque for $30,000 in repayment of the Esanda Finance Facility to Esanda Finance.  Cranot had on that day received $30,000 by cheque from Mr Ebbage.  As previously noted, Mr Ebbage paid $30,000 to Cranot on 8 January 1996 and $17,500 on 11 January 1996 both of which are recorded as loans to Cranot.  There were numerous phone calls in February 1996 from Esanda Finance with regard to the settlement on 31 January 1996 which Mr Alford said had not gone ahead. 

1. On 11 March 1996, Esanda Finance wrote to Mr Alford referring to the fact that the loan agreement expired in October 1993 and that despite various agreements and indulgences an amount of $74,827.61 was owing on the Finance Facility as at 14 March 1996.  Esanda Finance said in the letter, “We understand that some problems have been incurred in respect to the proposed sale of part of your practise [sic] which has again caused delay to the conclusion of this lending”.  The “proposed sale” of the Beaudesert practice had in fact occurred by then.  Mr Alford said in evidence that this in fact referred to his sale of part of the Southport practice to Garry Best, Alicia Atkinson and Karl Farmer.  If so, then it was money which he was to receive and not Mr Ebbage’s funds that were to be used to repay the Esanda Finance Facility.  Mr Alford was informed in the letter that if Esanda Finance had not received payment by 15 March 1996 they would refer the matter to their solicitors.

1. The liability was finally discharged on 12 February 1997.

1. In the statement of claim, the plaintiffs claimed $400,000 as the sum in which Mr Ebbage was indebted to Mr Alford as well as expenses incurred of $76,714.47.  Mr Alford said in cross-examination that the figure pleaded of $400,000 was incorrect as $30,000 of that sum had been paid.

1. Apart from his assertions, the only objective factor which might support Mr Alford’s case that Mr Ebbage was responsible for the repayment of Mr Alford’s Esanda Finance Facility was the actual payment of $30,000 by Mr Ebbage to Cranot upon the sale of the Beaudesert practice.  Like so much of the other evidence, however, this payment was equivocal.  It was the price set out in the Beaudesert sale contract for plant and equipment. I did not, for reasons previously set out, find Mr Alford to be a reliable witness on controversial matters and I am therefore unable to rely on Mr Alford’s assertions. There was insufficient evidence to persuade me on the balance of probabilities that Mr Ebbage, or any entity associated with him, had agreed to repay Mr Alford’s Esanda Finance Facility and that Mr Ebbage still owes $170,000 or any other amount to Mr Alford, or any entity associated with him, in respect of Mr Alford’s Esanda Finance Facility.

Investment in Split Cycle Technology

1. In February and March 1993 when Mr Ebbage and Mr Alford were discussing the renewal of their partnership and formation of the AE practice, Mr Alford told Mr Ebbage about SCT Ltd.  This was an unlisted public company incorporated in New South Wales in March 1988 to research, develop and commercially exploit a patented adaptation of the internal combustion engine invented by Rickard Mayne. Mr Alford took a substantial investment in SCT Ltd himself when he became aware of it after having advised clients of his accountancy practice as to their potential tax liability from their investment in SCT Ltd.  Mr Alford did not reveal to Mr Ebbage the names of those shareholders, who were Bretton and Francis Hawker, but told Mr Ebbage that there were many SCT Ltd shareholders who stood to make significant capital profits as a result of share and option purchases in SCT Ltd and that Mr Alford, his family, and other clients, including Colin Diamond, had procured shares or options in SCT Ltd. 

1. After Mr Ebbage expressed some interest in an investment in SCT Ltd, Mr Alford invited him to the Gold Coast Indy car race in March 1993 as a guest in the SCT Ltd corporate box.  Mr Alford introduced Mr Ebbage to a number of people involved in SCT Ltd including Mr Mayne, the inventor of the engine known as the split cycle engine and managing director of SCT Ltd.

1. Mr Alford said in evidence that he and Mr Ebbage attended a meeting with Mr Mayne at 6.00 am on 24 March 1993 at the premises of SCT Ltd at Arundel on the Gold Coast where Mr Mayne demonstrated the principles of his technology and the prototypes.  On 26 March 1993, Mr Ebbage purchased an initial shareholding and option holding in SCT Ltd for $40,000.  That investment was substantially increased by Mr Ebbage directly with Mr Mayne or through Mr Alford.  Mr Alford, however, rather curiously denied under cross-examination that he invited Mr Ebbage to invest in SCT Ltd.

1. Mr Alford said that Mr Diamond, and his clients and associates, acquired a significant shareholding and option holding in SCT Ltd through Chancetest Ltd (“Chancetest”) a company which had been incorporated in the United Kingdom in 1991 specifically to invest in SCT Ltd.  Mr Diamond said that Chancetest invested in SCT Ltd shares on Mr Alford’s recommendation.  It appears that Dario sold 145,000 shares to Mr Diamond for $149,350 on 14 December 1993.  Mr Alford told Mr Diamond that he and Mr Ebbage had, independently of each other, each substantially invested in SCT Ltd.

Mr Manthey’s invention and the initial agreement

1. The third important character in the events that unfolded was Steven Manthey.  Mr Manthey invented and developed new ideas for internal combustion engines whilst working as a mechanic on the Gold Coast.  He had left school in the mid-1970s at the age of 13.  While he has great difficulty with literacy, Mr Manthey is an intelligent person with an obvious inventive insight with regard to machinery.  His literacy problems could be seen in the obvious difficulty he had reading documents put to him while he was giving evidence, moving his lips as he read to himself.  After leaving school, he started rebuilding car engines and thinking about ways in which they could be improved.  Although he had no formal training, he obtained work with a light engineering firm, and then in the late 1980s, he opened a car repair and panel workshop known as Exotic Autos.  At around the same time, he met Mr Ebbage who was a car enthusiast.  Mr Manthey spent many years working from time to time on rebuilding a Pantera DeTomaso motor vehicle owned by Mr Ebbage.  For various reasons, including his lack of skill and interest in that area, Mr Manthey’s financial and business affairs were poorly recorded or managed.  He has always relied on the advice of others in his financial and business affairs.

1. During 1992, Mr Ebbage asked Mr Manthey about the organisation of his business.  An informal arrangement was made for Mr Ebbage to gather together Mr Manthey’s financial records and help Mr Manthey to organise his financial affairs.  No cash payment was made by Mr Manthey for this.  Instead, Mr Manthey assisted Mr Ebbage by, for example, inspecting a boat on the Sunshine Coast that Mr Ebbage was thinking of purchasing.  Mr Ebbage had therefore gratuitously taken on responsibilities to Mr Manthey as his accountant.

Mr Alford’s account of two agreements with Mr Ebbage and Mr Manthey

1. Mr Alford gave evidence by affidavit sworn on 20 March 2002 that he had met Mr Manthey in Mr Ebbage’s presence on a number of occasions.  He said that in April 1993, Mr Ebbage told him that he had discussed SCT Ltd and its engine technology with Mr Manthey.  Mr Ebbage said that Mr Manthey was scathing in his criticism of both the SCT Ltd technology and its inventor, Mr Mayne.  Mr Alford said he knew from previous discussions with Mr Ebbage and Mr Manthey that Mr Manthey had many ideas regarding mechanical apparatus including some relating to purported significant improvements on the traditional internal combustion engine.

1. Mr Alford said that in April or May 1993, Mr Manthey flippantly told Mr Alford and Mr Ebbage at Mr Manthey’s workshop that rather than waste their money investing in SCT Ltd shares, they should fund him to develop his ideas.  He gave reasons why the split cycle technology would not, and could not, be commercially exploited.  Mr Alford said that he and Mr Ebbage disregarded Mr Manthey’s criticisms but nevertheless became interested in funding the development of Mr Manthey’s ideas.

1. Mr Alford said that one weekend in late May or early June 1993, he visited Mr Manthey’s workshop with Mr Ebbage and again discussed the split cycle technology and Mr Manthey’s ideas for the development of an alternative engine technology for “a fraction of the cost” spent by SCT Ltd.  He said that at the conclusion of that meeting it was resolved between the three of them that Mr Ebbage would continue discussions with Mr Manthey.  Mr Alford said that after returning from Mr Manthey’s workshop, he made a file note of those criticisms made by Mr Manthey that he could recall.  That file note was not produced at the trial of this action.

1. Mr Alford said that a week after his meeting with Mr Ebbage and Mr Manthey at Mr Manthey’s workshop, an investor and shareholder in SCT Ltd, Gordon Bird, was at the office of the Southport practice for a meeting on a matter unrelated to SCT Ltd.  Mr Alford said that Mr Bird had an engineering background and had invested in SCT Ltd in 1992, having inspected the split cycle engine technology in 1991.  Mr Alford said he told Mr Bird of the criticisms made by Mr Manthey of the split cycle engine.  Mr Bird was, he said, dismissive of some of the criticisms but agreed that others had merit and had been raised by Mr Bird himself when he initially investigated the technology.  Mr Bird did not give evidence at the trial of this matter.

1. Mr Alford said that immediately after that meeting he told Mr Ebbage of Mr Bird’s comments and that he and Mr Ebbage agreed that Mr Alford would discuss Mr Manthey’s criticisms with Mr Mayne.  Mr Alford said he also told Mr Hawker of Mr Manthey’s criticisms.  Mr Hawker gave evidence by affidavit and was cross-examined by telephone as he was in New Zealand at the time of the trial.  Mr Hawker’s evidence confirmed that Mr Alford told him that an associate of Mr Ebbage was critical of Mr Mayne’s engine.

1. Mr Alford gave evidence that on 16 June 1993 he met with Mr Mayne at the SCT Ltd premises and discussed the issues in the file note which he had made and told Mr Mayne that the criticisms had been made by an engineering associate of Mr Ebbage’s (that is, Mr Manthey). Mr Mayne gave evidence by affidavit and was cross-examined.  He did not recall whether Mr Alford met him on this date.  He said that Mr Alford used to visit the factory regularly.  Mr Mayne had no recollection of Mr Alford’s mentioning the name Steven Manthey, or showing Mr Mayne a list of criticisms in mid-1993.   

1. Mr Alford said that Mr Mayne satisfied his queries.  He said that Mr Mayne said he welcomed any inspection or meeting to discuss his technology. 

1. Mr Alford said that he met with Mr Ebbage on the evening of 16 June 1993 and that they agreed they would arrange for Mr Manthey to visit the SCT Ltd factory and inspect the latest version of the split cycle engine.  He said that Mr Ebbage obtained Mr Manthey’s agreement to inspect the split cycle engine prototypes and that he arranged with Mr Hawker and Mr Mayne for Mr Manthey and Mr Ebbage to attend the SCT Ltd factory.  Mr Hawker gave evidence that he arranged for Mr Ebbage and Mr Manthey to meet and speak with Mr Mayne.  He said that “from recollection” that occurred in or about mid-July 1993.  Mr Hawker was not however himself present at any such meeting and has no independent knowledge of the date.  His evidence was consequently of little assistance in determining the date of the visit by Mr Manthey and Mr Ebbage to the SCT Ltd factory.

1. Mr Alford said that an inspection by Mr Ebbage and Mr Manthey of the engine took place at the SCT Ltd factory on 14 July 1993.  Mr Alford said that he met with Mr Ebbage earlier that day and arranged to meet with Mr Ebbage and Mr Manthey after the inspection.  Mr Alford said that he received a call from Mr Ebbage at about 12.35 pm advising that he was delayed and would arrive with Mr Manthey in approximately half an hour.  Mr Alford said the meeting in fact took place at the Southport practice at about 2.00 pm and lasted for two hours and 45 minutes, and that as a result he was obliged to rearrange a meeting he had previously scheduled with clients at the Nerang practice for 4.00 pm that day. 

1. Mr Alford said that Mr Manthey was steadfast in his criticism of the split cycle technology.  Mr Alford said that during the meeting on 14 July 1993 he wrote a three page prompt itemising some 28 criticisms and comments made by Mr Manthey during that meeting.  There is a file note on AE practice letterhead in Mr Alford’s handwriting which he said was the prompt that he wrote during the meeting on 14 July 1993.  However the file note was undated.  Mr Alford said that he was nevertheless able to date the meeting from the telephone message recorded by a member of staff advising that “Steve” and Mr Ebbage would arrive in half an hour.

1. There is a telephone message which Mr Alford referred to as supporting this version.  It is to “Tony” from “Paul” dated 14 July 1993 at 12.35 pm and says, “Will be here in ½ hour with Steve”.  In the plaintiffs’ submissions it was argued that what happened was that “Ebbage leaves message for Alford that he and Manthey would be at Alford Ebbage Southport office in half hour”.  The message does not refer in terms to Mr Manthey but rather to “Steve”.  As submitted by the defendants, it is equally likely that the message referred to any other client of the accountancy firm or indeed any other person called Steve.

1. Mr Manthey directed Neil Cummings of the firm M Neil Cummings & Associates in Los Angeles to receive $US1,500,000 into his trust account for the benefit of OX2ED.  Mr Manthey directed him to then deposit those funds to the Chase Manhattan Bank in New York for the account of the Royal Bank of Scotland (Nassau) Ltd Account no. 544-7-03599 for Bond Mercantile Ltd sub account no. 2779 (which company maintains its offices at Nassau in the Bahamas).  Mr Manthey said that he directed the moneys to the Sabre Foundation, a trust of which he and his family were the sole beneficiaries, to correct what he believed to be the imbalance of moneys paid to or on behalf of Mr Ebbage before his death. 

1. Mr Manthey denied that he knew where the money paid to the Royal Bank of Scotland had gone during his deposition held on 26, 27 and 30 March 2001 in the New Mexico litigation.  He also claimed a lack of familiarity with the Sabre Foundation.  His ignorance of the Sabre Foundation was quite plausible given Mr Manthey’s reliance on others at that time and his lack of understanding when financial matters were explained to him.  He was clearly much better informed by the time of trial which is only to be expected given the amount of litigation in which he had by then been involved.  He gave evidence which I accept that before the trial he “checked up” on all these matters so that he would be able to answer questions about entities set up and things done by others on his behalf.  This was in an entirely different category to the “oral agreements”, significant aspects of which Mr Alford was unable to remember before the litigation began but whose memory of them improved as the litigation progressed.  Those matters were peculiarly within Mr Alford’s memory and knowledge whereas with regard to financial dealings, Mr Manthey relied heavily on the advice and actions of others.

1. On 11 June 1999, Mr Manthey caused Motor City to transfer 381,714 shares in AET Inc to Glencoe Estates Ltd (“Glencoe”), a Cayman Islands company, free of charge.  When he gave his deposition in the New Mexico proceedings, Mr Manthey had difficulty recalling this particular transaction.  He said, however, that he thought that he was the beneficial owner of Glencoe and that the likely reason for this transfer was to take them away from the control of Moores Rowland whom he no longer trusted because of the many share transfers of which he had been unaware. 

1. Mr Manthey also directed Gregory Howland to record the cancellation and re-issue of the remaining 11,034,600 AET Inc shares held by OX2ED to three corporations which were established and controlled by Mr Manthey through Mr Sharp: 1,428,000 shares to Carmel International Corp (“Carmel”), a company incorporated in the Bahamas;  4,089,300 to Maverick Associates Inc (“Maverick”), a company incorporated in Nevis;  and 5,517,300 to Coach Financial Inc (“Coach”), a company incorporated in Belize.  There was no consideration to be paid for these transfers.  Mr Manthey gave evidence that the shares were to be held for the benefit of OX2ED.  The advantage of holding the shares in those countries was that the identity of the beneficial owners and controllers of the shares would be kept confidential.  The shares were bearer shares which were not registered and were therefore transferable by delivery of the stock certificates.  Mr Manthey caused 71,362 of the shares held by Coach to be transferred to other persons and entities.

1. Mr Howland, a resident of New Mexico, at that time performed secretarial and other duties for AET Inc although he was not the company secretary.  He provided information to United Stocks Transfer so that the transfers could be effected.  He also effected the recording of the transfers of the shares in the register of AET Inc on Mr Manthey’s instructions.  Mr Travis from the brokerage firm, Patterson Travis, did not know of these transfers at the time that they occurred.  He was concerned when he did find out that the shares might flood the market driving the price down.  He was also concerned about the failure to file the proper SEC disclosure about the transfer of the shares.  Subsequently Mr Manthey provided Mr Howland with instructions to transfer stock out of Maverick to specified individuals.  Mr Howland refused to obey that instruction.  The plaintiffs submitted that this demonstrated that the assertion that the shares were still beneficially held by OX2ED was not true at the time they were transferred to Carmel, Coach and Maverick.  They further submitted that Mr Manthey’s claim that the shares were beneficially held by OX2ED was an opportunistic one to prevent disclosure of his interest in the shares in documents filed with the SEC and to forestall Mr Ebbage’s estate.

1. Mr Manthey gave evidence, however, which on balance I accept, that he transferred the shares in that particular way so that half of them would be in Coach to be held for Mr Ebbage’s estate and half into two separate companies so that he could sell them when they progressively became unrestricted shares to raise finance to ensure that the work would continue and he could make some money for himself.  This structure had been recommended by Mr Sharp.  After the New Mexico litigation commenced, Mr Manthey caused the shares then owned by Coach, Carmel and Maverick to be deposited in a Californian court so that they were able to be transferred pursuant to any judgment in the New Mexico litigation and to rebut accusations that he was trying to hide or steal shares.

1. In mid-1999, Mr Sharp telephoned Mr Howland to inquire as to the status of AET Inc and what kind of shares were held by Coach, Carmel and Maverick and whether the shares held by Maverick were transferable.  He was told there was a legend on the stock which was placed under r 144 of the Securities and Exchange Commission Act 1933 (US) which restricted them from being resold to the general public for a period of time. 

1. On 23 July 1999, Mr Ebbage Snr was granted probate of Mr Ebbage’s estate.  The grant was resealed in Vanuatu on 2 September 1999.  In their prayer for relief, the plaintiffs sought, inter alia, the revocation of probate with letters of administration being granted to Mr Alford.  There is no justification for making such an order.  Mr Ebbage Snr appears to have done his best in an extremely difficult situation.

1. In August 1999, Mr Manthey informed Mr Howland that OX2ED should be shown on the SEC filings as the beneficial owner of the stock which had been transferred to Carmel, Maverick and Coach.  This was confirmed by letter dated 23 September 1999.

1. During August 1999, at Mr Manthey’s request, Mr Holmes became a board member of AET Inc.  At some time during 1999, All Australian Racing Pty Ltd (“AAR”) was set up for Mr Manthey by Mr Holmes.  Mr Manthey was its only director.  AAR purchased plant and equipment from AET.

1. On 2 September 1999, in order to advance his claim, Mr Alford telephoned Mr Manthey and secretly tape-recorded the conversation.  The first part of the recording captured only that which was said by Mr Alford.  In the conversation, Mr Alford said that the initial funding of AET was embezzled by Mr Ebbage from companies associated with Mr Alford.  He expressed extreme displeasure at the wealth generated for other people by AET and said he wanted “the 25 per cent which the family is entitled to”.  He threatened Mr Manthey that if he took action it would destroy AET Inc.  Mr Manthey told Mr Alford that he had asked Mr Ebbage if Mr Alford had any interest in AET and Mr Ebbage assured him that he did not.  He asked because Mr Alford had rung the factory a couple of times and because Mr Ebbage had told him at inception that he intended to take Mr Alford in to have half Mr Ebbage’s interest. 

1. Mr Manthey said that his original contract was with Mr Ebbage.  Mr Manthey did not agree with any proposition that there were two meetings at which any tripartite agreement was made.  Mr Manthey’s unprompted comments show that he understood that the joint venture was between himself and Mr Ebbage with Mr Ebbage contributing the business know-how and investing money.  He was prepared to say that Mr Alford might have or did have an interest in Mr Ebbage’s share but he said his only source of knowledge was what Mr Ebbage had told him.  Had he been involved in the oral agreements as alleged by Mr Alford, that would not have been his only source of knowledge.

1. On 10 November 1999, Moores Rowland wrote to Mr Manthey and informed him that, because of allegations that he was using the powers of attorney granted to him by OX2IP and OX2ED in breach of orders made by the Supreme Court of Vanuatu, they were giving him notice that the powers of attorney had been revoked.  The attached notices of revocation dated 9 November 1999 revoked the powers of attorney from 27 August 1999.

1. Mr Harrison and Mr Munro flew to Australia in late December 1999 to try to settle litigation which had been commenced in Vanuatu against them and others by the Ebbage estate.  Mr Harrison sent a letter by facsimile transmission to Mr Manthey on 30 December 1999 saying that notwithstanding Mr Manthey’s advice that Moores Rowland should not give access to the records of the OX2 companies to the Ebbage estate, Mr Munro and he were of the view that they were obliged to provide such access.  Mr Manthey’s evidence was that Paul Bailey received and dealt with such letters.

1. By the end of 1999, Mr Manthey had fallen out with both Paul and Murray Bailey and Mr Manthey dispensed with Paul Bailey’s services.  Murray Bailey resigned as CEO of AET Inc.  Mr Manthey started to rely more heavily on Rodney Newman.

1. In March 2000, Mr Ebbage Snr commenced proceedings in New Mexico against Mr Manthey.  In April 2000, these proceedings were commenced by the plaintiffs against Mr Ebbage Snr and HPM.  HPM is now the trustee of the Ebbco Trust.

1. On 7 July 2000, AET’s lawyers issued a notice of demand on OX2IP for $2,223,537.  On 31 July 2000, AET in a consent order in this court agreed not to move to wind up OX2IP on the basis of this demand.  This was made together with a number of other orders in compromise of a dispute between HPM, AET and Mr Manthey.  The plaintiffs sought to make something of the issue of the notice of demand but it was clear in Mr Manthey’s evidence that he had no idea what a notice of demand was or meant.

1. On 10 July 2000, Holmes and Partners produced a financial report which demonstrated that:-

1.Between 21 February 1996 and 2 December 1998, OX2ED maintained a number of Australian dollar and United States dollar accounts at different banks;

2.Between 10 December 1996 and 2 December 1998, the assets of OX2ED comprised shares in AET Inc and cash at bank;

3.As at 2 December 1998, the imbalance in shares in AET Inc held by OX2ED and transferred to Mr Ebbage or associated entities stood at 955,320 shares more than those transferred to Mr Manthey or associated entities;

4.As at 2 December 1998, the funds withdrawn from the OX2ED bank accounts and applied to the benefit of Mr Ebbage or associated entities from the proceeds from sale of shares in AET Inc held by OX2ED and from other sources exceeded sums paid to Mr Manthey from the same sources as follows:-

(a)in relation to the Australian dollar account, by AUD$127,463;

(b)in relation to the United States dollar accounts, by US$838,736.

1. In July 2000, Mr Alford secretly video taped a meeting which was conducted in the boardroom of his accountancy office.  Those present were Mr and Mrs Manthey, together with their then lawyers, Michael Small and Charles Wilson, and Mr Alford with John Connor, his solicitor.  Mr Manthey’s comments on that video tape make it clear that any agreement which he made was made only with Mr Ebbage and that any information he thought he had about Mr Alford’s interest was only from Mr Ebbage.  As I have said, if he had been present at the meetings in August and October 1993, as alleged by Mr Alford, he would have known of Mr Alford’s interest from those meetings not from information or opinions given by someone else.  Although he says that Mr Alford “was involved” early on after his trip to Brisbane to see Mr Ahearn with Mr Ebbage, this does not prove or even suggest that there were the enforceable agreements between Mr Alford, Mr Ebbage and Mr Manthey as alleged in the statement of claim.  Indeed on Mr Alford’s version, any tripartite agreement entered into was before Mr Manthey’s trip to Brisbane with Mr Ebbage to see Mr Ahearn.  In any event, an involvement is far from an enforceable contractual or equitable right.  Mr Alford explained in his evidence that he did not explicitly refer to the two agreements in August and October 1993, because “I [Mr Alford] would have had no recollection at that stage that that was actually the case”.  Not only did Mr Alford not put those alleged agreements to Mr Manthey during the video taped conversations, the oral agreements on which Mr Alford relied in his statement of claim were not unambiguously put to Mr Manthey during the hearing of this matter for his comment.

1. The New Mexico litigation, as well as other litigation in the Supreme and District Courts in Queensland, the Superior Court of the State of California and the Supreme Court of Vanuatu, was settled on 19 July 2001.  The parties to the settlement were Mr and Mrs Manthey, Mr Ebbage Snr as executor of the estate of Mr Ebbage, AET, OX2ED, OX2IP, Macro Management, Resolution Services Ltd, HPM, Green Fit and Motor City.

1. As has been shown, various transactions took place and moneys and property were transferred throughout the world to entities registered in many different places.  If Mr Alford, or any of the plaintiffs, had had an interest in a joint venture, AET or any other entity associated with the ownership of the intellectual property in Mr Manthey’s invention, they would have had a tracing action to recover that interest[6] but they had no such interest.  Accordingly, it is not necessary to consider whether or not the plaintiffs would in any event be defeated because of their initial delay in asserting their rights, because of the operation of the equitable doctrine of laches.[7]

   [6]Natural Extracts Pty Ltd v Stotter; GG Jay Investments Pty Ltd v Doveka Pty Ltd (1997) 24 ACSR 110, NG 3192 of 1992 and 3238 of 1992, 16 May 1997 per Hill J; Nelson v Larholt [1948] 1 KB 339.

   [7]Orr v Ford (1989) 167 CLR 316; Allcard v Skinner [1886-90] All ER 90.

1. There is no utility in making further detailed findings as to what interest Mr Alford might have had, if a tracing action were open, since such an action is plainly not open to him.  While many of his actions reflect no credit on Mr Manthey or his many advisers, many of whom have been solely motivated by greed, Mr Manthey’s gullibility and the greed of himself and others does not make Mr Alford’s version of the question whether there was ever any enforceable agreement whereby Mr Alford gained an interest in AET or any joint venture any more likely.  Mr Alford’s only right was to recover repayment of any debt owed to him or one of his corporate entities.  Those alleged debts were set out in the annexures to the statement of claim.

Moneys said to be owing from the defendants to the plaintiffs

1. Mrs Atkinson referred in her affidavit evidence to $6,000 being paid to Mr Manthey for engine development by PPG Trust trading as Ebbage and Co (Beaudesert) but in fact these appear to have been payments for work done on Mr Ebbage’s Pantera or other vehicles and as such are irrelevant to any claim made against Mr Manthey in this case.  It relates instead to an accounting of the moneys owed by and from Mr Ebbage and Mr Alford to their accountancy partnership as it appears to be a personal expense of Mr Ebbage.  The payments total $7,130 and were made on 13 May, 4 June, 9, 15, 16 July and 20 August 1993.  No claim was made for the repayment of those moneys in these proceedings.

Annexure A

1. The plaintiffs alleged that from July 1994 and not withstanding that the joint venture had not been fully documented, AEF advanced funds sourced from the practice to AET for the purposes of the joint venture.  In the alternative, they alleged that AEF advanced funds sourced from the practice to EOS for the purposes of enabling EOS to make contributions to the joint venture and the advanced funds were repayable by EOS to AEF upon demand.  The particulars were said to be set out in Annexure A to the statement of claim. 

1. In their defence, the Ebbage interests said that Mr Alford and Mr Ebbage agreed in or about May 1995 that funds already advanced by AEF to AET would be treated as a loan by EOS to AET, and as having been loaned by AEF to EOS.  Any further funds advanced by AEF to AET would be treated as a loan to EOS from AEF.  They did not know on what terms the loan by AEF to EOS was made, and therefore whether or how it was repayable, nor did they or the Manthey interests know whether the funds were sourced from the AE practice.

1. In their defence, the Manthey interests admitted that from July 1994, the funds identified in Annexure “A” were applied to the development of the internal combustion engine.  They said that the funds were advanced by AEF to the Ebbage interests who in turn contributed such funds by way of venture capital by the Ebbage interests to Mr Ebbage’s partnership with Mr Manthey.  As contributions to the partnership, the funds, when paid by the Ebbage interests were not repayable to the Ebbage interests, such funds having been contributed as joint venture capital to the partnership.  It is not necessary or even desirable to characterise the nature of the payments by EOS to AET as there was no issue joined between them in these proceedings.

1. The Manthey interests then alleged that such funds did not constitute either a loan or contribution of joint venture capital by AEF to AET.  Rather, they said, the funds constituted a loan from AEF to the Ebbage interests for the purpose of enabling the Ebbage interests to make further contributions of capital to the partnership between Mr Ebbage and Mr Manthey.  They alleged that there was no contractual relationship of any kind between the plaintiffs or any of them and the Manthey interests.

1. Mr Alford estimated in his evidence that in the calendar year of 1994, between $80,000 and $100,000 was paid by AEF, or other companies associated with the AE practice, to AET and in the calendar year of 1995, between $150,000 and $200,000.  In para 52(c)(iii) of the statement of claim, the plaintiffs alleged that $A195,966.41 remained payable by AET to AEF.

1. Annexure A deals with sums found in the annual general ledger of AEF from 7 July 1994 to 30 June 1995 prepared by Mr Ebbage.  The entries are shown as payments to Ebbco Holdings Trust and journaled as a loan from Ebbco Holdings Trust to AET.  The total amount for that year is $190,332.85, which includes an opening balance of $27,400.  On its face, that money would appear to be owing from AET to the Ebbco Holdings Trust.  The moneys are then owed by the Ebbco Holdings Trust (or its trustee EOS) to AEF.

1. Mrs Atkinson said in evidence that she examined the $27,400 and found that those payments were journaled into the ledgers and accounts of AEF.  They were sourced from AES and were originally in the 1994 accounts for AE Service Trust under a loan account entitled “loan AET”.  They were subsequently transferred by journal to AEF.  These payments would appear to be repayable on demand from AET to AES.  These moneys would appear to include certain sums that Mr Alford knew were to be paid to Mr Manthey or to his benefit, such as $10,000 in late 1993.  However, there was no claim in the prayer for relief for moneys said to be owing by the third defendant, AET, to the sixth plaintiff, AES.

1. Annexure A was amended to include loans allegedly made from 1 July 1995 to 30 June 1996.  The ledger records further debts of $39,925.79 and credits of $7,742.69.  The last payment is recorded as having occurred on 8 December 1995.

1. The last two entries in Annexure A are journal entries for $13,338 and $7,000 which Mrs Atkinson said were “just closure of loan accounts in AE Beaudesert and AE Holdings No 6 … and they were just generically transferred in on that 30 June ’95.  It could just be a data entry”.  That is an insufficient basis to satisfy the court that those moneys were loans made to AET which are repayable to AEF.

1. Other entries which are not able to be characterised with certainty as payments made by or on behalf of AEF to AET include items included as travel expenses for the Targa Tasmania rally.  These were Mr Ebbage’s expenses for attending the Rally in 1995.

1. The loans to AET were said to have been made by Ebbco Holdings Trust.  Mr Alford said, in cross-examination, that this was a fraud by Mr Ebbage.  However, as I have earlier noted, Mr Alford gave evidence that this trust was associated with Mr Ebbage.  It therefore correctly recorded Mr Ebbage’s interests receiving a share of the profits of AEF which were then paid to AET.  Whether or not these moneys were part of Mr Ebbage’s profit share involves a finalisation of the partnership accounts so that moneys paid to or drawn by both Mr Alford and Mr Ebbage are accounted for and reconciled.  This task has not been completed and was not sought in this action. 

1. Mrs Atkinson said in her affidavit that Annexure A sets out an accurate accounting of the funds provided by corporate entities associated with the AE business (AEF, AEB, and AES) directly to AET and Mr Manthey identified as an annual general ledger account “830-loan – Ebbco Holdings Trust”.  She deposed that the title of the account identified as Ebbco Holdings Trust is incorrect.  She said that from the commencement of funding by the AE business to AET, all advances were noted as “Loans – AET”.  She asserted that the general ledger account 830 was originally entitled AET.  She said that Mr Ebbage appeared to have altered that title in or about 1995.  She deposed that all entries in the cash books during the years in which the companies made payments to AET recorded advances being made by the companies directly to AET and not to the Ebbco Holdings Trust and/or EOS.  Mrs Atkinson referred to the cash sheets and adjustment journal entries to AEF.  However, these were removed from the bundle of documents at the end of the trial. 

1. She further deposed that bank statements for accounts maintained on behalf of AEF corroborated and supported entries made into the cash book for AEF as and when cheques were presented on the dates indicated in the cash book.  She deposed that AET cash books supported the entries contained in the AEF cash books and in Mr Ebbage’s handwriting confirmed the payments being made by AEF and not EOS and/or the Ebbco Holdings Trust or the Ebbco Trust.  The AET cash books were, however, also removed from the bundle of documents at the end of the trial.

1. Mrs Atkinson deposed that funding to AET was sourced from the cash flow of the Beaudesert and Southport practices.  She said that the Beaudesert practice funds were paid to AET directly, Mr Ebbage having immediate access to those funds and prior to any funding being provided to the service trust for payment of the operating expenses of the AE business.  She said that Mr Ebbage held the cheque book for the bank account maintained by the Beaudesert practice and that Mr Alford did not have access to that account other than with the consent of Mr Ebbage.  She deposed that the documents reflected funding by the Southport practice through AEF in respect of the costs incurred by, or on behalf of, AET for the 1995 Targa Tasmania car rally.

1. Mrs Atkinson also said that Mr Ebbage had incorrectly recorded the advances from AEF, AES and AEB as advances to the Ebbco Holdings Trust.  Her evidence was that the advances so recorded were never contemplated as being loans to the Ebbco Holdings Trust and were at all material times loans to AET and reflected as such in the records of AEF.

1. Mrs Atkinson said she was unaware of any association or involvement by EOS in its capacity as trustee of either the Ebbco Trust or the Ebbco Holdings Trust with AET until after Mr Ebbage’s death and at a time when questions were being raised by Mr Alford in relation to the interest he said he held in the joint venture.  Mr Farmer was unable to throw any light on this matter.  Although he said he was aware of some funding taking place for the AET project he was not aware of which entity paid for or which entity received the funding.

1. Mrs Atkinson deposed that Annexure A to the plaintiffs’ amended statement of claim recorded payments made by AEF calculated to 23 June 1995 in the total sum of $190,332.85; and that the total sum advanced by AEF to AET as at 30 June 1996 amounted to $222,515.95 in accordance with the figures calculated at page 48 of Volume 14 of the bundle of documents.  That page was also removed from the bundle.  She said that all source documentation including cheque butts and cash books have recorded the advances as being made to AET and not to the Ebbco Holdings Trust.  The prayer for relief claimed that $222,515.95 was due from HPM and AET to AEF or, in the alternative, from EOS to Mr Alford.

1. Even if what Mrs Atkinson said about the records were to be accepted, this would not mean that the moneys paid to AET were not correctly journaled as being loaned to, or for that matter, paid against moneys to be distributed to or profit share owing to the Ebbco Holdings Trust.  Mrs Atkinson conceded that she had no independent recollection or knowledge of why “Loan – Ebbco Holdings Trust” was on that document.  She also conceded that if the Ebbco Holdings Trust was responsible for those funds, the accounting treatment would not have been inappropriate.  In my view, the books of the AE practice correctly showed these loans as having been made to the Ebbco Holdings Trust and were part of the moneys received from the accountancy partnership to the benefit of Mr Ebbage.  Whether or not they were in excess of Mr Ebbage’s profit share and are therefore repayable, depends on an account of the Alford Ebbage partnership which has not been done nor sought in this action.

Annexure B

1. The plaintiffs also alleged that from about July 1994 AEG provided accountancy services to AET in connection with the joint venture particulars of which are found in Annexure B.  In paragraph 52(c)(iv) of the amended statement of claim, the plaintiffs alleged that $88,420.04 remained owing to AEG from AET.  Annexure B deals with accountancy services said to have been rendered between 10 July 1995 and 15 July 1996.  All of the annexures apart from Annexure A were prepared by Mrs Atkinson on instructions from Mr Alford.  Mrs Atkinson was unaware at the time the liability was said to have been incurred of whether or not AET was being billed for work done.  The Manthey interests admitted that from July 1994, accountancy services were provided to AET but did not admit that the accounts rendered by AEG truly reflected the work completed.

1. Annexure B includes $72,000 said to be owed by AET on 29 February 1996 for services from 9 September 1994 to the date which is exhibited to Mr Peters’ affidavit.  The balance unpaid of the billed work is said to be $88,420.04.  The prayer for relief claimed that this is money due from HPM and AET to AEG.  AEG was the trading company which operated the Southport practice.  The Ebbage interests pleaded that Annexure B was an unintelligible document.

1. Annexure B sets out the following schedule of invoices:  

DateInvoice NoAmountReceivedBalance  

10.07.95         3416               49390.00  49390.00

22.12.95  -10000.00       39390.00

31.01.96         3728                   211.24  39601.24

31.01.96         3721  24.00  39625.24

14.02.96  -20000.00       19625.24

15.02.96         CONTRA      18000.00  37625.24

29.02.96         4490               72000.00  109625.24

04.04.96   -7500.00     102125.24

01.05.96         3809  19.80  102145.04

04.07.96  -15000.00       87145.04

15.07.96         4739                 1275.00  88420.04

1. An unexplained aspect of Annexure B is that invoices were said to have been issued on 10 July 1995 for $49,390; 31 January 1996 for $211.24 and $24; CONTRA of $18,000 on 15 February 1996 and for $72,000 on 29 February 1996.  Thereafter, invoices were issued on 1 May 1996 for $19.80 and on 15 July 1996 for $1,275.  The work in progress of the AE practice shows that $71,860.10 was the total fees and outlays generated by 1 March 1996 which was presumably the $72,000 bill issued on 29 February 1996, which therefore must have incorporated invoices previously issued.  It would appear that Annexure B has wrongly added in the $49,390 owing on 10 July 1995 and $211.24 and $24 owing in January 1996 and $18,000 said to be for contra on 15 February 1996.  These figures should therefore be deducted from the amount billed said to be still owing.  This would mean that under Annexure B $20,794.80 fees invoiced to AET remain unpaid.  Even if the $18,000 was, as Mrs Atkinson said at paragraph 186(a) of her affidavit sworn on 28 February 2002, paid by AE to AET to provide sufficient funds to pay the cheque of $20,000 drawn by AET on the previous day, and this is taken from the amounts paid, then $38,794.80 would remain unpaid.  However, the source of Mrs Atkinson’s information appears to be Mr Alford who gave no evidence on this himself.  It appears at least equally likely that the $18,000 said to contra was an incorrect charging to AET of the $18,000 per annum consultancy fee paid to Mr Ebbage by the AE practice and then by Mr Alford.

1. Appendices 3 and 16 to the report produced by Mr Suddes on 10 July 2000 shows that in addition to the payments made by AET to the AE practice for professional fees which were shown in Annexure B, $10,030 was paid to, or on behalf of, “Alford Ebbage” on 27 October 1994 and $24,000 on 7 December 1994 being a further $34,030 paid.  It could not therefore be said with confidence that any accountancy fees remained outstanding.

1. Annexure B also made a claim for $319,464 for unbilled work in progress.  This was said to be 21 days in December 1995 and 240 days from January to November 1996 making a total of 261 days of 8 hours at $153 per hour.  Mrs Atkinson deposed that the calculation of unbilled work in progress was calculated correctly and in accordance with the agreed charge out rate applied on behalf of Mr Ebbage in respect of the number of days he was engaged by AET at the factory premises as at 9 November 1996.  However, the partnership was dissolved at the end of 1995 and there seems to be no basis for this claim.  It was not claimed in the prayer for relief.

Annexure C

1. Mr Alford alleged that from 29 November 1995 until 30 June 1996, $139,203.89 was paid from AES as trustee of the AE Service Trust to the benefit of Mr Ebbage.  The amended statement of claim alleged that from on or about 29 November 1995, Mr Alford procured the company AES (as trustee for the AE Service Trust) to pay Mr Ebbage to devote his time to administer and further the “joint venture” in the sums as set out in Annexure C.  The individual payments were listed in Annexure C to the statement of claim.  Mrs Atkinson deposed in her affidavit to various things she had been told by others particularly Mr Alford about the arrangements made between Mr Alford and Mr Ebbage but she had no personal knowledge of this.  The date, 29 November 1995, was chosen because Mr Alford told her to use that date.  The prayer for relief claimed repayment of $139,203.89 said to be due to AES from HPM and AET.

1. When the Beaudesert practice was sold, the purchasers, Mr Gillow and Mr Teese, were responsible for the collection of debts for work in progress carried out prior to the sale of the Beaudesert practice.  The amount of money collected for the outstanding work in progress was said by Mr Alford to be between $139,000 and $140,000 which was paid to AES.  This corresponds to the amount paid out to Mr Ebbage as detailed in Annexure C.  It appears that the moneys received by Mr Ebbage which were detailed in Annexure C related to the continuing liability to account for work in progress of the Beaudesert practice while it was owned by Mr Ebbage.  These payments would, as Mrs Atkinson conceded, be considered as part of Mr Ebbage’s share if there were to be a reconciliation of the accounts of the AE partnership which was not claimed in this action.  There is no liability under Annexure C.

Annexure D

1. Annexure D lists amounts which the plaintiffs alleged were paid between 22 December 1995 and 1 April 1996 from AEF to Crayfield on behalf of Mr Ebbage, totalling $5,633.56.  The amounts alleged to be paid from AEF to the benefit of Mr Ebbage are:

“22.12.95     Crayfield – Int Dec 95 to Jan 96     200065       2089.04
 15.02.96     Crayfield   200067       1220.89
 01.04.96     Crayfield – March  200068        1102.74
 01.04.96     Crayfield – April   200069       1220.89
Total payments on behalf of PG Ebbage            $5,633.56”

1. When Mrs Atkinson was instructed by Mr Alford to prepare this document, she was told to include payments out but not instructed to include payments in.  In paragraph 43 of the amended statement of claim, the plaintiffs alleged that from on or about 22 December 1995, Mr Alford procured the company AEF to pay Mr Ebbage to devote his time to administer and further the “joint venture” in the sums set out in Annexure D.  The payments in Annexure D made on 1 April 1996 were $1,102.74 and $1,220.89 (a total of $2,323.63).  They were debited to AEF’s account on 17 April 1996.  However, on 3 April 1996, $2,300 had been deposited to AEF’s account from EOS, presumably, as Mr Alford accepted might have been the case, in anticipation of those cheques being drawn.  The source of those payments was therefore Mr Ebbage.  Neither of those payments was therefore owing to Mr Alford or his interests.  Whatever the reason for the payments made to Crayfield by AEF, none of them was a payment made to Mr Ebbage to devote his time to administer and further the “joint venture”.  There was no claim in the prayer for relief for any of the amounts listed in Annexure D.

Annexure E

1. Annexure E records payments alleged to have been made from IPA as trustee for AE Service Trust No 2 on behalf of Mr Ebbage from 19 April 1996 to 26 June 1998.  These payments total $41,058.55.  Mr Alford said that the payments were made to support Mr Ebbage whilst he was engaged full-time at AET.  He told Mr Farmer at the time that Mr Ebbage was to be paid a consultancy fee because Mr Ebbage needed a wage whilst working for AET.  IPA was the successor of AES and was the service company for the Southport practice at this time. 

1. Mr Alford denied that Mr Ebbage was paid a consultancy fee for providing information and assistance to the AE practice in relation to Beaudesert clients after the end of 1995.  However, Mr Alford did concede that Mr Ebbage was retained to provide specialist services in respect of clients of the Southport practice and therefore for maintaining the goodwill in respect of the Alford Ebbage name.  The Southport practice continued to be known as Alford Ebbage until March or April 1998.  Whatever the motive for this consultancy being provided, the fees were payable for the consultancy services provided by Mr Ebbage.  He was to be paid $18,000 a year.  According to Mrs Atkinson’s evidence, he was paid a consultancy fee into 1998.  Because of dissatisfaction expressed by Mr Farmer, Mr Best and Mrs Atkinson with the service provided by Mr Ebbage, those payments were journaled as coming from Mr Alford’s drawings rather than the practice account except for the  payments until the end of June 1996. 

1. The payments from 1996 to 1998 appear to represent the retainer or consultancy fee paid to Mr Ebbage and as such are not repayable. 

Conclusion

1. The plaintiffs have been unsuccessful in their claim that there was $416,714.47, or any other figure, owing from the estate of Mr Ebbage to Mr Alford in respect of Mr Ebbage’s alleged liability to pay Mr Alford’s Esanda Finance Facility.  They have also been unsuccessful in their claim to any beneficial interest in AET, AET Inc, OX2IP, OX2ED or Macro or any assets held by them.  They have failed to establish any entitlement to a beneficial interest in any assets including the Mantheys’ home or any entitlement to equitable compensation or damages.  This is because I am satisfied that there was never any joint venture which would give rise to any such entitlements.

1. So far as the debt claim is concerned, the prayer for relief claimed $222,515.95 said to be owing by the second and third defendants, HPM and AET, to AEF (Annexure A), or to Mr Alford by EOS, $88,420.44 said to be owing by HPM and AET to AEG (Annexure B), $139,203.89 said to be owing by HPM and AET to AES (Annexure C), and $41,058.55 said to be owing from HPM and AET to IPA.  In addition, interest at the rate of 10 per cent per annum compounding on monthly rests from specified dates was claimed.  Of the debt claim, for the reasons given, none of the amounts claimed is repayable in this action.

1. Judgment should be entered for the defendants.