Braham Investments Pty Ltd v Wantrup

[2018] VSCA 291

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2018 0025

BRAHAM INVESTMENTS PTY LTD (ACN 107 954 629)	Applicant
v
CHARLES WANTRUP	Respondent

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JUDGES:	WHELAN, KYROU and McLEISH JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	14 and 18 September 2018
DATE OF JUDGMENT:	12 November 2018
MEDIUM NEUTRAL CITATION:	[2018] VSCA 291
JUDGMENT APPEALED FROM:	Braham Investments Pty Ltd v Sovereign MF Ltd [2017] VSC 801

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APPEAL – Review of findings of fact –­ Real review – Not to interfere unless findings demonstrated to be wrong by ‘incontrovertible facts’ or ‘glaringly improbable’ – Due allowance for advantages enjoyed by trial judge – Appellate court in as good position to draw inferences – Robinson Helicopter Co Inc v McDermott (2016) 331 ALR 550, Fox v Percy (2003) 214 CLR 118 and Bauer Media Pty Ltd v Wilson (No 2) [2018] VSCA 154 applied.

APPEAL – Protracted delay in delivering judgment – Trial judge’s advantage on credit issues weakened – Deference to trial judge’s findings diminished – Need to review factual findings on appeal with ‘special care’ – NAIS v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 228 CLR 470, Expectation Pty Ltd v PRD Realty Pty Ltd (2004) 140 FCR 17, Food and Beverage Australia Ltd v Andrews [2017] VSCA 258 and Monie v Commonwealth of Australia (2005) 65 NSWLR 729 applied.

TRUSTS – Solicitor’s trust account – Three payments of money into trust account of solicitor for investment promoter – Money disbursed on promoter’s instructions – Whether money was to be held on trust pending documentation – Trial judge held plaintiff did not intend money to be held on trust pending documentation and payments not held on trust for plaintiff – Challenge to trial judge’s factual and credit findings – Appeal allowed and judgment set aside – Matter remitted for retrial. 

TRUSTS – Nature of relevant inquiry in relation to intention to create a trust – Outward manifestation of intention within totality of circumstances – Conscience of putative trustee must be affected in relevant way – Re Australian Elizabethan Theatre Trust (1991) 30 FCR 491 and Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 applied – George v Webb (1991) 30 FCR 491 considered.

PRACTICE AND PROCEDURE – Appellate court unable to decide relevant issues ­– Unresolved credit issues affecting principal witnesses – Retrial ordered.

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APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr R Heath QC with	Rigby Cooke Lawyers
Mr B Petrie
For the Respondent	Dr A Hanak	Minter Ellison

TABLE OF CONTENTS

Introduction
Appellate review of findings of fact
Delay in the delivery of judgment
Review of the evidence

Dealings prior to the relevant payments
The first disputed payment ― $500,000 ― December 2011
Dealings in January and February 2012
The second disputed payment ― $100,000 ― August 2012
The third disputed payment ― $500,000 ― September 2012
Dealings after the third disputed payment
Braham Investments’ accounts
Wantrup trust account records
Mr Giorgio’s attitude to Mr Braham

Issues raised by the evidence
The judgment
The significance of protracted delay in the delivery of judgment
Proposed grounds of appeal and submissions made
Identification of the significant issues concerning factual findings
Consideration of significant issues concerning factual findings

No contemporaneous documents supporting Mr Braham
Acceptance of Mr Giorgio’s account of the immediate usage agreement
Wantrup & Associates’ trust records
Mr Braham’s credit
Conclusions on proposed grounds 2 to 6

Proposed ground 1

Conclusion

WHELAN JA
KYROU JA
McLEISH JA:

Introduction

1. This proceeding concerns dealings principally between three individuals:  Simon Braham, a surgeon, and the director of the applicant, Braham Investments Pty Ltd (‘Braham Investments’);  Nickolas Giorgio, a director of a number of companies, most notably Sovereign MF Ltd (‘Sovereign’) and Eos Janus Capital Pty Ltd (‘Eos’);  and Charles Wantrup, a solicitor and principal of the firm Wantrup & Associates.  The dispute between the parties is over three payments totalling $1.1 million.

1. Leaving to one side for the moment the various corporate entities, the three payments were made by Mr Braham into Mr Wantrup’s solicitor’s trust account on transactions in relation to which Mr Wantrup was acting on instructions from Mr Giorgio.  Critical discussions about the basis upon which the payments were made occurred between Mr Braham and Mr Giorgio alone.  In substance, Mr Braham maintains that what was discussed and agreed was that the payments would remain in Mr Wantrup’s trust account until investments to which they related had been documented.  In substance, Mr Giorgio maintains that what they discussed and agreed was that the payments would be paid out immediately and used for the investment purposes discussed and that the documentation would then follow after terms had been resolved between the respective parties’ solicitors.  In substance, Mr Wantrup maintains he was unaware of either version of these asserted arrangements and that he received the payments on behalf of his client, Sovereign, and disbursed the funds in accordance with his client’s instructions. 

1. Braham Investments had its own solicitor at all relevant times, being Mr Demian Walton at B2B Lawyers.

1. Mr Wantrup paid out the $1.1 million which Braham Investments had paid into his trust account on Mr Giorgio’s instructions.  The relevant investments were never documented.  Mr Braham sought recovery of the $1.1 million from Sovereign, Eos and Mr Wantrup.  Sovereign and Eos went into liquidation, leaving as the only claim to be adjudicated that between Braham Investments and Mr Wantrup.

1. The claim Braham Investments made against Mr Wantrup was essentially twofold, being breach of statutory duties and breach of fiduciary duties.  Braham Investments alleged that the three payments had been held on trust by Mr Wantrup for Braham Investments, and that they constituted trust money within the meaning of the Legal Profession Act 2004.  It was alleged that as a consequence, Mr Wantrup owed Braham Investments statutory duties and fiduciary duties.  In paying out, or dealing with, the funds as he did, it was alleged that Mr Wantrup had contravened those statutory and fiduciary duties.[1]

   [1]The allegation of the conduct of Mr Wantrup which constituted breach in relation to the first and second disputed payments was that he paid out the sums from his trust account whereas the allegation in relation to the third disputed payment was that he ‘banked the cheque’: Appellant, ‘Third Further Amended Statement of Claim’, 15 March 2016 [28]. The significance of this difference is difficult to discern, but the particulars of the allegation in relation to the third disputed payment assert that the ‘banking’ of the cheque meant that its proceeds were ‘immediately available’ to Sovereign. It seems, therefore, that the allegation in relation to each of the disputed payments was essentially the same, namely that the funds were paid out in circumstances where they ought not to have been.

1. The trial judge found against Braham Investments and in favour of Mr Wantrup.  He rejected Mr Braham’s version of the arrangement with Mr Giorgio and accepted Mr Giorgio’s version of that arrangement.  The judge found that the funds were not held on trust for Braham Investments and that Mr Wantrup did not owe fiduciary duties to Braham Investments.  The trial judge also rejected the claim for breach of statutory duty for that and other additional reasons. 

1. Braham Investments now seeks leave to appeal.  It does not seek leave to appeal in relation to the trial judge’s rejection of the claim for breach of statutory duty, although it maintains that the provisions of the Legal Profession Act remain relevant to the claim that the funds were held by Mr Wantrup on trust and that Mr Wantrup owed fiduciary duties to Braham Investments.

1. The proposed grounds of appeal raise an issue of law concerning the nature of the relevant inquiry in relation to intention in establishing a trust but otherwise constitute a detailed criticism of almost every factual finding made by the trial judge.  It will be necessary to make reference to the proposed grounds of appeal subsequently, but for present purposes it suffices to say that every significant factual finding made by the judge on a controversial issue, with a few exceptions, is challenged.    

1. The application for leave was argued on the basis that if leave were granted we would determine the appeal forthwith.

Appellate review of findings of fact

1. In Robinson Helicopter Co Inc v McDermott, the High Court said:

A court of appeal conducting an appeal by way of rehearing is bound to conduct a ‘real review’ of the evidence given at first instance and of the judge’s reasons for judgment to determine whether the judge has erred in fact or law.  If the court of appeal concludes that the judge has erred in fact, it is required to make its own findings of fact and to formulate its own reasoning based on those findings.  But a court of appeal should not interfere with a judge’s findings of fact unless they are demonstrated to be wrong by ‘incontrovertible facts or uncontested testimony’, or they are ‘glaringly improbable’ or ‘contrary to compelling inferences’.[2] 

[2](2016) 90 ALJR 679, 686–7 [43] (‘Robinson Helicopter’) (citations omitted) citing Devries v Australian National Railways Commission (1993) 177 CLR 472, 479–81 (Deane and Dawson JJ); Fox v Percy (2003) 214 CLR 118, 126–7 [25], 128 [28], [29] (Gleeson CJ, Gummow and Kirby JJ); Miller & Associates Insurance Broking Pty Ltdv BMW Australia Finance Ltd (2010) 241 CLR 357, 380 [76] (Heydon, Crennan and Bell JJ).

1. For a time there were different approaches on the issue of whether what the High Court had said applied to inferences drawn from findings of fact.[3]  It has now been resolved, although not by the High Court, that it does not.[4]  Instead, in general, an appellate court is in as good a position as the trial judge to decide the proper inferences to be drawn from facts which are either undisputed or found as facts on the evidence.  In deciding the proper inferences to be drawn, the appellate court must make ‘due allowance’ for the fact that it has neither seen nor heard the witnesses.[5]  The advantages of the trial judge, which are enjoyed in respect of making findings of fact as well as drawing inferences, were described by the High Court in Fox v Percy by reference to the ‘natural limitations’ facing an appellate court proceeding on the record:

These limitations include the disadvantage that the appellate court has when compared with the trial judge in respect of the evaluation of witnesses' credibility and of the ‘feeling’ of a case which an appellate court, reading the transcript, cannot always fully share.  Furthermore, the appellate court does not typically get taken to, or read, all of the evidence taken at the trial.  Commonly, the trial judge therefore has advantages that derive from the obligation at trial to receive and consider the entirety of the evidence and the opportunity, normally over a longer interval, to reflect upon that evidence and to draw conclusions from it, viewed as a whole.[6]

[3]See generally Bauer Media Pty Ltd v Wilson (No 2) [2018] VSCA 154 [265]–[287] (Tate, Beach and Ashley JJA) (‘Bauer Media’);  Jovanovic v Magri [2017] VSCA 373 [53]–[54] (Whelan, Priest and McLeish JJA).

[4]Bauer Media [2018] VSCA 154 [272]–[287] (Tate, Beach and Ashley JJA); Southern Colour (Vic) Pty Ltd v Parr [2017] VSCA 301 [78] (Santamaria, Kaye and Ashley JJA); Australian Securities and Investments Commission v Geary (2018) 126 ACSR 310, 343–4 [223] (Ferguson CJ, Weinberg JA and Sifris AJA); Springfield v Duncombe [2017] NSWCA 137 [16]–[20] (Basten JA).

[5]Dearman v Dearman (1908) 7 CLR 549, 564; Fox v Percy (2003) 214 CLR 118, 127 [25] (Gleeson CJ, Gummow and Kirby JJ).

[6]Fox v Percy (2003) 214 CLR 118, 126 [23] (Gleeson CJ, Gummow and Kirby JJ) (citations omitted).

1. While the appellate court should give respect and weight to the conclusion of the judge, having reached its own conclusion, it must give effect to it.[7]  The court is still required to conduct a ‘real review’ of the trial and the judge’s reasons.[8]  

   [7]Warren v Coombes (1978–79) 142 CLR 531, 551; Fox v Percy (2003) 214 CLR 118, 126–8 [25]–[27] (Gleeson CJ, Gummow and Kirby JJ).

   [8]Fox v Percy (2003) 214 CLR 118, 126–7 [25] (Gleeson CJ, Gummow and Kirby JJ).

Delay in the delivery of judgment

1. The evidence in the trial of the proceeding was heard over six days in March 2016.  The parties made their closing submissions on 26 April 2016 and judgment was reserved that day.  Judgment was delivered on 22 December 2017 (with a revision on 13 February 2018).[9]

   [9][2017] VSC 801 (‘Reasons’).

1. In NAIS v Minister for Immigration and Multicultural and Indigenous Affairs,[10] Kirby J observed that where the relevant matter for decision involves an assessment of the truthfulness of important witnesses, delay, especially protracted delay, may cast doubt on the validity of that decision.[11]  He went on to observe that in such a case it is incumbent on a court of appeal to approach its task with vigilance.[12]  In Expectation Pty Ltd v PRD Realty Pty Ltd[13] the Full Court of the Federal Court explained that significant delay imposes an obligation upon an appellate court to look with ‘special care’ at findings of fact challenged on appeal.[14]

   [10](2005) 228 CLR 470 (‘NAIS’).

   [11]Ibid 496 [85].

   [12]Ibid 497 [88].

   [13](2004) 140 FCR 17.

   [14]Ibid 32 [69].

1. The trial judge’s decision in this case turned substantially, if not entirely, on issues of credit, principally between Mr Giorgio and Mr Braham.  The proposed grounds of appeal articulate a comprehensive challenge to the trial judge’s factual conclusions.  For whatever reason, there was a protracted delay in the delivery of the decision.  We will return to the issue of the significance of that delay after addressing the judgment.  At this point, it is sufficient to observe that the nature of the issues between the parties (both at trial and on this application), and the protracted delay which occurred, necessitates a thorough review of the evidence.  We will undertake that review by reference to the chronological sequence of events, rather than in the sequence in which the evidence was led before the trial judge. 

Review of the evidence

Dealings prior to the relevant payments

1. There were dealings prior to the payments totalling $1.1 million which are the subject of the dispute, which were relevant and which were particularly relied upon by Braham Investments. 

1. According to Mr Braham, his dealings with Mr Giorgio began in around 2009.  Their dealings began in relation to unsuccessful investments Mr Braham had undertaken in association with another doctor named Andrew Ludekens.  In that context Mr Giorgio began introducing investment opportunities to Mr Braham.[15]

   [15]Transcript of Proceedings (16–18, 21, 23 March 2016, 26 April 2016) (‘T’) 70–1.

1. Sovereign held an Australian financial services licence and acted as the responsible entity for the Sovereign Aged Care Property Fund and the Sovereign Tarneit Land Fund.[16]  At all relevant times Mr Giorgio and one Michael Kalidonis were the controllers of both Sovereign and Eos.[17]

   [16]Third Further Amended Statement of Claim [2] admitted in Respondent, ‘Third Defendant’s Further Amended Defence’, 15 March 2016 [2].

   [17]Third Further Amended Statement of Claim [6] and Third Defendant’s Further Amended Defence [6].

1. Eos acted as a ‘treasury company’ for Sovereign.[18] Mr Giorgio in his evidence said that Eos performed this role because there were ‘significant legacy issues’ in relation to Sovereign,[19] and because Sovereign did not have a bank account of its own.[20]  Mr Giorgio explained that Eos met expenses on behalf of Sovereign.[21]

   [18]Mr Giorgio gave evidence to that effect at T 379. Eos’s role was pleaded by Braham Investments in those terms in the Third Further Amended Statement of Claim [7].

   [19]T 379.

   [20]T 386.

   [21]T 379.

1. Mr Wantrup began acting for Sovereign in 2010.[22]

   [22]T 243.

1. The evidence of both Mr Giorgio and Mr Wantrup was that, in general, all money paid by investors in relation to the funds of which Sovereign was the responsible entity was paid into the Wantrup & Associates trust account and was disbursed by Wantrup & Associates on Sovereign’s instructions.[23]

   [23]T 380 (Giorgio), T 306 (Wantrup).

1. It seems that the relationship between Mr Braham and Mr Giorgio was not without friction in 2010.  Mr Giorgio gave evidence that ‘frustration and anger’ about Mr Braham’s responses to his proposals led him to raise an invoice in the name of Eos directed to Mr Braham seeking payment of $55,000, expressed to be for fees arising out of ‘discussions and presentments of opportunities’.[24]  The invoice was never paid.

   [24]Application/Appeal Book (‘AB’) F 109 and T417–8.

1. Very shortly after that invoice, in December 2010, Braham Investments made a secured loan of $2.6 million to Sovereign in relation to the Sovereign Aged Care Property Fund.[25]  The relevant security documents were negotiated and agreed between Mr Wantrup on behalf of Sovereign and Mr Walton on behalf of Braham Investments.  By an email of 25 October 2010 Mr Walton advised Mr Wantrup that his client wished to proceed ‘subject to agreement as to the form and the finer detail of the legal documents’.[26]

   [25]AB F 136–60.

   [26]AB F 166.

1. On 7 December 2010, prior to finalisation of the documentation, Mr Braham emailed Mr Wantrup and Mr Walton asking whether Mr Wantrup had received the loan funds into his trust account.  His email included the following passage:

As you know Nickolas has withdrawn the offer on at least two separate occasions, can you ensure/guarantee that subject to the finer legal documentation been [sic] agreed on there will be no other impediments to completing the deal?[27]

[27]AB F 127.

1. Mr Wantrup replied on 7 December 2010 confirming that the funds had been received and stating:

Funds confirmed as being at you [sic] direction.

Mr Wantrup went on to say that he could not confirm that withdrawal would not occur but that he considered that to be unlikely.[28]

[28]AB F 128.

1. The $2.6 million loan transaction settled on 14 December 2010.[29]

   [29]AB F 129.

1. In his evidence, Mr Wantrup was asked about the statement he had made in his email of 7 December 2010 that the $2.6 million was being held at Mr Braham’s direction.  When asked the source of that instruction, he said that he certainly would not have made the statement without instructions and that although he could not now remember the instruction he assumed that it came from Mr Giorgio.[30]  He also confirmed that, on the basis of the emails, his understanding was that the funds had been transferred into his trust account ‘subject to’ agreement being finalised on the documentation.[31]

   [30]T 245–6.

   [31]T 248.

1. In mid-2011 Mr Giorgio invited Mr Braham to invest in the Tarneit Land Fund.  By an email of 8 June 2011 Mr Giorgio proposed an investment by way of a ‘secured note’.[32]  Mr Walton responded to this proposal on behalf of Braham Investments by an email the same day, indicating that his client agreed in principle but that:

there is no binding agreement until transaction documents have been entered into.[33]

[32]AB F 225.

[33]AB F 224.

1. By an email of 16 June 2011 from Mr Braham to Mr Wantrup, copied to Mr Giorgio and Mr Walton, Mr Braham advised that he had given instructions to his bank for $875,000 to be transferred into Mr Wantrup’s trust account for the purposes of investment with Sovereign ‘subject to agreement to terms and documentation’.[34]

   [34]AB F 228–9.

1. Mr Giorgio replied that that was ‘[N]oted and agreed’.[35]

   [35]AB F 228.

1. At this point it is necessary to say something about Mr Wantrup’s trust records.  Not all of the records which purported to be trust account records of Wantrup & Associates were accepted by Mr Wantrup as being properly part of his trust account records.  The trust ledger which Mr Wantrup maintained was the correct and valid one for the relevant transactions was a trust ledger headed ‘Trust Ledger’, naming the client as ‘Sovereign MF Ltd’ and specifying the matter as ‘Several matters’.[36]  For ease of reference we will refer to this document as the ‘official trust ledger’.  The official trust ledger records the receipt of $875,000 from ‘S Braham’ on 20 June 2011.  It will be necessary to address the evidence about the trust records separately, and in greater detail, below. 

   [36]This is the document at AB F 697–708, which was 932–43 in the Court Book at trial, and which Mr Wantrup identified as the correct ledger at T 347.

1. On 4 July 2011, Mr Braham paid a further sum of $800,000 into Mr Wantrup’s trust account.  The official trust ledger records its receipt that day as being from ‘Simon Braham’.  The day before, 3 July 2011, Mr Braham had sent Mr Wantrup an email, copied to Mr Walton and Mr Giorgio, advising that he had given Mr Giorgio a cheque that day (3 July) and that the funds were to be invested for two months.  The email said that the interest payment was ‘$60,000 plus the bank’s deposit rate after the two month investment’.  The email stated:

The funds are to released [sic] from Wantrup trust apon [sic] satisfactory completion of the securitization documentation. 

The email continued:

The documentation to support the $875,000 investment as a first mortgage deed will follow the successful completion of the first investment.

Later that same day Mr Giorgio replied with the single word:  ‘Noted’.[37]

[37]AB F 249–50.

1. On 7 July 2011 Mr Giorgio sent Mr Braham an email referring to delays which were occurring in relation to ‘the two transactions’ and stating that Mr Walton’s approval was awaited.[38]  Mr Giorgio’s email referred to Mr Braham’s email of 3 July 2011 and said that that email needed to be re-written ‘so that we can expedite the process’.  Mr Giorgio’s email then set out a re-written version of Mr Braham’s 3 July email, the significant alteration being removal of the reference to release of funds upon satisfactory completion of security documentation and its replacement with a statement relevantly providing that the funds were to be released ‘upon clearance’.  The next day, 8 July 2011, Mr Braham forwarded Mr Giorgio’s email, containing the suggested redraft, to Mr Walton and Mr Wantrup.  Mr Braham’s email read:

We need to expedite the process of completing the paperwork as detailed by Nickolas.  Please note the changes to my email of Sunday as detailed below.[39] 

[38]AB F 279–80.

[39]AB F 279.

1. Mr Walton’s response, directed to Mr Wantrup, but copied to Mr Braham and Mr Giorgio, was in the following terms:

My client’s funds in your trust account are not to be released without specific instructions received through me.

If the below revised email is intended to suggest that the $800,000 held in your trust account is to be released to your client without security documentation being in place then I doubt that Simon understood this and any such instruction is rescinded.[40]

[40]AB F 279–80.

1. When Mr Braham was asked about this email exchange in cross-examination he refused to accept that he had agreed to do what Mr Giorgio had asked.  When pressed as to what part of his response to Mr Giorgio’s request indicated disagreement, he responded by saying that it was not what he wrote but what he did, in that he did not cut and paste the email as requested but forwarded it to Mr Walton instead.[41]

   [41]T 142.

1. Disbursement of the sum of $800,000 then became an issue of contention between Mr Giorgio and Mr Wantrup.  By a direction dated 18 July 2011 Mr Giorgio directed Wantrup & Associates to pay the sum into a nominated bank account of Sovereign.[42]  That same day Mr Giorgio sent Mr Wantrup an email stating he had made an agreement with Mr Braham under which the $800,000 was to be paid out when cleared.[43]  Mr Giorgio’s email was, in substance, a complaint that Mr Wantrup had failed, and was continuing to fail, to act on Sovereign’s instruction to pay out the sum of $800,000.  When cross-examined about that matter Mr Wantrup said that he had not been aware of what Mr Giorgio maintained had been Mr Braham’s agreement to the payment out of the $800,000.[44]

   [42]AB F 285.

   [43]AB F 288.

   [44]T 253.

1. Mr Wantrup responded to Mr Giorgio by email, on 18 July 2011, advising that he would send to him Mr Braham’s email which had required that security documents be signed ‘which contradicts what Dr Braham led you to expect’.[45]

   [45]AB F 290.

1. Whilst the evidence is not entirely clear, it seems that these transactions were eventually documented as secured notes under a deed dated 23 August 2011.[46]

   [46]AB F 309–38, and see also the mortgage at AB F 301–6.

1. Mr Wantrup’s evidence was that the $2.6 million and the $1.675 million (in two tranches) were received and held on behalf of Sovereign.[47]  But Mr Wantrup accepted that conditions had been imposed on the disbursement of those funds.  In cross-examination he said that the arrangements made concerning access to these funds were exceptional, and he described them as ‘completely unusual’.[48]  Mr Wantrup said that he was aware at the time that Mr Giorgio was unhappy with the delays that had been experienced and that Mr Giorgio ‘wasn’t going to put up with that anymore’.[49]  He said that the arrangements under which those funds had been held whilst the documents were negotiated had applied to those two investments and only those two.  Mr Wantrup said:

it was extremely unusual, and Nickolas did everything he possibly could to get Braham to accept that the money was needed urgently and the documents would follow.[50]

[47]T 307–8.

[48]T 313.

[49]T 358.

[50]T 358.

1. It is against that background that the three payments totalling $1.1 million which are now the subject of dispute were made.  The first such payment was a sum of $500,000 paid into Mr Wantrup’s trust account in December 2011.

1. Before addressing the evidence concerning that first disputed payment, some initial observations about the prior dealings are warranted. 

1. First, it is clear that in relation to the $2.6 million payment and the two payments totalling $1.675 million express conditions were imposed that the funds paid into Wantrup & Associates’ trust account were not to be disbursed until the relevant documentation had been finalised.  In relation to the disputed payments, Braham Investments relies on what it characterises as an established practice whereby funds were deposited to be held in trust pending finalisation of the documentation.  Mr Wantrup relies upon the fact that these conditions were unusual and had been expressly imposed in relation to the prior transactions, in contrast to the absence of any such express stipulations in relation to the disputed payments.    

1. Secondly, it is clear that Mr Giorgio was unhappy with the arrangement under which access to the funds was precluded until the documentation was finalised.  Mr Wantrup’s evidence that Mr Giorgio was seeking to alter that position is supported by the contemporaneous documents, and those documents also support the proposition that Mr Braham was prepared to accede to Mr Giorgio’s demands in that respect until countermanded by Mr Walton.  On this issue, Mr Braham’s evidence concerning the email exchange on 8 July 2011 might be considered to be not credible.  On one view, he did agree to do what Mr Giorgio asked, and he did so in writing.  The explanation he gave when cross-examined might be seen as unsatisfactory.  On the other hand, Mr Braham did ask Mr Walton to expedite the completion of the paperwork, which Mr Giorgio had indicated was causing the delay.  That might be seen as supporting his account.

1. Thirdly, Mr Giorgio’s assertion that Sovereign had no bank account does not seem consistent with the direction he gave Wantrup & Associates to pay $800,000 into a nominated bank account of Sovereign.[51]  That matter was not put to Mr Giorgio.

   [51]See also a National Australia Bank ‘real time gross settlement’ form directing payment from the Wantrup & Associates trust account to a nominated Commonwealth Bank account with ‘beneficiary name’ ‘Sovereign MF Limited’ at AB F 286–7.

The first disputed payment ― $500,000 ― December 2011

1. In addition to Sovereign and Eos, Mr Giorgio was associated with another company named Krema Pty Ltd (‘Krema’).  In 2011 Krema was proposing to purchase and refurbish a café known as ‘Kush’ which operated from leased premises in Chapel Street, South Yarra.  By an email dated 3 November 2011, Mr Giorgio sent Mr Braham a ‘term sheet’ in relation to a proposed investment in this venture.[52]

   [52]AB F 340.

1. The term sheet summarised proposed terms for a private placement of convertible notes for the purpose of the purchase and refurbishment of the business.  The amount specified as required was $1,500,000.  The interest rate was 25 per cent per annum with an ‘exit fee’ of 50 per cent of the face value of the notes or conversion to equity.  The term sheet specified that it was solely a basis for discussion and it continued:

No legally binding obligations will be created, implied, or inferred until a signed undertaking for a Note is received.  Without limiting the generality of the above, it is the parties’ intent that, until that event, no agreement shall exist among them and there shall be no obligations whatsoever based on such things as parole evidence, extended negotiations, ‘handshakes’, oral understandings, or courses of conduct (including reliance and changes of position).[53]

[53]AB F 568.

1. The case pleaded on behalf of Braham Investments in relation to this payment was that in a single conversation at a meeting in November 2011 Mr Giorgio invited Mr Braham to invest $500,000 in the redevelopment of the Kush café and requested that he ‘demonstrate his interest’ in the investment by depositing $500,000 into Mr Wantrup’s trust account, ‘such funds to be held in trust while an agreement and securities in respect of the investment were prepared’.[54]  This description of the arrangement was also set out in an affidavit by Mr Braham of 17 April 2013[55] and in Mr Braham’s outline of evidence.[56]

   [54]Third Further Amended Statement of Claim [8].

   [55]AB F 844.  The extract in the Application Book does not show whether it was sworn or affirmed.

   [56]AB F 855.

1. The account which Mr Braham gave in his evidence in chief was that there were two meetings concerning this proposed investment in November 2011.  According to Mr Braham’s evidence, at the first meeting what occurred was the following:

He invited me to invest.  I said I would put money into Charles Wantrup’s trust account pending documentation.  I asked him not to bank the cheque until I had the funds cleared and the money would not be disbursed until the documentation was complete.[57]

Mr Braham’s evidence was that Mr Giorgio said in response:  ‘Agreed’.[58]

[57]T 77.

[58]Ibid.

1. In his evidence in chief Mr Braham said that there was then a second meeting on 15 November when he handed over a cheque with the stipulation that the cheque was not to be banked until the funds had cleared and that the funds were not to be released ‘until the documentation was complete’.[59]

   [59]Ibid.

1. In cross-examination, it was put to Mr Braham that the account he had given in his evidence in chief was inconsistent with his outline, inconsistent with his affidavit of 17 April 2013, and inconsistent with Braham Investments’ pleadings.  The inconsistencies put to him were that the pleading and outline had suggested that there had only been one relevant conversation, whereas his evidence now was that there had been two;  and that the pleading and affidavit had relied upon what were said to be statements made by Mr Giorgio to Mr Braham proposing that he could ‘demonstrate his interest’ by making payment into Mr Wantrup’s trust account, whereas his evidence now was that he had stipulated the terms upon which the $500,000 would be paid and that Mr Giorgio had agreed.  In substance, Mr Braham’s response was that there had been two conversations, notwithstanding what had been previously said.  Otherwise, it seems to us that he professed to be unable to comprehend the difference between his evidence and the prior statements.[60]

   [60]T 153–61.

1. Mr Giorgio was called to give evidence by counsel for Mr Wantrup.  His evidence about the first disputed payment was that he met Mr Braham on 12 or 13 November and that they discussed the Kush investment.[61]  When asked what that discussion was he said:

The discussion related to ― the basis ― how we were going to conduct the actual investment was uncertain, in the sense that we didn’t know whether it was going to be under a convertible note or some other arrangement.  I needed to take consultation from our legal counsel.  However, the issue that I had raised with Dr Braham was that I didn’t want to get into a long-winded issue with documents and I needed to actually clarify that with our legal counsel before we were certain as to how we were going to proceed with it.[62]

[61]T 389.

[62]T 390.

1. Mr Giorgio said that he discussed with Mr Braham the delays which had occurred whilst legal documentation was being finalised on the prior occasions.  The following interchange then occurred in evidence in chief with counsel for Mr Wantrup:

What, if anything, did you discuss with Mr Braham about those delays at the meeting in November?  – – –  That we would ― I did not want to revisit the past in terms of the length of time it took to actually finalise documentation and that if Dr Braham was going to enter into this investment, that we would do it on the basis that funds would be disbursed and the documents would follow.

I see.  And that was something you discussed with Dr Braham?  – – –  Yes, correct.[63]

[63]T 391–2.

1. When asked what Mr Braham had said in response to what he had said, Mr Giorgio’s evidence was that Mr Braham said words to the effect:

I have no problem with that, Nickolas.  I know that you had been frustrated in the past.[64] 

[64]T 392.

1. On 11 November 2011 Mr Braham and Mr Giorgio exchanged text messages about the security for ‘the Krema investment’, which referred to a suggestion as to security made by ‘Demian’, a reference to Mr Walton.[65]

   [65]AB F 713.

1. On Sunday 13 November 2011 Mr Braham sent an email to Mr Walton, which he also sent to Mr Giorgio and Mr Wantrup, referring to the issue of security and advising that Mr Giorgio had told him that day that the security would be directors’ guarantees and a first ranking debenture over the company.  The email continued:

Charles will provide the documents, including the financials, this week for your perusal and I’m going to deposit $400,000 (possibly a bit more) in Charles’ trust account Tuesday (by cheque given to Nickolas in favour of Wantrup legal trust).[66]

[66]AB F 341.

1. When cross-examined about this email Mr Braham agreed that there was no reference in the email to the fact that the payment into Wantrup & Associates’ trust account was on the conditions which he says had been expressly imposed previously.  Mr Braham said:  ‘I didn’t feel it was necessary’.[67]

   [67]T 152.

1. Mr Giorgio replied to Mr Braham’s email on Sunday 13 November 2011 saying that he would follow up with Mr Wantrup the next day.[68]  In his cross-examination, Mr Giorgio agreed that he had made no reference in his email to the arrangement which he says he had already made with Mr Braham under which the funds could be paid out of Wantrup & Associates’ trust account prior to the completion of documentation.  Mr Giorgio agreed that there were no contemporaneous written communications which referred to the existence of this arrangement.[69]  Mr Giorgio denied that an arrangement had been made under which the funds would not be released until the documentation was complete.[70]

   [68]AB F 342.

   [69]T 452.

   [70]T 456.

1. Braham Investments drew a cheque for $500,000 dated 15 November 2011 payable to the Wantrup & Associates trust account.[71]  There were a series of email exchanges between Mr Braham and Mr Wantrup concerning when that cheque could be banked.[72]

   [71]AB F 349.

   [72]AB F 808–9.

1. On 29 November 2011 Mr Giorgio sent Mr Wantrup an email asking him to bank Mr Braham’s cheque and to then ‘transfer the cleared the funds to EJC in preparation of settlement’.[73]  The reference to ‘EJC’ was a reference to Eos.  After receiving that email from Mr Giorgio, Mr Wantrup sent Mr Braham an email which read:

Has the cheque you gave Nickolas to give to me been cleared yet.  I need you to tell me that the cheque you gave Nickolas can be banked and be cleared funds.[74] 

[73]AB F 354.

[74]AB F 351.

1. In response Mr Braham advised that he was waiting for another cheque to be cleared and then said:  ‘I imagine the cheque will clear tomorrow’.[75]

   [75]Ibid.

1. According to the official trust ledger, the $500,000 cheque was banked on 29 November 2011 and was returned dishonoured the next day.[76]

   [76]AB F 705.

1. The person responsible for preparing trust receipts in Mr Wantrup’s office at this time was an employee named Rebecca Naumovski.[77]  Ms Naumovski wrote out a receipt for the $500,000 banked on 29 November 2011.  She wrote the name ‘Simon Braham’ next to the entries concerning both from whom the money had been received and on whose behalf the money had been received.[78]

   [77]T 248.

   [78]AB F 370.

1. On 1 December 2011 Mr Giorgio sent an email to one of his employees, copied to Mr Wantrup, asking them to prepare an authority directing Wantrup & Associates to pay Eos the $500,000.[79]  The direction was duly prepared[80] and was forwarded to Mr Wantrup on 1 December 2011.[81]

   [79]AB F 360.

   [80]AB F 359.

   [81]AB F 360.

1. A further cheque for $500,000 from Mr Braham was banked on 6 December 2011.  This cheque was also dishonoured the next day.[82]  Ms Naumovski also prepared a trust account receipt in relation to this cheque, again noting ‘Simon Braham’ as both the person from whom the money was received and on whose behalf it was received.[83]

   [82]AB F 705.

   [83]AB F 370.  The receipt indicates that the payment was received by electronic funds transfer but the official trust ledger indicates it was a cheque. 

1. Between 1 December and 9 December 2011 the parties exchanged emails concerning the dishonoured cheques, and at the same time Mr Wantrup and Mr Walton exchanged emails concerning the proposed convertible note deed and related documents.[84]

   [84]AB F 360–71.

1. By an electronic funds transfer on 8 December 2011 Braham Investments paid a sum of $500,000 into the trust account of Wantrup & Associates.  Ms Naumovski again prepared a trust receipt.  This time she named ‘Braham’ as the person from whom the funds were received and in relation to the person on whose behalf they were received she named ‘Sovereign MF Ltd’.[85]  The funds were paid out of the Wantrup & Associates trust account to Eos the next day, 9 December 2011.[86]

   [85]AB F 370.

   [86]AB F 476 and AB F 705.

1. Mr Wantrup in his evidence said that Ms Naumovski’s trust receipts were ‘completely wrong’ and that he would not have seen them at the time.[87]  We will return to that issue.

   [87]T 262.

1. In his evidence in chief concerning the events in late November and December 2011, Mr Braham referred to the dishonoured cheques and to the communications he had received after their dishonour.[88]  He said that when he learnt that the cheque had again been dishonoured on 8 December, he attempted to contact Mr Wantrup but, when unable to do so, he contacted Mr Giorgio.  Mr Braham’s evidence in chief was:

Mr Giorgio asked if I could arrange a transfer of funds into Mr Wantrup’s trust account.  I did have 20 minutes or so to do that, so I believe I attended the branch in Balaclava and arranged the transfer of funds into Mr Wantrup’s trust account.[89] 

[88]T 79–86.

[89]T 85.

1. In cross-examination Mr Braham was asked about the repeated requests made to him to provide cleared funds.  He agreed that he was asked three times to provide ‘cleared’ funds and that ultimately he transferred the funds electronically.[90]  The following was put to him:

I want to suggest this to you having regard to these text messages and events:  You knew, at the beginning of December, that there was urgency in getting cleared funds to Sovereign, do you agree?  – – –  There wasn’t urgency to get cleared funds to Sovereign.  I wanted to demonstrate my interest and was doing my best to let that occur.[91] 

[90]T 162–8.

[91]T 166.

1. He denied that ‘urgency’ had been communicated to him.  He was questioned as to why he did not respond to the numerous requests for cleared funds by asking why that was necessary when the money was not to be disbursed until the transaction had been documented.  He responded:

my side of the bargain was to get the money in the trust account.  Their side of the bargain was to provide the documents.  I tried to keep my side of the bargain as best I could.[92]

[92]T 168.

1. Mr Giorgio in his evidence said that the pressure for cleared funds was a result of the fact that he believed settlement of the Kush purchase was imminent and that he wanted to have cleared funds ‘at the ready’.[93]

   [93]T 395–6.

1. Mr Wantrup maintained, in substance, that he simply acted on his client’s instructions in receiving and paying out the funds.  The clearest statement by Mr Wantrup to this effect is in a letter he wrote on 15 March 2013 to B2B Lawyers.[94]  He said he did not receive any instruction from Mr Braham or anybody acting on his behalf in relation to the basis upon which the $500,000 was to be held.[95] In cross-examination, he said he did not believe he had been told in November or December 2011 about the agreement Mr Giorgio contends he made with Mr Braham regarding use of the funds,[96] and he also agreed with the proposition that he had not received any instruction from Sovereign ‘suggesting that it was beneficially entitled to monies that Braham provided’.[97] 

   [94]AB F 695.

   [95]T 260–1.

   [96]T 350.

   [97]T 303.

1. As matters transpired, the Kush transaction was never documented.  A number of impediments were encountered, most notably difficulties in finalising the proposed assignments of the leases of the premises on which the business was conducted. 

Dealings in January and February 2012

1. On Friday 20 January 2012, Mr Braham sent an email to Mr Walton and Mr Wantrup, copied to Mr Giorgio, concerning, amongst other things, a meeting he had had with Mr Giorgio the night before where they had agreed upon a ‘rolling over’ of the $2.6 million loan made in 2010.[98]

   [98]AB F 846.

1. Mr Giorgio gave evidence that he had frequently met Mr Braham.  He said that at the meeting referred to in Mr Braham’s email he had discussed Mr Braham’s investment in Kush.  Mr Giorgio said:

He was already aware from day one that we were relying on his initial investment into Kush.  I did tell him that it was going to be disbursed in terms of paying some legal fees and we were going to set aside some for an imminent settlement.

Mr Giorgio’s evidence was that Mr Braham reacted without surprise, that he said that it was ‘not a problem’, and that he had no issues with it.[99]

[99]T 398–9.

1. When Mr Braham was questioned about this meeting he said that there probably was a meeting, although he had no independent recollection of it.  He said the Kush investment had ‘stalled’ and he did not think that they discussed it.[100]  When it was put to him that Mr Giorgio had told him that the money provided had been used in the Kush business he disagreed with that.[101]

   [100]T 169–70.

   [101]T 170.

1. On 16 February 2012, Ms Naumovski sent an email to Mr Braham.  Ms Naumovski’s email told Mr Braham that attached was ‘a statement of your trust ledger held with Wantrup & Associates’.  The email went on:

As you can see, there is an overdrawn amount of *76.25.[102] 

[102]AB F 481.

1. Early the next morning, 17 February 2012, Mr Braham sent an email to Ms Naumovski, which appears to be a reply to her email, as the subject lines are the same, but which seems unresponsive.  Mr Braham asked Ms Naumovski to contact his accountant, Mr Lamanna, saying that Mr Lamanna had been requesting ‘copies of your trust ledger for six months now and you have failed to provide this to him’.[103]  Ms Naumovski  replied the same day as follows:

My apologies,

but I have never been contacted by Anthony [Mr Lamanna] regarding yourself and the funds you hold in trust.

I will send them through now.  Are you after the ledger only for ludekens and gunns?[104]

[103]AB F 483.

[104]AB F 484.

1. Mr Braham replied asking Ms Naumovski to contact Mr Lamanna to discuss what he required.  Ms Naumovski then sent an email to both Mr Braham and Mr Lamanna which said that attached were ‘the trust ledgers for Mr Simon Braham’.  The email went on:

As you can see, there is an additional amount of $51.44 in bank charges which needs to be paid in relation to the dishonoured cheques.[105]

[105]AB F 486.

1. Mr Lamanna replied, copying his reply to Mr Braham, thanking Ms Lamanna for the ‘copies of the trust account ledgers’ and then stating:

In regards to ‘Sovereign MF’ matter, kindly provide details of each of the withdrawals made in the 2011/2012 year vis-a-vis $800,000 on 17/8/2011 and $500,000 on 9/12/2011.[106]

[106]AB F 487–8.

1. One of the documents Ms Naumovski had attached was a document purporting to be a trust ledger which named as the client ‘Simon Braham’ and described the ‘Matter’ as ‘Ludekens & Gunns’.  The ledger showed a debit balance of $876.25.  The reference to *76.25 in Ms Naumovski’s email of 16 February 2012 was obviously a typographical error.  Mr Braham paid the sum of $876.25.  His evidence was that he made the payment himself.[107]  Mr Wantrup gave evidence in relation to this particular document.  He agreed that in relation to this ‘Gunns issue’ he had held funds for Mr Braham.  He said that this was arranged by Mr Giorgio and Mr Ludekens.[108]  His evidence was that funds were paid into his trust account for the purpose of being on-paid to a solicitor named O’Keefe and to counsel.  He said that he did not know why this had been done.[109]  In cross-examination, whilst he agreed that money had been held on this account for Mr Braham, he rejected the suggestion that he had been the client.  He agreed that he had looked to Mr Braham to meet the discrepancy of $876.25 on the account.[110]

   [107]T 173.

   [108]T 268.

   [109]T 269, 272.

   [110]T 327.

1. The second document attached by Ms Naumovski was another purported trust ledger which also named the client as ‘Simon Braham’.  It described the ‘Matter’ as ‘Sovereign MF’.  The ledger begins by recording the receipt and disbursement of $800,000 in mid-2011.  The receipt and subsequent reversal of the two dishonoured cheques for $500,000 in late November and early December 2011 are then set out, followed by the receipt on 8 December 2011 of $500,000 by electronic transfer and the payment out of that sum to Eos the following day.  The receipt numbers on this ledger for the cheque banked on 6 December 2011 and for the electronic transfer are different to the numbers on the receipts Ms Naumovski had written out as previously referred to.[111]  The ledger is in debit in a sum of $51.44 referable to the dishonoured cheques.

   [111]The receipt numbers at AB F 370 are TA 604742 and TA 604744.  The receipt numbers on the ‘ledger’ are TA 604722 and TA 604724.

1. As indicated, Mr Braham was copied in to Mr Lamanna’s email of 17 February to Ms Naumovski, and he was an addressee of Ms Naumovski’s earlier email to Mr Lamanna.  Mr Lamanna then emailed Mr Braham separately.  He referred to the receipt of the ‘copies of trust account ledgers’ which he said recorded ‘only two contributions by you … to Sovereign MF’.  He then listed them as $800,000 on 4 July 2011 and $500,000 on 8 December 2011.  Mr Lamanna continued:

Kindly review your records to confirm whether the information recorded in the trust ledgers includes all contributions advanced to Wantrup & Associates regarding Sovereign MF.

In addition, also confirm:

1. whether you (directly or on behalf of any entity you control) advanced any additional funds directly to Sovereign MF and

2. whether you (directly or on behalf of any entity you control) advanced any other funds directly to Wantrup & Associates (other than to cover legal costs as reported on page 2 of the trust ledger ― see attached).[112]

[112]AB F 493.

1. Mr Braham replied to Mr Lamanna shortly after receiving his mail stating:

I think this is all correct

It would be better to confirm with Demian.[113]

[113]AB F 493.

1. Mr Lamanna then exchanged emails with Mr Walton concerning the transactions set out.[114]  He did so by forwarding to him the earlier emails between himself and Mr Braham.  Mr Walton did not raise any matters of concern.[115]

   [114]AB F 492.

   [115]AB F 491.

1. The emails in February and the attached ledgers were primarily relied upon by Mr Wantrup.  The ledger in the ‘Sovereign MF’ matter revealed to anyone reading it that the sum of $500,000 transferred to Wantrup & Associates on 8 December 2011 had been paid out to Eos on 9 December 2011.  If that was not already clear, Mr Lamanna’s email of 17 February had expressly referred to a ‘withdrawal’ of $500,000 on 9/12/11.  This issue was the subject of considerable cross-examination of Mr Braham.  On the other hand, the same ledger named Mr Braham as a client, suggesting that the receipts recorded in that ledger, beginning with the $800,000 deposited in July 2011 and including the $500,000 transferred on 8 December 2011, were held on behalf of Mr Braham.  This was the subject of cross-examination of Mr Wantrup. 

1. Mr Braham was asked about the February 2012 emails in his evidence in chief.  He said that he did not recall seeing the ledgers attached to the email initially sent to him by Ms Naumovski on 16 February 2012.  He said that he did not study the ledgers forwarded to him and that he was relying on Mr Lamanna to read them.[116]  In cross-examination he agreed that it was likely that he noticed that there were overdrawn amounts on the documents attached to Ms Naumovski’s email of 16 February 2012.  He agreed that he had made the transfer of $876.25.  He said that he did that after Mr Lamanna had checked it.  In substance Mr Braham maintained that he had not paid much attention to the attachments and that he did not understand them.  He maintained that he was not ‘qualified’ to read trust ledgers.  He said he was confused by debits and credits.  Eventually he agreed that it was obvious that one of the documents recorded the fact that the $500,000 had been paid to Eos.  He said:

It’s obvious to me now, reading the document, yes, but in February 2012 I didn’t understand the document.  I didn’t look at the document.[117]

[116]T 87.

[117]T 171–81.

1. He was then asked about Mr Lamanna’s email to Ms Naumovski, which had been copied to him, in which express reference had been made to ‘withdrawals’ of $800,000 on 17/8/2011 and $500,000 on 9/12/2011.  He agreed that if this had been brought to his attention he would have seen what it was referring to.  He said that this was a matter his accountant was addressing not him.  When asked whether he was suggesting that he would not have understood those words in 2012 he said:

I employed an accountant and a lawyer to understand these words.  I’m a doctor, I have my area of speciality.  I defer to others in their area of speciality.[118]

[118]T 183.

1. In response to a question from the trial judge as to whether reading the documents today he could understand them, he responded ‘possibly’.  Eventually he agreed that with the benefit of hindsight it was obvious the $500,000 had been withdrawn.  He was asked about the passage in Mr Lamanna’s email asking him to check his records and to confirm whether the ledgers were correct, and he said that he did not review the trust ledgers as requested.  He was then asked about the statement he made in his email reply to the effect that he thought it was ‘all correct’.  He said that he could only say that with the best of his knowledge at the time.[119] 

   [119]T 182–5.

1. As indicated, Mr Wantrup in his evidence said that Ms Naumovski had erroneously completed the trust receipts for the $500,000.  In his cross-examination he asserted that the ledgers attached to Ms Naumovski’s February 2012 emails did not ‘belong to our proper trust account.  It is something she has created for the purpose of discussing it with Dr Braham’.  He went on:

In terms of the accuracy of the entries, there is no dispute, but it is not part of our trust account.  It has never been part of our trust account and was prepared, I believe, to show these to Dr Braham by putting it on a standard form, and I regard it as not forming part of our books and records.[120]

[120]T 329.

1. Mr Wantrup maintained that he had never seen the ledger containing the entries concerning the $500,000 and that it was not a ‘trust ledger’.[121]

   [121]Ibid.

1. Mr Wantrup agreed that he had asked his staff to look into and recover the discrepancies.[122]  Mr Wantrup rejected the proposition that the attachments to Ms Naumovski’s emails constituted part of his trust records or were authorised by him.[123]  The following interchange with counsel for Braham Investments occurred:

I want to suggest to you, Mr Wantrup, that listing the $500,000 as being held for the benefit of Mr Braham in [the ledger] was consistent with there being no Krema investment until the signed note undertaking had been received?  – – –  Well, if I adopted that document, you might be correct, but I haven’t. 

But it came out of your office?   – – –  I don’t care.  I haven’t adopted it, it is not part of our documents.  It is a concoction by her for her own purposes.[124]

[122]T 330.

[123]T 333.

[124]T 338.

1. Ms Naumovski was no longer in Mr Wantrup’s employ at the time of the trial.  A witness outline had been prepared for her which stated that trust receipts had been prepared under the instructions of Mr Wantrup and that they were always reviewed either by him or by her superior, a Mr Vanderhorst, who is now deceased.  Mr Wantrup in his evidence suggested that Ms Naumovski’s employment had been terminated after a significant discrepancy had been located in the accounts.[125]  Ms Naumovski was not called to give evidence in the trial.

   [125]T 374.

1. It is sufficient to observe at this stage that the emails in February 2012 raised credit issues which had to be addressed in relation to Mr Braham concerning his knowledge of the payment out of the $500,000, but also in relation to Mr Wantrup concerning his trust records.

1. On 8 June 2012 Mr Wantrup became a director of Sovereign.[126]

   [126]Applicant and Respondent, ‘Summary for Court of Appeal’, 13 June 2018 [1].

The second disputed payment ― $100,000 ― August 2012

1. On 21 August 2012 Braham Investments drew a cheque in the sum of $100,000 payable to the Wantrup & Associates trust account.[127]  Text messages between Mr Braham and Mr Giorgio exchanged in the days beforehand reveal that this $100,000 payment had been discussed between them and that it related to a ‘settlement’ which Mr Giorgio said he was ‘gearing for’ in the next few days.[128]  A receipt was made out by an employee of Mr Wantrup other than Ms Naumovski.  It named Simon Braham as the person from whom the funds were received and Krema as the person on whose behalf the funds were received.[129] 

   [127]AB F 505.

   [128]AB F 719.

   [129]AB F 506.

1. Mr Braham maintained both before and during the trial that this $100,000 related to the Tarneit Land Fund, and he rejected any suggestion that it was in fact a further payment in relation to Kush.  The trial judge found against Mr Braham on that issue and that finding is not contested.  The argument before us proceeded on the basis that the trial judge’s finding that the $100,000 related to Kush is correct.  In that respect the trial judge accepted Mr Giorgio’s evidence.

1. What the two individuals said about the $100,000 does, however, have continuing relevance.  First, because it is now accepted (or not contested) that Mr Braham’s evidence was rightly rejected on that issue;  secondly, because there was, at the least, potential tension between Mr Braham’s assertion that he believed the $500,000 was still being held by Mr Wantrup in trust in relation to the Kush investment pending finalisation of the documentation, when an additional $100,000 was sought, again with some urgency;  and thirdly, because both Mr Giorgio and Mr Braham essentially maintained that the arrangement made in relation to this payment was a replication of that made in relation to the first disputed payment.  In that context, there was a significant interchange in the course of Mr Giorgio’s evidence in chief.  It was as follows: 

What, if anything, was discussed about how access would be gained to that $100,000?  – – –  In the same manner.

In the same manner as what?  – – –  As the 500,000.

How is this $100,000 payment made?  – – –  He provided a cheque made out to Wantrup & Associates.

Did you discuss with him who the cheque would be made out to?  – – –  He indicated, ‘should I make out the cheque to Eos Janus?’  I said, ‘No, just make it out to Wantrup & Associates’.

Did you explain why?  – – –  I guess we had  – – –

Do you remember what you said about that?  – – –  Yeah, I said, ‘No, just keep protocol and let’s just follow suit in protecting your position’.[130]

[130]T 402.

1. This interchange is significant because it is difficult to see how payment to the Wantrup & Associates trust account could in any way protect Mr Braham’s position if what Mr Giorgio said was the basis of the arrangement between them in relation to disbursal of the funds were true.

1. The official trust ledger records that the $100,000 was received on 22 August 2012 and was paid out to Krema ‘as per client instruction’ on 24 August 2012.  The relevant instruction, signed by Mr Giorgio and dated 22 August 2012, named the client as Eos and the description of the matter as ‘Krema Pty Ltd’.[131]

   [131]AB F 507.

The third disputed payment ― $500,000 ― September 2012

1. On 21 September 2012 a meeting was held at the Hyatt Hotel between Mr Giorgio, Mr Braham, and Mr Wantrup.  At that meeting Mr Braham handed Mr Wantrup a cheque drawn by Braham Investments payable to Wantrup & Associates’ trust account in the sum of $500,000.  The cheque was post-dated 24/9/12.[132]  The official trust ledger records the cheque as received on that day, and as returned dishonoured on 26 September 2012.  On 26 September 2012, Mr Braham arranged to obtain a bank cheque for the sum of $500,000 payable to ‘Charles Wantrup & Associates’.[133]  That cheque was paid into Wantrup & Associates’ general office account, and a general account receipt was issued stating that the amount was received from ‘S. Braham’ with an entry next to the description ‘Memo’:  ‘To pay EJC ($400,000), Barristers’ fees (John Denton, Bowen Lawyers and Rubenstein) and outstanding invoices’ in type face, and ‘for account Sovereign MF Limited’ in handwriting.[134]

   [132]AB F 533.

   [133]AB F 551.

   [134]AB F 554.

1. The proposed Hyatt meeting was referred to in a text message of 17 September 2012 at 1:33 pm from Mr Giorgio to Mr Braham.  That same day Mr Giorgio sent Mr Braham an email, copied to Mr Wantrup.[135]  The email addressed the Kush investment and the documentation which remained to be completed in relation to it.  It continued:

In the matter regarding Sovereign Tarneit Land Fund and the request for further funding it was agreed that you would provide an immediate amount of $500,000 on the following terms:

1.Interest to be at 15% p.a. to mature on or before 30th November 2012

2.50% share of house commissions received by Eos Janus Holdings Pty Ltd on 48 lots in stages 5 and 6

3.Secured by current first mortgage held together with debenture charge over SMF already held.[136]

[135]AB F 511.

[136]AB F 511.

1. By an email of 18 September 2012 from Mr Braham to Mr Giorgio, copied to Mr Wantrup, Mr Braham asked when Mr Wantrup anticipated the ‘paperwork’ for both the Kush and Tarneit investments would be prepared and sent to Mr Walton.  The email continued:

In regards to the $500k I’m raising for the Tarneit Land Fund I’m selling some shares today and organising to borrow some money.[137]

[137]AB F 516.

1. Shortly afterwards Mr Giorgio replied to Mr Braham, again copying in Mr Wantrup, saying that he would be ‘seeking to have the documentation completed with Charles over the next few days’.[138]  Text messages exchanged between Mr Giorgio and Mr Braham on 20 September concerned the outstanding documentation.  Mr Giorgio said the documents ‘should be with us tomorrow’.  Mr Braham asked whether the documents could be emailed to Mr Walton and Mr Giorgio said they could.[139]  There were further text messages exchanged about when the funds to be provided would be cleared.[140]

   [138]AB F 513.

   [139]AB F 751–2.

   [140]AB F 723.

1. In his outline of evidence,[141] in his affidavit of 17 April 2013,[142] and in Braham Investments’ pleading,[143] what was asserted by Mr Braham was that Mr Giorgio had asked him to ‘demonstrate interest’ in the proposed additional $500,000 investment by paying that sum into the Wantrup & Associates trust account.  As will be seen, that is not the way Mr Braham described the relevant discussions in his evidence. 

   [141]AB F 856.

   [142]AB F 842.

   [143]AB D 60.

1. In relation to the dealings immediately prior to the meeting at the Hyatt Hotel on 21 September, Mr Braham said that he was asked by Mr Giorgio for further funds in relation to Tarneit.  Mr Braham’s evidence was that his response was that he would try and raise the funds, that he would need some time to do so, and that the terms of the investment ‘were as previously discussed and the money was not to come out until final legal agreements’.[144] 

   [144]T 108–9.

1. Mr Giorgio’s account of the discussions prior to the Hyatt meeting was that he explained to Mr Braham that there was a need for additional funds in relation to Tarneit so as to meet ‘compliance costs’.  His evidence was that Mr Braham was agreeable to that but was unsure how much he could contribute.  When asked whether there was discussion about how quickly the money was needed Mr Giorgio said:

Only that the quicker we pay the compliance costs, the quicker we get title issuance.[145]

[145]T 404.

1. In his evidence in chief Mr Braham said that he, Mr Giorgio and Mr Wantrup met at the Hyatt Hotel in the city at around 3:00pm.  He said that there was discussion about the outstanding documentation and that he pointed out that in relation to Kush he had been waiting for the documents for nine months.  He said there was a discussion about the Kush investment and that Mr Giorgio then asked if he had the cheque for the further Tarneit investment.  Mr Braham said that he said yes and then went on:

Your Honour, we discussed the further Tarneit investment.  I said, ‘I have the cheque.  The funds will not be available until early next week.  It is to be banked into Charles Wantrup’s trust account and the funds were not to be released prior to final legal agreements’.[146]

[146]T 111.

1. When asked what was said in response Mr Braham said:

Both Mr Giorgio and Wantrup agreed.[147]

[147]Ibid.

1. Mr Braham said that he dated the cheque 24/9/12 because he had to get cleared funds into the account and he knew that that would not happen until early the following week.[148]  He said there was no discussion about the money being paid out from Mr Wantrup’s trust account once the cheque had been cleared.[149]  Mr Braham was asked whether there was any discussion at the meeting in relation to Eos and he said that there was not.  He was asked whether there was any discussion at the meeting concerning a Mr O’Neill from the Commonwealth Bank.  He said there was not.[150] 

   [148]T 112.

   [149]T 113.

   [150]Ibid.

1. When cross-examined about the Hyatt meeting it was put to Mr Braham that a representative of the Commonwealth Bank had attended the meeting.  Mr Braham said that there was ‘definitely’ not a representative of the bank present.[151]  It was put to Mr Braham that Mr Wantrup would give evidence that at the same time that he handed over his cheque, Mr Wantrup wrote out a cheque which was handed to the Commonwealth Bank representative.  Mr Braham said:  ‘That did not happen’.[152]

   [151]T 202.

   [152]T 203.

1. It was put to Mr Braham that there had been no discussion in Mr Wantrup’s presence to the effect that the funds were not to be released prior to final legal agreement and Mr Braham said that that was ‘absolutely incorrect’.[153]

   [153]Ibid.

1. Mr Braham was then taken to an earlier version of Braham Investments’ statement of claim where no reference had been made to the Hyatt meeting.  When asked whether he had always recalled the Hyatt meeting he said that he had and that the earlier version of the statement of claim had been ‘drawn up by my lawyers’.[154]

   [154]T 208–10.

1. Mr Wantrup gave evidence that when he arrived at the Hyatt Hotel Mr Giorgio and Mr Braham were already there.  He said there was a discussion about overseas tax structures and that he was then handed a cheque for $500,000.[155]  He continued:

When I received the cheque, I was told that the Commonwealth Bank was coming to collect the cheque.  I rang my office.  I spoke to a secretary of mine at the time and asked her to bring a chequebook to me.  She came with the chequebook.  I completed the cheque.  The Commonwealth Bank guy arrived and stood there expectantly.  I put the cheque in an envelope and it was given to him.

[155]T 265.

1. Mr Wantrup’s evidence was that Mr Braham was present whilst this happened, and that the person from the Commonwealth Bank was named ‘Dean’, but that he did not remember his second name.[156]

   [156]Ibid.

1. Mr Wantrup said that Mr Braham made it clear that there were not funds in the account at that time but that there would be on the following Monday.  He said that the ‘Commonwealth Bank person’ was told not to bank the Wantrup cheque.[157]  Mr Wantrup identified a cheque butt for a cheque in the sum of $400,000 as being referrable to the cheque he wrote.  Amongst the notations on the cheque butt was his handwriting reading ‘Eos Janus $400,000’.[158]  By reference to his bank account statements he was asked about the deposit of $500,000 on 26 September.  He was asked why that had not been deposited into his trust account.  He initially said that he did not want ‘things bouncing through my trust account’ but then said ‘the 400,000 was being written against the general account, so it appeared logical’.[159]

   [157]Ibid.

   [158]T 266 and AB F 839.

   [159]T 267.

1. In cross-examination Mr Wantrup was asked whether there had been discussion about documentation at the Hyatt meeting and he said that there had not.[160]  In relation to the bank representative he said that Mr Giorgio introduced him as Sovereign’s banker.  Mr Wantrup said there was no discussion as to how Mr Braham’s cheque ‘would be deployed’.[161]  It was put to him that when Mr Braham handed over his cheque there was a discussion about the terms upon which he was to hold the funds and he denied that.[162]  He denied that reference had been made by Mr Braham to the fact that he had been awaiting documents on the Kush investment for nine months.[163]  He denied that it had been ‘explained’ at the Hyatt meeting that the funds were to be held in trust until the documents were done.[164] 

   [160]T 363.

   [161]T 364.

   [162]T 365.

   [163]Ibid.

   [164]T 366–7.

1. Mr Giorgio in his evidence in chief, when asked who was present at the meeting at the Hyatt on 21 September 2012, said ‘Mr Wantrup, Dr Braham and our banker attended, Dean O’Neill’.[165]  Mr Giorgio said that Mr O’Neill was there to obtain a cheque and that he was introduced to Mr Wantrup and Mr Braham.  When asked what had happened, Mr Giorgio said that Mr Wantrup had provided to him, that is to Mr Giorgio, a ‘counter cheque against the cheque that Dr Braham had provided Mr Wantrup’.[166]  Both the cheques were post-dated.[167]

   [165]T 406.

   [166]Ibid.

   [167]Ibid.

1. In cross-examination, it was put to Mr Giorgio that Mr O’Neill had not been present whilst Mr Braham was there and Mr Giorgio rejected that.  Mr Giorgio was cross-examined about how the $500,000 had been applied.  When challenged on his assertion that the $500,000 investment in September 2012 was on the same basis as the prior investments Mr Giorgio said:  ‘Well the investment was different.  However, the disbursement occurred before his eyes’.[168]  Mr Giorgio rejected the proposition that he and Mr Wantrup had been told that the funds were to be paid into the trust account and were not to be released prior to final legal agreements. 

   [168]T 483–4.

1. At 5:18 pm on 21 September 2012, Mr Braham sent an email to Mr Lamanna and Mr Wantrup, advising them that he was ‘entering into 2 further investments with sovereign’.  The email continued:

Could you supply Charles Wantrup with the details of Braham Properties so I can put the new investments into the correct name.

Could you supply copies of the trust deed for Braham Properties and Braham investments.[169]

[169]AB F 538.

1. It should be noted at this point that very early in his cross-examination Mr Braham was asked about his knowledge of trusts.  The following interchange occurred:

And Braham Properties is a trustee of a trust;  is that correct?  – – –  I’m not the right person to ask that question.

Why not?  You’re a director of the company?  – – –  I’m a doctor, I’m not a lawyer.

Do you not understand whether or not it is a trustee of a trust?  – – –  The terms I don’t understand.

I’m sorry, which terms don’t you understand, Dr Braham?  – – –  The trustee of a trust. 

Did it execute a trust deed at any point in time, that you recall?  – – –  I’m not sure what that means, your Honour.

Have you ever received communications from anybody that suggested that this company, Braham Properties, was acting as the trustee of a trust?  – – –  I wouldn’t want to make a comment about that. 

I’m going to ask you to answer my question, please.  Have you received communications that you recall that suggested that Braham Properties is the trustee of a trust?  – – –  I couldn’t answer that question because I don’t understand the question. 

What part of the question don’t you understand? – – –  I don’t understand what a trustee of a trust means.

You don’t understand that at all?  – – –  No.

Braham Investments, is that a trustee of a trust, to your knowledge?  – – –  Again, I don’t know what that term actually really means.[170]

[170]T 120–1.

1. Similar evidence was given by Mr Braham about his knowledge of companies with which he is associated.[171]

   [171]T 119–20, 121.

1. After the meeting on 21 September 2012, there were a number of communications between the parties concerning when cleared funds would be available and concerning the dishonoured cheque.[172]  There were also text messages concerning the outstanding documents.[173]  On 25 September 2012, Dean O’Neill, described as ‘Private Client Manager Commonwealth Private Bank’, sent an email to Mr Giorgio which read:

I’ve received a notice that the cheque you handed me on Friday has been returned.  Can you please contact/reply to me as a matter of urgency to discuss.[174]

[172]AB F 724, 520, 550, 761.

[173]AB F 760.

[174]AB F 836.

1. Mr Giorgio replied advising that the cheque had been dated 24 September and that he would need to present it again.[175]

   [175]AB F 835.

1. By a direction dated 24 September 2012, signed by Mr Giorgio, Sovereign directed Wantrup & Associates to transfer ‘from the trust money received by you from Simon Braham’ specified amounts, including $400,000 to Eos.[176]  Mr Wantrup drew a cheque on his general account on 26 September 2012 to Eos in the sum of $400,000.[177]

   [176]AB F 534.

   [177]AB F 840.

1. Mr Braham in his evidence in chief said that after the cheque which he handed over at the Hyatt had been dishonoured he made alternative arrangements.  He said:

I decided the best thing to do, as it worked last time in December 2011, was attend a branch of the Commonwealth Bank and arrange for a bank transfer.[178]

[178]T  115.

1. He said he encountered difficulty in that course and so instead he obtained a bank cheque.  He said that he asked the bank to make it out to ‘Charles Wantrup & Associates’ trust account’.[179]  He said that he took it back to the outpatients’ department where he was working at the time and that a representative from Charles Wantrup’s office attended there and collected the cheque.[180]

   [179]T 116.

   [180]Ibid.

1. In cross-examination, he was asked about contact made with him concerning the dishonoured cheque and about the need for clear funds.  The following interchange occurred:

What I want to suggest is that you understood that at this time that the cheque needed to be cleared because you knew that they needed to use the funds?  – – –  No, your Honour.  The funds were to remain in the trust account awaiting final documentation.

…

You did not respond to say, ‘What is the rush?   It is just going to sit in a trust account until the lawyers sort this out’, did you?  – – –  It was my undertaking to get the money into the trust account.[181]

[181]T 206–7.

1. Mr Wantrup in his cross-examination was asked why he had paid the $500,000 into his general account.  It was put to him that the suggestion he had made that he was concerned about the cheque ‘bouncing’ could not be correct as it was a bank cheque, and he agreed with that.  He suggested that he may have given the instruction before the cheque arrived.[182]  When asked what the $400,000 paid out to Eos was used for, Mr Wantrup said he had no idea.  He said that he had not discussed this with Mr Giorgio, Mr Braham or Mr Walton.[183]

   [182]T 360.

   [183]T 368.

Dealings after the third disputed payment

1. On 15 October 2012, Mr Braham sent an email to Mr Walton, which he copied to Mr Lamanna and Mr Wantrup, which relevantly read as follows:

Good morning Demian and Charles

How are we progressing with the paperwork for the tarneit further investment

I can confirm that the investment is $600000.  sovereign is offering 15% and Eos Janos [sic] 50% of the commission of $20000 on each of the 48 lots.

Have we finished the paperwork for the kush investment.  The amount is $600000.  The terms are on the PDS circulated last year. 

I have placed the money’s [sic] in Charles Wantrup trust for both investments and are keen [sic] for the paperwork to be completed so he can disperse the funds ASAP.[184]

[184]AB F 556–7.

1. The statement ‘so he can disperse the funds ASAP’ is particularly noteworthy.  There is no written correction of Mr Braham’s apparent misapprehension that the funds were yet to be ‘dispersed’ in the evidence.    

1. On 19 October 2012, Mr Braham sent an email to Mr Wantrup, copied to Mr Giorgio and to Mr Walton, which relevantly read:

Could you as a matter of urgency please send Demian the proposed transaction documents for the further Tarneit Invedtment [sic] including the signed priority deed.  It’s been several weeks since I put the Money in your trust and I’m anxious to get the investment underway. 

I would also like to settle the Kush investment so could you send Demian the relevant documents.[185]

[185]AB F 556.

1. In response to that email Mr Giorgio replied with the word:  ‘Noted’.  Mr Wantrup replied:  ‘Dear Simon.  I sent the documents to Demian on 26 September.  I’ll chase up.  Charles’.[186]  Neither Mr Giorgio nor Mr Wantrup corrected Mr Braham’s apparent belief that the investment was not yet ‘underway’.

   [186]AB F 560.

1. Mr Walton advised Mr Wantrup that he had not received the email of 26 September and the documents were sent to him again on 19 October, including a copy of the original term sheet.[187]  Dealings between Mr Wantrup and Mr Walton in relation to the documentation continued during November.[188]

   [187]AB F 558, 566.

   [188]AB F 637–8.

1. On 2 November 2012, Mr Braham sent an email to Mr Wantrup which relevantly read:

I put this money in your trust account a long time ago.

I have been continually requesting that the documents be finialised [sic], but you have not returned Demian’s email’s (see below).  I have been very patient regarding those delays.

Nickolas has assured me that the money is safe in your trust account and will not be distributed until documentation is finialised [sic]. 

However I require that documentation be completed immediately or if you do not want to complete the documentation at this time could you please return the funds and I will put the money back in your trust account when you are ready to complete the documents.[189]

[189]AB F 630.

1. Mr Wantrup responded not long afterwards by email referring to other commitments and some leave he had taken and stating that he ‘intend[ed] to finalise this over the long weekend’ and asking Mr Braham to ‘[p]lease bear with me’.[190]  Mr Wantrup again said nothing to correct Mr Braham’s apparent belief that the money was ‘safe’ in Wantrup & Associates’ trust account.

   [190]AB F 631. 

1. On 23 November 2012, Mr Braham sent an email to Mr Giorgio and to Mr Wantrup advising that, whilst he wished to continue with his investments in Tarneit, he had changed his mind about the investment in Kush.  He said that he had been ‘told by my lawyers’ not to proceed in the present circumstances.  He went on:  ‘I have been strongly advised I can no longer afford to have cash tied up in Kush and need it for the urgent matters in February 2013’.[191]  In reply Mr Giorgio emailed that this was:  ‘Not a problem‘.[192]  In his cross-examination Mr Giorgio recognised the inconsistency between Mr Braham’s email and Mr Giorgio’s account of events.[193]  The inconsistency was that the Kush money had already been spent.  When challenged as to why he did not ‘tell him that he’d got it all wrong’, Mr Giorgio responded:  ‘I told him when I met him’.[194]

   [191]AB F 676.

   [192]AB F 677.

   [193]T 464.

   [194]T 463–4.

1. In February 2013, Mr Walton began requesting the return of the $1.1m paid in the three disputed payments.[195]  Mr Wantrup asked Mr Giorgio to ring him about a response.[196]

   [195]AB F 679–81.

   [196]AB F 682.

1. On 4 March 2013, Mr Walton wrote to Mr Wantrup stating that he had failed to respond to requests for return of the funds.  The letter enclosed a draft letter addressed to the Legal Services Commissioner.  Mr Walton advised that he intended to forward that letter to the Legal Services Commissioner on 6 March 2013 unless the funds were returned.[197]

   [197]AB F 683.

1. The enclosed draft letter set out, in substance, Braham Investments’ pleaded case, including the assertions that the payments had been made in order to ‘demonstrate interest’.  The letter set out requests which had been made for the return of the funds and asserted that the funds ‘remain to be returned by Wantrups’.[198] 

   [198]AB F 685–7.

1. By an email of 8 March 2013 Mr Wantrup advised B2B Lawyers that he had asked his ‘accountancy staff to give me a report’ and that he had sent a copy of the B2B letter to Mr Giorgio and asked for his comments.[199] 

   [199]AB F 690.

Consideration of significant issues concerning factual findings

No contemporaneous documents supporting Mr Braham

1. The trial judge found that there were no contemporaneous documents associated with any of the three payments which supported Mr Braham’s assertion that the money which he provided was to be held in trust by Mr Wantrup until the documentation for the proposed investments had been completed.[313] 

   [313]Reasons [275].

1. In our opinion there was contemporaneous documentary evidence which supported that assertion.  That evidence was:

·The term sheet, which was sent to Mr Braham prior to the first disputed payment and sent again to Mr Walton after the third disputed payment, which provided that no agreement of any kind would exist until the transaction was documented, and which in that respect relevantly reflected the arrangements which had been made in relation to the prior investments.

·Mr Braham’s emails of 15 October 2012 and 19 October 2012 which clearly suggested that Mr Braham believed at that time that the funds were still held in trust (‘so he can disperse the funds ASAP’, money in trust for ‘several weeks’ and ‘anxious to get the investment underway’).

·Mr Braham’s email to Mr Wantrup of 2 November 2012 which clearly asserted the same thing (‘Nickolas has assured me that the money is safe in your trust account and will not be distributed until documentation is [finalised]’) and Mr Wantrup’s response which did not correct that apparent misapprehension.

·Mr Braham’s email of 23 November 2012 and the response by Mr Giorgio which are inconsistent with the proposition that the Kush investment money had already been spent and that Mr Braham was aware of that.

·Mr Wantrup’s letter in reply to B2B Lawyers in March 2013 which was inconsistent with Mr Giorgio’s assertion of the existence of the ‘immediate usage agreement’, and which was written, according to Mr Giorgio, after Mr Giorgio had given Mr Wantrup a full account of his dealings with Mr Braham.

·The documents purporting to be part of the Wantrup & Associates trust records which appear to record the existence, at one time at least, of a relevant ‘Braham’ ledger. 

1. In our opinion the judge’s finding that no contemporaneous documents supported the position contended for by Mr Braham has been demonstrated to be wrong by the documents to which we have referred.  The conclusion that the emails of 15 October 2012, 19 October 2012, 2 November 2012 and 23 November 2012, or their significance, were overlooked by the trial judge is fortified by his finding that ‘even as late as the end of 2012’ Mr Braham had made no complaint and raised no objection to his funds having been paid out of the Wantrup & Associates’ trust account.[314]  The emails to which we have referred suggest that no complaint or objection was made because Mr Braham believed that the money had not been paid out. 

   [314]Reasons [347].

1. Given the delay in the delivery of judgment, it cannot be assumed that the documentary evidence to which we have referred was considered by the trial judge notwithstanding his failure to refer to it in the relevant context.

1. In the respondent’s written case it was submitted that it was unnecessary for the trial judge to individually consider all of the documents now relied on by the applicant.  It was submitted that with three exceptions, which the judge had addressed, none of these documents formed part of the ‘pleaded case’.  In oral submissions counsel for Mr Wantrup submitted that documents now relied upon by Braham Investments had either not been relied upon and were marginal, or had not been relied upon and ‘post-dated’ the third disputed payment.

1. Insofar as there was an implicit submission that relevant documents could be ignored or classed as not ‘contemporaneous’ because they ‘post-dated’ the third disputed payment, we would reject that contention.  The documents are contemporaneous in the sense that they are proximate to the relevant events, reveal a relevant contemporaneous state of mind, and were written prior to the relevant issues becoming contentious.

1. Insofar as a submission was made that relevant documents had not been ‘relied upon’, the contemporaneous documents which we consider support Mr Braham’s account were all in evidence and were all referred to at some point in the trial.[315]  Having said that, it must also be said that the significance of the contemporaneous documents to which we have referred, other than the March 2013 correspondence and the Wantrup & Associates trust records, was not emphasised, or clearly explained, to the trial judge by counsel for Braham Investments.  Some of the documents which we consider to be significant were barely mentioned.  This circumstance is, in our view, also part of the reason why the documents, and their significance, were overlooked by the trial judge.

   [315]There are many references in the trial transcript, both in addresses and evidence, to the term sheet, the correspondence in March 2013, and the Wantrup & Associates trust records.  The email chain including the emails of 15 and 19 October 2012 (AB F 556–7, and at trial CB 681–2) were documents to which the judge was taken in opening (T 11–12, 54 and 65).  It seems that the only reference made to the email of 2^nd November 2012 (AB F 630 and at trial CB 755), was in the course of Mr Braham’s evidence in chief (T 118).  The email of 23^rd November 2011 (AB F 676–7 and at trial CB 815–6) was a document the judge was taken to in opening (T 55), was a document Mr Giorgio was cross-examined on (T 462–3) and was a document relied upon by Braham Investments in counsel’s closing address (T 619–20). 

1. What we consider to be the judge’s demonstrably incorrect finding concerning the contemporaneous documentation is significant for two reasons.  First, the documents support Mr Braham’s version of events.  Secondly, they significantly undermine a key factor which led to the judge preferring Mr Giorgio’s account to Mr Braham’s.  That factor is the judge’s conclusion that Mr Braham knew from February 2012 that his funds had been paid out of the Wantrup & Associates trust account.  The judge returns to this factor again and again in the judgment.  The emails of February 2012 were, of course, very relevant.  But they had to be analysed in the light of the documents to which we have referred which supported a contrary conclusion to that drawn by the judge.  The judge’s erroneous conclusion that no contemporaneous documents supported Mr Braham’s version meant that analysis was not undertaken.

Acceptance of Mr Giorgio’s account of the immediate usage agreement

1. There were a number of issues raised by the evidence concerning Mr Giorgio’s credit.  We consider that two were particularly significant.  The first is Mr Wantrup’s letter in response to B2B Lawyers’ complaints in March 2013, which made no reference to the ‘immediate usage agreement’ which Mr Giorgio says that he had made with Mr Braham.  The second is Mr Giorgio’s evidence in relation to the second disputed payment that when Mr Braham asked him to whom the cheque should be made out he told Mr Braham that the cheque should be payable to Wantrup & Associates so as to ‘keep protocol … in protecting’ Mr Braham’s position.

1. The judge did not address the significant problem for Mr Giorgio’s credit in relation to the arrangement which was made constituted by Mr Wantrup’s correspondence with B2B Lawyers in March 2013, notwithstanding that it was a matter to which counsel for Braham Investments referred on a number of occasions in his final address at the trial.[316]  The judge makes no relevant reference to Mr Wantrup’s letter of 15 March 2013 in the Reasons.[317]  The judge makes no reference to what, in our view, is the obvious problem for Mr Giorgio’s credit created by this letter.  We can see no explanation for this failure other than the fact that the judge has simply overlooked it.  The delay between the trial and the judgment must be seen as significant in this context.  On the issue of Mr Giorgio’s credit the judge has not referred to evidence which was uncontradicted, reasonable and inherently probable, being Mr Wantrup’s letter of 15 March 2013, written, according to Mr Giorgio, after he had told Mr Wantrup of all of his dealings with Mr Braham, and which is strikingly inconsistent with Mr Giorgio’s evidence as to those dealings. 

   [316]T 589, 595, 620, 623.

   [317]The only reference made to the letter is at Reasons [156] where the judge is quoting the particulars of an allegation in the Third Further Amended Statement of Claim.

1. The second matter of significance in this context is Mr Giorgio’s evidence concerning the second disputed payment where he told Mr Braham to make the cheque out to Wantrup & Associates to keep protocol in protecting his position.  If Mr Giorgio’s evidence as to the ‘immediate usage agreement’ were correct, payment to the Wantrup & Associates trust account could not possibly protect Mr Braham’s position.  Under the arrangement which Mr Giorgio maintains was made, the funds were to be paid out immediately from the Wantrup & Associates trust account on the instructions of Mr Giorgio.  The judge’s treatment of this issue, in our view, has been demonstrated to be wrong and is glaringly improbable because the judge simply did not address the ‘protection’ aspect of what Mr Giorgio said.  The judge’s conclusion was that what Mr Giorgio said most likely amounted to no more than saying that Mr Braham should follow the usual course.  That is not what the evidence was.  Mr Giorgio’s evidence was that following that course would protect Mr Braham’s position.  The judge gave no meaning to that aspect of what was said. 

1. These unsatisfactory aspects of the way in which Mr Giorgio’s credit was dealt with by the trial judge also affect the trial judge’s analysis of Mr Braham’s evidence.  Both witnesses swore that the issue of disbursement was discussed and agreed, although they were diametrically opposed as to the content of what had been agreed.  The judge had to address their respective credibility, and conclusions in relation to one would necessarily affect conclusions in relation to the other. 

Wantrup & Associates’ trust records

1. The trial judge addressed the controversial documents which purported to be part of the Wantrup & Associates trust records, but which Mr Wantrup disavowed, early in his judgment in the context of what were contended to be admissions made by Mr Wantrup.  In that early context he proceeded on the basis that Mr Wantrup’s evidence was ‘wholly’ accepted.  In our opinion, the Reasons fail to explain the basis for this unqualified acceptance. 

1. Further, in our opinion, the trial judge never properly considered the trust records, or the purported trust records, within the context of the chronology of events, the other contemporaneous documents, and the other evidence.  Having dismissed their significance as admissions, based upon an unqualified acceptance of Mr Wantrup’s evidence, the records receive little further substantive consideration in the determination of the dispute.  In our opinion, the trial judge’s treatment of those records, and of Mr Wantrup’s credit in relation to them, was inadequate, or, at least, inadequately explained.  Again, in this context, the delay is significant.

Mr Braham’s credit

1. We would not have placed the same emphasis which the trial judge did on the inconsistencies between Mr Braham’s evidence in relation to his dealings with Mr Giorgio, on the one hand;  and Braham Investments’ pleaded claim, the affidavit of 17 April 2013, and Mr Braham’s outline of evidence, on the other.  The inconsistencies were there and the judge was bound to address them.  We do not find the inconsistencies to be as stark or as telling as the judge did.  But putting to one side the matters we have already addressed, in our opinion, the judge’s findings concerning Mr Braham’s credit otherwise have not been demonstrated to be wrong by incontrovertible facts or to be glaringly improbable.  Of course, the matters already addressed are significant in relation to Mr Braham’s credit, as we have explained.

Conclusions on proposed grounds 2 to 6

1. We have reached the following conclusions which mean that leave to appeal should be granted on proposed grounds 2, 3, 4 and 6 and that the appeal should be allowed:

(1)The trial judge has been demonstrated to be wrong in his finding that no contemporaneous documents supported Mr Braham’s assertion that the funds were to be held in trust until the documentation was completed.  Further, the Reasons fail to refer to evidence in that respect which was uncontradicted, reasonable and inherently probable.

(2)The judge failed to refer to evidence which was of critical importance in relation to Mr Giorgio’s credit, being the correspondence between B2B Lawyers and Wantrup & Associates in 2013;  and reached a finding concerning Mr Giorgio’s evidence about the second disputed payment which was glaringly improbable.

(3)The trial judge failed to adequately address the Wantrup & Associates trust records and Mr Wantrup’s credit in relation to them. 

1. The consequence of these conclusions is that the judgment below must be set aside.  In the circumstances, we do not consider that this is a matter where this Court can now decide the relevant issues for itself.  That is principally because matters of credit in relation to each of the three principal witnesses need to be properly addressed and we do not consider that we are in a position to do so.  For this reason we will not grant leave to appeal on proposed ground 5.

1. The reasons we do not consider we can determine the matter ourselves are as follows.  If we were to endeavour to decide the matter on the material before us, we would not be able to act on the uncorroborated evidence of Mr Braham, substantially for the reasons which the trial judge gave, subject to the matters to which we have referred.  But we could not act on Mr Giorgio’s evidence either, for the reasons we have given, and which in our view the trial judge failed to adequately address.  Without having heard evidence from Mr Wantrup, we do not consider that this Court can fairly reach a conclusion in relation to his credit, particularly in relation to his trust records.  Those documents are, in our opinion, potentially important.  Thus, the only course is to set aside the judgment and order a retrial.

Proposed ground 1

1. Proposed ground 1 is in the following terms:

The learned trial judge erred in his approach to the factual enquiry concerning the question of intention in respect of each alleged trust, leading to the erroneous conclusions set out in [R 405(a)–(e)], namely:

(a)The learned trial judge’s erroneous enquiry into the mutual intent of Braham and Mr Wantrup, rather than the unilateral intent of Braham as the settlor, in circumstances where the alleged trust relationship did not arise from an agreement (in the sense of a contract) in respect of any of the Payments ([R 67(d)], [R 132] and [R 133]).

(b)In dealing with the question of intent, the learned trial judge erroneously considered and had regard to:

(i)        Mr Wantrup’s subjective intent ([R 67(d)], [R 69]);

(ii)Sovereign’s ‘general’ instructions to Mr Wantrup in respect of payments into the Trust Account; and

(iii)Mr Giorgio’s evidence concerning the ‘intent of the three payments’ ([R 307]).

1. Braham Investments submits that because there was no contractual relationship between it and Mr Wantrup, the relevant inquiry when considering whether trust obligations existed between them ought to have been concerned with the unilateral intention of Braham Investments, objectively assessed.

1. The judge held that in the particular circumstances of the case, and the way the case was pleaded and conducted, Braham Investments was required to establish ‘mutual intent, that is the relevant intent of Braham and Wantrup’.  The judge went on to say that he had also considered separately the alleged intent of Mr Braham and found that it had not been established.[318]

   [318]Reasons [133].

1. In support of this proposed ground Braham Investments places particular reliance upon a statement of general principle by Gummow J in Re Australian Elizabethan Theatre Trust.[319]  In that case, which addressed an alleged trust of the kind typically referred to as a Quistclose trust,[320] Gummow J said:

The question as to the existence of any express trust will always have to be answered by reference to intention.  …  Ordinarily, the relevant intention is that of the alleged settlor, but where the subject matter of the trust is contractual rights against the settlor, conferred by the settlor upon the alleged trustee, the objective (or ‘purpose’) of the transaction being to benefit third parties, it may be appropriate to look at the mutual intention of settlor and trustee

…  

The relevant intention is to be inferred from the language employed by the parties in question and to that end the court may look also to the nature of the transaction and the relevant circumstances attending the relationship between them.[321]

[319](1991) 30 FCR 491.

[320]A reference to Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567.

[321](1991) 30 FCR 491, 502, 503.

1. Braham Investments also particularly relies upon a decision of Ward J in the Equity Division of the Supreme Court of New South Wales in George v Webb.[322]  That case also concerned an alleged Quistclose trust.  The facts in George v Webb bore some similarity to what occurred in this case in that it concerned a situation where a person had paid money into the trust account of a solicitor for the promoter of a proposed investment.  When the money was paid, the solicitor was expressly advised by the payer in an email that the funds were ‘to be used for’ the proposed investment.  Ward J found that a Quistclose trust had existed, whether the issue was analysed by reference to the unilateral intention of the payer[323] or the mutual intention of the payer and the promoter.[324]  Ward J expressed the view that where there is no contractual arrangement between the payer and the alleged trustee, the relevant intention is that of the payer and the intention of the alleged trustee must be irrelevant.[325]

   [322][2011] NSWSC 1608.

   [323]Ibid [221].

   [324]Ibid [223].

   [325]Ibid [210].

1. This issue does not need to be decided in this appeal, given our conclusions on the other grounds of appeal.  But because of the attention devoted to it at trial, and before us, we will briefly address the matters raised on behalf of Braham Investments.

1. Consideration of the issue is complicated by a lack of clarity in relation to what the applicant’s case was concerning the nature of the trust obligation allegedly created.  Counsel for Mr Wantrup maintained that Braham Investments had never pleaded or alleged the existence of a Quistclose trust and the trial judge also asserted that that was the position.[326]  Braham Investments’ pleaded claim does, however, contain at least suggestions of a claim of that kind, and its counsel undoubtedly relied on George v Webb at trial, which is a case about an alleged Quistclose trust.

   [326]Reasons [130].

1. Braham Investments’ relevant pleaded claim, as set out in its third further amended statement of claim, is as follows:

·By reason of the arrangements made between Mr Braham and Mr Giorgio (para 11 incorporating paras 8(b), 9, 9A and 10, and para 18 incorporating paras 15(b), 16A(b), 16B and 17):

→Mr Wantrup held the relevant funds on trust for Braham Investments to be applied only at its direction (paras 11(a) and 18(c)),

→alternatively until and unless an agreement was entered into by, and security was provided to, Braham Investments in respect of the proposed investments (paras 11(a) and 18(c)).

·Mr Wantrup knew or ought to have known that the funds (paras 12 and 19):

→belonged to Braham Investments (paras 12(a) and 19(a)),

→were deposited into the trust account to be held on trust for Braham Investments (paras 12(b) and 19(b)),

→were to be applied or released to Mr Giorgio’s companies only at the direction of Braham Investments (paras 12(c) and 19(d)),

→alternatively for the purpose of the proposed investment upon completion of the preparation of and entry into an agreement and securities in respect of the proposed investment (para 19(d)).

1. The references to the proposed investment and to the purpose raise the sort of features often analysed as Quistclose trusts.

1. The particulars given in Braham Investments’ pleading of Mr Wantrup’s knowledge incorporate substantially all of the pleaded factual circumstances, including the dealings between Mr Braham and Mr Giorgio, as well as Mr Wantrup’s involvement in both the prior dealings and the three disputed payments.

1. We would adopt as a correct statement of the position what was said by Gummow J in Re Australian Elizabethan Theatre Trust.  However, as Gummow J also recognised, that does not mean that one does not have regard to the totality of the circumstances, or that one disregards Mr Wantrup’s knowledge.  Braham Investments’ own pleading reflects the importance of both those matters.  This is because:

·In determining whether a trust relationship exists, regard must be had to the whole of the relevant circumstances.[327]

·Whether an intention to create a trust exists must be determined by reference to the outward manifestation of such an intention within the totality of the circumstances.[328]

·Trust obligations arise where equity operates on the conscience of the holder of the legal interest.  A person cannot be a trustee of property if that person is ignorant of the facts alleged to affect his or her conscience.  In other words, unless the putative trustee is aware that he or she is intended to hold the property for the benefit of others, his or her conscience will not be affected in a relevant way.[329]

[327]Byrnes v Kendle (2011) 243 CLR 253, 287–8 [108]–[110].

[328]Legal Services Board v Gillespie-Jones (2013) 249 CLR 493, 525 [119].

[329]Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669, 705.

1. In this context, Mr Wantrup relies upon English authority to the effect that payment of money by a party to a transaction to the other party’s solicitor is equivalent to payment to the other party itself, absent any agreement or arrangement to the contrary.[330]  It might be argued that that approach is not applicable in Victoria, given the relevant statutory provisions, but it is unnecessary to decide that issue.  In any event, what Mr Wantrup’s counsel characterised as the ‘default position’ relying upon this authority is subject to arrangements and agreements to the contrary, of which George v Webb is an example. 

   [330]Bellis v Challinor [2015] EWCA Civ 59 [79].

1. Accepting Gummow J’s statement in Re Elizabethan Theatre Trust, what Mr Wantrup was told, or must have realised from the facts, remains critical, just as that was critical in George v Webb. 

1. It follows from our brief outline of the applicable legal principles that, in our view, the judge’s statement about mutual intent was not strictly accurate.  However, the exercise he undertook of considering the entirety of the circumstances was correct.  Those circumstances included Mr Braham’s individual intent, which the judge separately considered.  His conclusion as to Mr Braham’s intent, considered separately, meant that Braham Investments’ claim failed.  There were errors in the factual findings made in relation to that conclusion, which we have addressed at some length.  But any error by the judge in relation to the legal principles could not have affected the outcome because the judge found against Braham Investments on the basis of Mr Braham’s separate individual intent.  Put another way, if the judge’s factual findings were uncontested, or if the attack on them were rejected, so that ground 1 stood alone, the appeal would inevitably have failed.

1. As proposed ground 1 is arguable, we would grant leave to appeal, but the appeal on that ground cannot be upheld.

1. As is evident from the terms of proposed ground 1 set out above, the ground seeks to impugn not only the approach to principle adopted by the judge but also the conclusions he reached in para 405 of his judgment.  That is the paragraph in which the judge summarised his findings.  Those findings must be set aside on the basis of our conclusions in respect of proposed grounds 2, 3, 4 and 6.  Accordingly, our conclusion that the appeal should be dismissed on ground 1 does not mean that the judge’s findings set out in para 405 of his judgment are correct.  The issues encompassed by those findings will form part of the subject matter of the retrial. 

Conclusion

1. In conclusion, we would grant leave to appeal and allow the appeal on grounds 2, 3, 4 and 6.  We will set aside the judgment below and remit the matter for retrial before a different judge. 

1. Subject to any contrary order of the remitter judge, all of the issues that were before the judge will form part of the subject matter of the retrial.  The remitter judge should proceed on the basis that the legal principles set out above in relation to ground 1 apply.  The remitter judge must make his or her own factual findings — including in relation to the credit or reliability of witnesses — without regard to the factual findings of the judge.  In relation to the factual issues, it will be a matter for the remitter judge to determine the scope of the evidence to be adduced on the retrial, including whether any of the evidence adduced at the first trial will form part of the evidence on the retrial.