Braham Investments v Sovereign MF

IN THE SUPREME COURT OF VICTORIA AT MELBOURNE
COMMERCIAL COURT

Not Restricted

S CI 2013 1984

BRAHAM INVESTMENTS PTY LTD (ACN 092 139 403) in its capacity as trustee of the Braham Investments Trust	Plaintiff
v
SOVEREIGN MF LIMITED (ACN 104 694 555) (In Liquidation) in its own capacity and in its capacity as the trustee of the Sovereign Tarneit Land Fund, EOS JANUS CAPITAL PTY LTD (ACN 007 031 405) (In Liquidation) and CHARLES WANTRUP	Defendants

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JUDGE:	Digby J
WHERE HELD:	Melbourne
DATE OF HEARING:	16–18, 21, 23 March and 26 April 2016
DATE OF JUDGMENT:	22 December 2017
CASE MAY BE CITED AS:	Braham Investments v Sovereign MF
MEDIUM NEUTRAL CITATION:	[2017] VSC 801 First Revision: 13 February 2018

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EQUITY – Trusts and trustees – Whether an express trust settled by transfer to solicitor’s trust account – Common intention of the parties – Whether only settlor’s intent necessary – Objective test – Whether agreement implied by course of past conduct.

LEGAL PROFESSION – Holding and disbursing of trust money by a solicitor – Effect of ss 3.3.2, 3.3.3(3) and 3.3.14 – Breach of statutory duty – Whether possible to bring a private action under Legal Profession Act 2004 s 3.3.14.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R Heath	Rigby Cooke Lawyers
For the Third Defendant	Dr A Hanak	Minter Ellison
No appearance for any other party

TABLE OF CONTENTS

Background......................................................................................................................................... 3

Outline of circumstances of the three payments......................................................................... 6

The first payment (8 December 2011)........................................................................................ 6
The second payment (22 August 2012)...................................................................................... 7
The third payment (26 September 2012).................................................................................... 7

Questions for determination............................................................................................................ 8

The common intention of the parties............................................................................................. 9

The parties’ submissions................................................................................................................ 10

Past conduct....................................................................................................................................... 11

Earlier course of conduct relied on by the plaintiff.................................................................. 12

The December 2010 investment................................................................................................ 12
The June/July 2011 investment................................................................................................. 14
The significance of past course of conduct relied on by the plaintiff.................................. 16
Other conduct evidencing intention........................................................................................ 17
Admission against interest........................................................................................................ 20

Liability under the LPA.................................................................................................................. 26

Standard of proof in relation to grave allegations..................................................................... 31

Relief sought by the plaintiff........................................................................................................ 31

Considerations.................................................................................................................................. 32

Preliminary matters – standard of proof................................................................................. 32
Admissions against interest....................................................................................................... 33
The plaintiff’s claims for relief against the first and the second defendants...................... 33

The Law – Express Trusts – The Requirement for Intent......................................................... 34

The relevant intention..................................................................................................................... 38

The parties arguments on the relevant intention................................................................... 43
Quistclose..................................................................................................................................... 46

Payment of funds into a solicitor’s trust account...................................................................... 47

The three payments......................................................................................................................... 51

Alleged breaches of trust................................................................................................................ 52

The first payment (8 December 2011)........................................................................................... 54

Plaintiff’s case — the first payment.......................................................................................... 54
Giorgio’s evidence in chief — the first payment.................................................................... 62
Wantrup’s evidence in chief — the first payment.................................................................. 67
Considerations — the first payment........................................................................................ 69
Braham’s evidence — inconsistent, unreliable and unpersuasive............................. 69

The second payment (August 2012).............................................................................................. 86

Plaintiff’s case - the second payment...................................................................................... 86
Braham’s evidence in chief — the second payment.............................................................. 87
Giorgio’s evidence in chief — the second payment............................................................... 89
Wantrup’s evidence in chief — the second payment............................................................ 90
Considerations — second payment.......................................................................................... 90

The third payment (September 2012)........................................................................................... 94

Plaintiff’s case — the third payment........................................................................................ 94
Braham’s evidence in chief — the third payment.................................................................. 96
Giorgio’s evidence in chief — the third payment................................................................ 100
Wantrup’s evidence in chief — the third payment.............................................................. 100
Considerations — third payment........................................................................................... 102

The plaintiff’s attack on Giorgio’s credit is rejected............................................................... 111

Issue as to the purpose of the second payment........................................................................ 116

Conclusions..................................................................................................................................... 120

Earlier course of conduct relied on by the plaintiff................................................................ 121

Urgency — of access to funds...................................................................................................... 123

Convenience of Wantrup Trust Account................................................................................... 124

Wantrup not a trusted adviser..................................................................................................... 125

Plaintiff’s second cause of action based on contraventions of the LPA.............................. 126

Summary of key conclusions and findings.............................................................................. 128

Proportionate liability................................................................................................................... 130

Decision........................................................................................................................................... 130

Orders............................................................................................................................................... 131

HIS HONOUR:

Background

Simon Braham (‘Braham’) is an ear, nose and throat surgeon and the director of Braham Investments Pty Ltd (‘plaintiff’). The third defendant, Charles Wantrup (‘Wantrup’), is and was at all material times a solicitor trading as Wantrup & Associates. Since this proceeding commenced, the first defendant, Sovereign MF Ltd (‘Sovereign’), and the second defendant, Eos Janus Capital Pty Ltd (‘Eos’), have gone into liquidation.[1]
[1]Sovereign went into liquidation on 24 May 2013. Eos went into liquidation on 24 July 2014. On 7 October 2013, Sifris J granted leave to the plaintiff to proceed against Sovereign MF Ltd (in Liquidation) and the plaintiff gave an undertaking it will not seek to enforce any judgment which it may obtain against the first defendant without obtaining leave of the Court. On 19 June 2014 Sifris J’s Orders, in Other Matters, recorded that the proceeding was stayed as against Eos Janus Capital Pty Ltd pursuant to s 440D of the Corporations Act 2001 (Cth).

These proceedings relate to three separate transactions concerning three payments made by the plaintiff to Wantrup & Associates over the period of December 2011 to September 2012 in connection with the plaintiff’s investments in a café business in Prahran and a ‘Land Fund’ in Tarneit, both in Victoria. Each of those investments was managed by Sovereign, involved Eos, and each also involved Wantrup & Associates receiving, banking and disbursing the funds provided by Braham by means of the three payments in issue. The total of the three payments was $1.1 million .

The three relevant payments, in each case from the plaintiff to Wantrup & Associates, were as follows:

(a) the first payment; a payment of $500,000 was made on 8 December 2011 (‘the first payment’), relating to a proposed investment in the redevelopment of a café known as ‘Kush’ in South Yarra in the State of Victoria;

(b) the second payment; a payment of $100,000 was made on 22 August 2012 (‘the second payment’) in relation to a proposed further investment in respect of Kush;[2]

(c) the third payment; a payment on 26 September 2012 (‘the third payment’) of $500,000 in connection with the Tarneit Land Fund.

[2]Some confusion and dispute exists as to whether the second payment related to Kush or the Tarneit Land Fund.

The first payment and the second payment were each made by the plaintiff and were deposited into Wantrup & Associates’ general trust account (‘Wantrup Trust Account’). In relation to the first payment the plaintiff transferred funds by EFT into the Wantrup Trust Account. In relation to the second payment, Wantrup received a cheque from the plaintiff made payable to ‘Charles Wantrup & Associates Trust Account’. In respect of the third payment, the plaintiff provided a bank cheque made payable to ‘Charles Wantrup & Associates’,[3] which was deposited in the Wantrup & Associates general office account.
[3]T115.20–T116.16.

Each of the above three payments by the plaintiff was made following meetings and discussions between Braham and Nickolas Giorgio (‘Giorgio’) who was a Director of both Sovereign, the first defendant, and Eos, the second defendant, at all material times until their liquidation.[4]
[4]Plaintiff’s Further Amended Statement of Claim, 15 March 2016, [7]–[8], [15], [16A].

Prior to the three above transactions in issue, the plaintiff, Sovereign, Eos and Wantrup, were involved in several investment enterprises, some of which are alleged by the plaintiff to be material to this proceeding.

The plaintiff claims that the first, second and third payments to Wantrup in relation to the Kush and Tarneit land investments were to be held on trust by Wantrup and were not to be disbursed without further direction from the plaintiff and finalisation and execution of documentation reflecting Braham’s agreement to invest in the said investments and securing Braham’s investments.[5]
[5]Ibid [11], [18].

The central and key question which in the above circumstances arises in this proceeding is whether the plaintiff’s moneys received by Wantrup & Associates were held in trust on behalf of the plaintiff, subject to certain conditions, or were held by Wantrup on behalf of his client, Sovereign.

The dramatis personae in this matter are as follows:

(a) Braham, sole Director of the plaintiff;

(b) Wantrup, Australian lawyer trading as Wantrup & Associates, Solicitors, and at all relevant times was acting as the solicitor for Sovereign;

(c) between 8 June 2012 and 26 April 2013, Wantrup was a non-executive Director of Sovereign and from 21 December 2012 a shareholder of Eos in his capacity as trustee of the Kalidonis Family Trust;

(d) the plaintiff also pleads that from prior to November 2011 Wantrup was Eos’ solicitor;[6]
[6]Plaintiff’s Third Plaintiff’s Further Amended Statement of Claim, 15 March 2016, [4(d)(ii)]; No pleaded response by third defendant.

(e) Sovereign, at all times from 12 May 2003, held an Australian Financial Services Licence number 238142 pursuant to which it acted as Responsible Entity for the Sovereign Aged Care Property Fund and the Sovereign Tarneit Land Fund;

(f) at all material times in connection with projects for which Sovereign was Responsible Entity, including the Aged Care Property Fund and the Tarneit Land Fund, Eos:

(i) acted as a treasury company for Sovereign;

(ii) received from Sovereign funds invested by investors in the projects; and

(iii) disbursed funds and made payments on behalf of Sovereign in respect of the projects;

(g) Nickolas Giorgio is and was at all material times from:

(i) 16 March 2010 a Director of Sovereign; and

(ii) 20 November 2009 a Director of Eos; and

(iii) together with Michael Kalidonis, the controller of each of Sovereign and Eos;

(h) at all relevant times Demian Walton (‘Walton’) of B2B Lawyers acted as solicitor for the plaintiff and Braham;

(i) Krema Pty Ltd was an entity associated with Sovereign.

Outline of circumstances of the three payments

The parties in essence allege the following in relation to the three payments in issue.

The first payment (8 December 2011)

Following a meeting between Braham and Giorgio in November 2011 at a restaurant in South Yarra, Victoria, the plaintiff transferred $500,000 into the Wantrup Trust Account in relation to his investment in the proposed redevelopment of the Kush Café, also in South Yarra. The transfer, as the plaintiff acknowledges, served ‘to demonstrate [Braham’s] interest in the proposed investment’ in the Kush Café.[7] This first payment was deposited by the plaintiff electronically on 8 December 2011 into the Wantrup Trust Account.[8]
[7]Plaintiff’s Further Amended Statement of Claim, 15 March 2016, [8].
[8]CB480.

Wantrup denies any intent or agreement that the money was to be, or was, held on trust for the plaintiff.[9] The relevant trust account receipt in relation to the first payment records that the $500,000 was received on behalf of Sovereign as an ‘investment’.[10]
[9]Third Defendant’s Further Amended Defence, 15 March 2016, [8].
[10]CB480; [TA604744].

The second payment (22 August 2012)

At a further meeting on about 15 or 16 August 2012[11] at a restaurant or café in South Yarra, between Giorgio and Braham, Giorgio, on behalf of Sovereign, invited the plaintiff to invest a further $100,000. The plaintiff alleges that those further funds were required in relation to the Tarneit Land Fund to ‘demonstrate the plaintiff’s interest in the proposed further Tarneit investment’.[12] On 22 August 2012, the plaintiff deposited a further $100,000 into the Wantrup Trust Account.
[11]T106-107; T400.20–T401.21.
[12]Plaintiff’s Further Amended Statement of Claim, 15 March 2016, [15].

The third payment (26 September 2012)

On 21 September 2012, following an earlier meeting in August 2012 at a restaurant in South Yarra at which Giorgio had informed Braham that a further $500,000 would be required for the Tarneit Land Fund investment, Braham provided Wantrup with a cheque for that amount payable to Wantrup & Associates, after providing an initial cheque which was dishonoured.[13] This third payment was deposited into the Wantrup & Associates’ General Office Account[14] on 26 September 2012.
[13]Ibid [16A]–[16B]; CB673.
[14]CB674.

Accordingly, the total amount paid by the plaintiff to Wantrup & Associates as a result of the three above payments was $1.1 million. It is that sum, which it appears has been lost as a result of the investments to which it was applied being unsuccessful, plus interest and costs, which the plaintiff now claims in these proceedings.[15]
[15]Ibid.

The plaintiff does not allege any fraud or dishonesty in relation to the three subject payments and associated transactions.

In these proceedings the plaintiff in essence seeks to recover the money he provided in relation to the ultimately unsuccessful investments in the ‘Kush’ café and the Tarneit Land Fund via his claim that the $1.1 million he provided was always impressed with a trust and provided subject to certain conditions.

The plaintiff also seeks relief in the nature of equitable compensation and damages, and a declaration as against all defendants, to the extent that they continue to hold any part of the $1.1 million, that they hold that sum on trust.

Wantrup denies any liability to the plaintiff in relation to the three payments.

Wantrup by his Further Amended Defence dated 15 March 2016 also maintains that if he is liable to the plaintiff in respect of the claim, that claim is an ‘apportionable claim’ and Wantrup seeks redress against the first and second defendants as concurrent wrongdoers.[16]
[16]See above, footnote [1].

The remaining issues in the proceeding are whether Wantrup in the circumstances held the plaintiff’s money subject to fiduciary duties, and whether Wantrup is in breach of his fiduciary duties or of his obligations under the Legal Profession Act 2004 (‘the LPA’), together with an associated issue as to the plaintiff’s ability to bring a private action under s 3.3.14 of the LPA.

Questions for determination

The determinative issues in this proceeding are summarised in a series of questions which the plaintiff has posed in its Closing Submissions as follows:

Wantrup received 3 amounts totalling $1.1 million from the plaintiff. He disbursed each amount on the instructions of Sovereign. The following fundamental questions arise:
(i)on whose behalf did Wantrup receive each amount? In other words, at the time of each payment, who was the beneficial owner of the moneys;
(ii)did the plaintiff pay the moneys to Wantrup with the intention that Wantrup would hold them on trust for the plaintiff;
(iii)alternatively, did the plaintiff pay the moneys with an intention that, upon receipt by Wantrup, Sovereign would become the beneficial owner of the moneys;

(iv)did the plaintiff manifest an intention to transfer beneficial ownership of the moneys (before or after they were paid to Wantrup)? [17]

[17]Plaintiff’s Closing Submissions, 19 April 2016, [1].

The additional further questions arise for determination in this proceeding:

(a) whether, as claimed by the plaintiff, s 3.3.14 of the LPA confers a private right of action in the circumstances, and whether in any event in respect of that asserted cause of action the moneys in question were trust moneys within the meaning of the LPA; and

(b) ancillary questions, including, if liability is established in the third defendant whether that liability should be apportioned amongst concurrent wrongdoers pursuant to Part IVAA of the Wrongs Act 1958 (Vic).

The common intention of the parties

The plaintiff submits that the primary question in this proceeding relates to intention, namely with what intention did the plaintiff make the relevant payments, in particular did the plaintiff transfer the funds in issue with the intention that Wantrup would hold them in trust for the plaintiff, or that Sovereign should hold those funds beneficially.[18]
[18]T554.26–T555.5-11, T5321.7 and T522.5.

The parties’ submissions

The plaintiff claims that Wantrup held the moneys in relation to the three payments in issue in the Wantrup Trust Account:

(a) on trust for the plaintiff, to be disbursed only on the plaintiff’s instruction;

(b) alternatively, that Wantrup owed the plaintiff a duty under s 3.3.14 of the LPA to hold the moneys in the Wantrup Trust Account for and on behalf of the plaintiff, to be disbursed only on the plaintiff’s instruction; or

(c) that Wantrup owed the plaintiff fiduciary duties with respect to the moneys to act prudently in the plaintiff’s best interests in dealing with those moneys, to observe the terms upon which the moneys were entrusted, and to disburse them only on the plaintiff’s instruction.[19]

[19]Plaintiff’s Further Amended Statement of Claim, 15 March 2016, [11]–[12], [18], [12A], [21A]–[22].

Wantrup denies the above claims[20] and asserts that even if any moneys were held on trust, they were held on behalf of Sovereign, not the plaintiff.[21]
[20]Third Defendant’s Further Amended Defence, 15 March 2016, [11]–[12], [18], [12A], [21A]–[22].
[21]Ibid [18].

The plaintiff’s emphasis is on the plaintiff’s intention when Braham made the relevant transfers and the argument that Wantrup ought to have appreciated that the moneys were paid with the intention that they be held on trust, given the prior conduct and communications at the time of the payments.

Further, the plaintiff’s case is that Wantrup dealt with the moneys (prior to disbursing them absent plaintiff’s instructions) in a way consistent with holding the moneys on behalf of the plaintiff.

Wantrup emphasises that the relevant intention to create an express trust is that of both parties, to be determined by words and facts known to both parties and that this intention must be communicated to the alleged trustee.[22] Wantrup’s submission is that there must be a mutual intention on the part of Braham and Wantrup to create an express trust in relation to the first, second and third payments.
[22]T524.1-27.

Wantrup submits that what is determinative is whether it was the parties’ intention that Wantrup would hold the moneys in question on trust for the plaintiff, to be released only on the plaintiff’s instruction.

The plaintiff observes, and Wantrup agrees, that intention to settle a trust must be determined objectively.[23] In this respect, the plaintiff points to the fact that the first payment of $500,000 was deposited into the Wantrup Trust Account and not provided to Eos or Sovereign directly. The plaintiff relies on this circumstance as part of its asserted proof of Wantrup’s knowledge that he was not to dispose of the money however and whenever the investors saw fit, or that Eos or Sovereign were to enjoy beneficial ownership of the money, but rather that money was to be held on trust until further instruction by a solicitor bound by equitable and statutory duties.[24]
[23]Plaintiff’s Opening Submissions, 10 March 2016, [10]; Third Defendant’s Closing Submissions, 8 April 2016, [10]; Byrnes v Kendle (2011) 243 CLR 253, 275 [59] and 286–90 [105]–[115]; Re Australian Elizabethan Theatre Trust (1991) 30 FCR 491, 502.
[24]Plaintiff’s Further Amended Statement of Claim, 15 March 2016, [12]; Plaintiff’s Closing Submissions, 19 April 2016, [21]–[22].

Wantrup submits that Braham did not reserve beneficial ownership in the moneys transferred by the three payments to itself.[25]
[25]Third Defendant’s Reply Submissions, 21 April 2016, [16].

Past conduct

The plaintiff also contends that Wantrup’s knowledge of the nature of the proposed trust that it relies upon can in part be implied from the course of past conduct between the parties, which establishes what the plaintiff asserts to be ‘the interests and expectations’ of the parties.[26] The plaintiff asserts that the past conduct it relies upon is consistent with Wantrup holding the subject moneys on behalf of the plaintiff and/or those moneys only being used for a specific purpose, that is secured investments based on written agreements.[27] The plaintiff also relies on certain past conduct as a basis to establish Wantrup’s knowledge of the true nature of the three payment transactions in December 2011 and August and September 2012.[28]
[26]Plaintiff’s Further Amended Statement of Claim, 15 March 2016, Clause 8(b), Particulars 8(b)(a) and (b); 15(b) and 16A(b); Plaintiff’s Opening Submissions, 10 March 2016, [11].
[27]Plaintiff’s Closing Submissions, 19 April 2016, [2]–[4].
[28]Plaintiff’s Further Amended Statement of Claim, 15 March 2016, [12(c)] and [19(d)(b)].

In particular, Wantrup held $2.6 million for the plaintiff in late 2010 for the purpose of funding a proposed loan advance ‘subject to final legal details’[29] and $1.675 million for another loan advance in mid-2011. On the plaintiff’s case the understanding on Wantrup’s part of the course of conduct which developed in relation to these historic transactions was that moneys would, inter alia, only be released to Sovereign or Eos at the direction of the plaintiff, alternatively upon completion of the preparation of and entry into an agreement and securities in respect of the proposed Kush Investment.[30]
[29]T313.30–T314.15; Plaintiff’s Closing Submissions, 19 April 2016, [13]–[14].
[30]Plaintiff’s Further Amended Statement of Claim, 15 March 2016, [12(c)] (and Particulars C); T276.9–16; Plaintiff’s Closing Submissions, 19 April 2016, [17].

Earlier course of conduct relied on by the plaintiff
The December 2010 investment

In relation to the abovementioned $2.6 million investment, the plaintiff alleges that on 22 November 2010 Wantrup communicated with the plaintiff’s solicitor, Walton of B2B Lawyers, about the prospect of a loan funds advance to Sovereign on the security of a first mortgage over a property in Glen Waverley.[31] On 25 November 2010 Walton sent an email to Wantrup to inform him that:

Our client wishes to proceed on the terms proposed, subject to agreement as to the form and finer detail of the legal documents … Could you please provide the proposed security documents.[32]

[31]Plaintiff’s Opening Submissions, 10 March 2016, [17].

[32]CB77.

The plaintiff alleges that on 27 November 2010 Giorgio suggested to Braham that the loan be made by depositing the $2.6 million into the Wantrup Trust Account.[33] On 1 December 2010 Braham emailed Wantrup, Giorgio and Walton explaining that he had ‘wanted to proceed in the investment last week subject to the finer details of the legal documents’.[34]
[33]CB68.
[34]CB79.

I note that Braham’s above email of 1 December 2010 expressly insists upon that proposed investment being ‘subject to the finer details of the legal documents’ and expressly stipulates that subject to the finalisation of Braham’s requirements, he would be happy to place the sum of $2.6 million in trust in an interest bearing account with B2B Lawyers. Braham’s email of 1 December 2010 also in my view, in relation to that particular proposed transaction, exhibits caution and a commercially sophisticated approach to the topics under correspondence, on Braham’s part.

On about 6 December 2010 the above proposals were revived and Braham, in an email to Wantrup, recorded his understanding that he would place funds in Wantrup’s trust account to demonstrate commitment to the investment, ‘subject to final legal details etc’.[35] Wantrup made inquiries and stated that one of the issues for him was holding those funds at Braham’s direction.[36] In an email exchange on 7 December 2010, Braham enquired of Wantrup as to the receipt of funds and review of documents. Wantrup confirmed that funds were ‘at you [sic] direction’.[37]
[35]CB84.
[36]CB88.
[37]CB89–CB90; Plaintiff’s Opening Submissions, 10 March 2016, [21]; Plaintiff’s Closing Submissions, 19 April 2016 [13]–[16]; T313.30–T314.15.

Accordingly on the plaintiff’s case, although the trust account receipt in that instance stated that the sum of $2.6 million was received by Wantrup on behalf of Sovereign, rather than Braham or the plaintiff,[38] it is clear from this exchange of emails that Wantrup understood that as far as this particular transaction was concerned, funds could not be released without Braham’s direction. The loan was settled on 14 December 2010 and funds duly released after execution of documents.[39]
[38]CB1126.
[39]Plaintiff’s Opening Submissions, 10 March 2016, [21]; CB92, CB94, CB123, CB154, CB184.

The June/July 2011 investment

In about mid-2011, Giorgio also invited Braham to invest in the Tarneit Land Fund. On 8 June 2011, Walton requested ‘the proposed transaction documents’ from Giorgio, and confirmed that ‘[t]here is no binding agreement until transaction documents have been entered into’.[40] Giorgio forwarded Walton’s email to Wantrup and asked him to attend to it.[41]
[40]CB255.
[41]CB255.

Braham was given the trust account details and, on 16 June 2011, emailed the Commonwealth Bank of Australia his instruction to pay funds in the sum of $875,000[42] into the Wantrup Trust Account.[43] That same day, Braham emailed Wantrup (copying in Giorgio and Walton), confirming that ‘I have asked Pat Couty of the CBA to transfer the amount of $875,000 into your trust account for the purposes of investment with Sovereign subject to agreement to terms and documentation’, which Giorgio ‘[n]oted and agreed’ to.[44] The relevant trust account receipt, which Braham was not shown,[45] stated that the funds had been received on behalf of Sovereign.[46]
[42]The Braham email to the CBA dated 16 June 2011 also refers to payment of $62,877.77 into Wantrup’s Trust Account. It appears that this sum was to cover barrister’s fees in respect of the Gunns’ litigation (see T31.8-11).
[43]CB258–CB259.
[44]CB259–CB260.
[45]Plaintiff’s Opening Submissions, 10 March 2016, [23].
[46]CB262.

In due course a further payment of $800,000 was made by the plaintiff for the same Tarneit Land Fund investment, bringing the total provided by the plaintiff in relation to that investment to $1.675 million.

In respect of these moneys, Braham’s email of 3 July 2011 to Wantrup, Giorgio and Walton stated:

I met with Nickolas today and gave him a cheque in favour of Charles Wantrup trust for purposes of investing in Tarneit. The funds are to be invested for 2 months to repay the bank guarantee and held in deposit by the bank. [47]

Braham also specified that funds would be released from the Wantrup Trust Account to Sovereign upon ‘satisfactory completion of the securitization documentation’, which was once again ‘[n]oted’ by Giorgio.[48] In Braham’s email of 3 July 2011 he also stated that Wantrup was to provide the required securitisation documentation to his lawyer, Walton, when available, and Braham noted ‘the documentation to support the $875,000 investment as a first mortgage deed will follow the successful completion of the first investment’.[49]

[47]CB280.

[48]CB281.

[49]CB280.

The relevant trust account receipt prepared the next day, on 4 July 2011 recorded that $800,000, was received on behalf of Sovereign.[50] Again, Braham was not shown this receipt.[51] The plaintiff contends that Braham intended, and Wantrup and Giorgio understood, that release of funds depended upon execution of security documentation. It is to be noted that Walton’s email of 8 July 2011 reminded Wantrup of the conditions of release, namely, ‘the funds are obviously to remain in your trust account until security documents are in place’.[52] In due course permission was given by Braham for the release of the funds and the funds were duly released.[53]
[50]CB282.
[51]Plaintiff’s Further Amended Statement of Claim, 15 March 2016, [24].
[52]CB316.
[53]CB321–CB325.

The significance of past course of conduct relied on by the plaintiff

In relation to both the $2.6 million and $1.675 million investments, in late 2010 and mid-2011 Wantrup’s submissions referred to Braham’s ‘completely unusual’ refusal to authorise the release of trust moneys until the relevant documents were completed.[54]
[54]T313.5–20; Plaintiff’s Closing Submissions, 19 April 2016, [15].

Wantrup submits that this ‘shows that [Braham] was able to confirm expressly when he wanted to impose a condition on the use of the money’,[55] which Wantrup asserts he did not do with respect to the payments in issue in this proceeding.
[55]Third Defendant’s Reply Submissions, 21 April 2016, [14].

The plaintiff relies on the knowledge which it asserts may be imputed to Wantrup from the above past dealings with the plaintiff,[56] and on that basis submits that it was ‘patently obvious’ that disbursements of the funds it provided had to await execution of security documents, and that in relation to the advances in issue ‘such a thing was not required to be said’ yet again.[57]
[56]Plaintiff’s Further Amended Statement of Claim, 15 March 2016, [12].
[57]T8.30.

The plaintiff stresses the alleged creation of an implicit, mutual understanding with Wantrup that the plaintiff did not ever authorise the release of funds without instruction and due execution of security documents.

The plaintiff also pleads that Eos and Sovereign knew of the matters giving rise to Wantrup’s knowledge of the plaintiff’s intent that the payments be held on trust, including the conditional nature of the payments subject to entry into an agreement and the provision of security.[58]
[58]Plaintiff’s Further Amended Statement of Claim, 15 March 2016, [14], [23], [29], [30], and [31]; see also [10], [17].

Wantrup, however, submits that the ‘two earlier transactions involving Braham were conducted in different circumstances’.[59] Wantrup’s case is also that the earlier previous investments relied on by the plaintiff to establish a course of conduct were quite distinguishable in the way in which Braham and Walton dealt with their preconditions, and the requirement for the earlier $2.6 million and the $1.9 million Aged Care Property Fund and the Tarneit Land Fund investments in 2010 and early in 2011.
[59]Third Defendant’s Closing Submissions, 8 April 2016, [20].

On the Wantrup submission there were distinct and important differences in the way the parties conducted themselves in one series of investment as compared with the other. Wantrup submits that in the earlier transactions in relation to $2.6 million and $1.675 million, ‘there was an express acknowledgement … that the money would not be transferred from the trust account’.[60] Wantrup submits in substance that the fact that there was no ‘express acknowledgement’ in respect of subsequent transactions supports Wantrup’s case that the parties were not operating on the same basis or understanding in relation to the December 2011, August 2012 and September 2012 payments in issue.
[60]Ibid.

Wantrup’s submission also stresses the requirement of communicating an intention to settle a trust to the trustee and that depositing funds into a solicitor’s trust account does not, in itself, establish that intention to the requisite objective standard.[61] Wantrup’s submission is that there must be more than a mere depositing of moneys into a trust account. Wantrup argues that ‘it must be established that those who gave the funds were persons ‘for whom’ the money was received and was to be held’.[62]
[61]Ibid [11].
[62]Legal Services Commissioner v Brereton (2011) 33 VR 126, 154 [106] (‘Brereton’); Cf Plaintiff’s Closing Submissions, 19 April 2016, [38]; CB670.

Other conduct evidencing intention

The plaintiff points to the payment of moneys into the Wantrup Trust Account, both in prior dealings and in relation to the events now in contention, and submits that this itself evidences an intention of the parties that those moneys would be held on trust.[63]
[63]Plaintiff’s Closing Submissions, 19 April 2016, [19]; CB446, CB454, CB596, CB620, CB653, CB1053–1054, CB1058, CB1068, CB1073, CB1075, CB1094.

Wantrup replies that such payment ‘is at best neutral and at worst is positively adverse to the plaintiff’s case’,[64] because it was within the plaintiff’s ability to stipulate the conditions on which moneys would be held and it is not alleged that this was done. In relation to the three payments in issue, Wantrup submits, nothing in the circumstances suggested that Wantrup was holding the moneys as trustee for the plaintiff.[65]
[64]Third Defendant’s Reply Submissions, 21 April 2016, [15].
[65]Third Defendant’s Closing Submissions, 8 April 2016, [21]; Legal Services Board v Gillespie-Jones (2013) 249 CLR 493, 525 [119].

Wantrup submits that the circumstances at the time of the earlier transactions in late 2010 and mid-2011 established a clear intention to settle a trust on specific conditions. Wantrup further submits the same or similar circumstances did not exist in relation to the dealings now in contention.

Specifically, Wantrup relies on the fact that he acted for the opposite party in the earlier transactions and that Wantrup’s duty, well understood to all concerned, was to act solely in Sovereign’s interest. Wantrup submits that these obligations were not modified and that Wantrup furnished no undertaking to assume trusteeship on behalf of Braham, or the plaintiff.[66]
[66]Third Defendant’s Closing Submissions, 8 April 2016, [21].

Wantrup adds that acting on the plaintiff’s behalf might have given rise to a conflict of interests; that Wantrup did not seek instructions from Sovereign that he was authorised to hold any moneys on the plaintiff’s behalf and there was no acknowledgement that Wantrup intended to modify the right to exercise a lien in respect of money held in his trust account.[67]
[67]Third Defendant’s Closing Submissions, 8 April 2016, [21].

Wantrup also points out that the first payment, the second payment and the third payment were all at the time recorded as loans to Sovereign,[68] ‘until the accounts were amended after the commencement of this proceeding’.[69]
[68]Ibid [22], [37]; CB617, CB619.
[69]Ibid [37]; CB616, CB618.

Wantrup notes in his submissions in relation to the first payment that Walton was shown the Trust Ledgers for review and ‘did not raise any queries about the withdrawal of funds from the trust account’.[70] Wantrup submits that it should be inferred and concluded that the plaintiff knew and understood the nature of the transaction as a loan to Sovereign, not as the settling of a trust which was subject to strict conditions.
[70]Ibid [24]; CB605–CB606.

The plaintiff draws attention to ‘incipient or continuing negotiations which assumed the prompt provision and/or consideration of draft documents’.[71] The plaintiff’s argument is that legal conditions and requirements were still being worked out and that the invitation from Sovereign, via Giorgio, was that the money being held by Wantrup should not be disposed of in the meantime. Wantrup’s response is that the plaintiff’s solicitor knew that moneys had been transferred without any express reservation.[72]
[71]Plaintiff’s Closing Submissions, 19 April 2016, [24].
[72]Third Defendant’s Reply Submissions, 21 April 2016, [17]; CB446.

The plaintiff also argues that Wantrup was treated ‘as a trusted adviser’ and had previously held moneys on behalf of Braham in connection with other litigation, that Wantrup in fact held himself out as Braham’s advisor, and that the trust account was used in this context.[73] The plaintiff contends that these prior arrangements and matters provide important context for the later payments.
[73]Plaintiff’s Closing Submissions, 19 April 2016, [25].

Wantrup submits that the plaintiff engaged its own solicitor, Walton, at all times, and therefore the plaintiff’s solicitor was at all material times the plaintiff’s trusted advisor.[74]
[74]Third Defendant’s Reply Submissions, 21 April 2016, [18].

Finally, the plaintiff relies on oral evidence to demonstrate a common intention to settle a trust and to establish that Braham did not ever understand from his communications with Giorgio and Wantrup that beneficial ownership of the funds in issue would pass to Eos or Sovereign.[75] Wantrup argues against any such intention being accepted on the evidence and also submits that Braham’s oral evidence should not be accepted, given the inconsistencies in, and reliability of, Braham’s evidence.[76]
[75]Plaintiff’s Closing Submissions, 19 April 2016, [26]–[36].
[76]Third Defendant’s Closing Submissions, 8 April 2016, [13]–[17], [26]–[33].

Admission against interest

The plaintiff submits that certain evidence amounts to an admission against interest by Wantrup.

The plaintiff’s submissions cite the decision in Herdegen v Federal Commissioner of Taxation,[77] in which Gummow J stated that:

In some factual situations where the existence of an express trust is in issue, it will be against the interest of the alleged trustee to admit the trust. Thus evidence of acts by him subsequent to the date of the alleged declaration of trust which tend to show the existence of the trust will be admitted as admissions against (but not for) his interest …[78]

[77](1988) 84 ALR 271.

[78]Ibid, 276.

The plaintiff relies on this passage as authority for the proposition that admission against interest may be used against an alleged trustee.[79]
[79]Plaintiff’s Closing Submissions, 19 April 2016, [39].

The plaintiff asserts that the following evidence amounts to such an admission against Wantrup’s interest:[80]
[80]Ibid.

(a) The Consolidated Trust Ledger which the plaintiff asserts was first discovered by Wantrup on the second day of trial.[81]
[81]CB2026.

‘On any reasonable analysis’, the plaintiff submits, this ‘is a consolidation of different ‘client’ ledgers prepared and maintained in accordance with reg 3.3.17’ of the Legal Profession Regulations 2005.[82]
[82]Plaintiff’s Closing Submissions, 19 April 2016, [40].

Wantrup submits in reply that the Consolidated Trust Ledger was part of the documentation produced by Giorgio to his solicitors and not produced by Wantrup,[83] and Wantrup further points out that he was not cross-examined in relation to that material.
[83]T93.4–6, T418.16–25. Plaintiff’s Closing Submissions, 19 April 2016, [40].
[83]T93.4–6, T418

Further, Wantrup submits that it was not suggested at trial that the Consolidated Trust Ledger formed part of his Trust Account Ledger,[84] nor was it established why this ledger was prepared or that any purpose for its creation was authorised by Wantrup. Wantrup submits that there is no evidence that the Consolidated Trust Ledger was reviewed and approved by him. Accordingly, Wantrup argues, the ledger cannot be used as an admission against him.
[84]Third Defendant’s Reply Submissions, 21 April 2016, [20].

In my view the Consolidated Trust Ledger was not established as a document which recorded or reflected Wantrup’s view or position as to its purpose or the accuracy of its contents, because that document was not established as a record which he created, or was involved in creating, or that he approved. Further the plaintiff’s failure to put the Consolidated Trust Ledger to Wantrup and establish his acceptance of the accuracy and import of its contents also in my view greatly lessens the potential probative value of that document as an admission by Wantrup against his interest.

Further, Wantrup’s evidence was in substance limited to confirming that document CB232 was the trust ledger of his firm, and the evidence was that the Consolidated Trust Ledger[85] was part of the documentation produced by Giorgio to the solicitors for Wantrup.[86]
[85]CB2026.
[86]T93.4–6, T418.16–25.

(b) The entry in Wantrup’s trust ledger which lists Braham as the client.[87]
[87]CB603.

The plaintiff contends that each ledger was created and updated in accordance with reg 3.3.17 of the Legal Profession Regulations 2005, and that each ledger identifies the person on whose behalf Wantrup held the funds: namely, Braham.[88] The plaintiff contends that it is likely that Ms Rebecca Naumovski, an employee of Wantrup (though not a lawyer),[89] prepared and sent Braham the ledgers in accordance with Wantrup’s instructions.[90]
[88]Plaintiff’s Closing Submissions, 19 April 2016, [41]; see CB603–CB604.
[89]T326, T330.
[90]Plaintiff’s Closing Submissions, 19 April 2016, [41]; T332, 334, 339.

Wantrup’s evidence is that he did not authorise the preparation of the ledger and was unaware of its being sent to Braham.[91] Wantrup argues that for this reason this Ledger cannot be used as an admission against his interest.[92]
[91]T329.
[92]Third Defendant’s Reply Submissions, 21 April 2016, [21].

In my view the Trust Ledger entry referring to Braham as a client was not established as a document which recorded or reflected Wantrup’s view or position as to its purpose or the accuracy of its contents, because that document was not established as a record which he created, or was involved in creating, or that he approved.

Further insofar as the plaintiff contends that each of the relevant Wantrup Ledgers was created and updated in accordance with Regulation 3.3.17 and that each ledger identifies the person on whose behalf Wantrup was holding funds, I consider that any presumption of regularity and the prima facie position which otherwise may be established by the consolidated trust ledger[93] and the Braham ledger[94] is displaced in this instance by the clear evidence given by Wantrup which contradicted the plaintiff’s assertions about the effect of the ledger.
[93]CB2026.
[94]CB603.

(c) The email of 15 March 2013 from Wantrup to Carol Mason, Administration Manager of Sovereign, attaching an email of the same date from Carol Mason to Wantrup, concerning the ‘WA Trust Ledger for Simon Braham/Sovereign’.[95]
[95]CB1123.

This document is alleged to be an admission against Wantrup’s interest.

Wantrup submits that this document is ‘a Sovereign document’ and was not produced by Wantrup.[96]
[96]Third Defendant’s Reply Submissions, 21 April 2016, [22].

The substantive part of the document here relied on by the plaintiff is a communication from Sovereign and for that reason in my view cannot, without more, amount to an admission against the interests of Wantrup.

(d) Trust Account Receipts dated 29 November 2011 and 6 December 2011.

The plaintiff points out that both Receipts refer to Simon Braham as the person that money is received from and on whose behalf it is received, and both Trust Account Receipts state ‘disbursements – INVESTMENT’ as the purpose for which the money is received.[97]
[97]CB480.

Wantrup’s evidence is that these documents were prepared without his knowledge,[98] and that the ‘whole concept of them being a disbursement is just nonsense’. Further Wantrup’s evidence was that these Trust Account Receipts were incorrect in that they referred to ‘Simon Braham’ as the person on whose behalf money had been received.[99]
[98]T248–9, T248.27-T249.3, T262 and T342.
[99]T262; T339.18–20 and T340.1–7.

I do not consider that these Trust Account Receipts relied on by the plaintiff constitute admissions against Wantrup’s interest, because he has sworn that he had no knowledge of those receipts, and in accepting that evidence as I do, I also accept that Wantrup’s conduct cannot be said to be acceptant of the accuracy or appropriateness of these receipts.

Furthermore, for reasons explained elsewhere, I have found that Wantrup did not intend to receive or hold, and did not hold, the money referred to in the said receipts on behalf of Braham.

(e) The bank reconciliation document.[100]
[100]CB593.

Wantrup’s evidence is that this document appeared to be an internal control document and not a trust account.[101] Wantrup could not identify the purpose for which it was designed. His evidence was however that the bank reconciliation document had been prepared without his knowledge.[102]
[101]T336.4–5.
[102]T335.20-T336.19.

The plaintiff, in its submissions, rejects Wantrup’s evidence that it was ‘an internal document prepared for control’ and ‘not a trust account’,[103] and that he did not authorise its creation. The plaintiff asserts that it is ‘tolerably clear’ the document was of a kind subject to reg 3.3.15 of the Legal Profession Regulations 2005.[104]

I also reject the plaintiff’s submission that the bank reconciliation document referred to amounts to an admission against Wantrup’s interest.

I consider that this document is in the nature of a Wantrup & Associates internal financial control document and I am not satisfied that the bank reconciliation is in the nature of a trust account or a document of the kind regulated by reg 3.3.15 of the Legal Profession Regulations 2005.[105] Furthermore, it has not been established that Wantrup personally created or authorised or adopted the bank reconciliation document.

[103]T336.

[104]Plaintiff’s Closing Submissions, 19 April 2016, [40].

[105]CB does not record the trust account receipt number, it does not specify from whom money is received or for who’s benefit the funds are received and it does not clearly identify the ledger account to be credited.

In the above circumstances, and absent evidence from Wantrup or any other relevant witness[106] as to the purpose for which the Wantrup & Associates’ trust ledger was prepared or any evidence or admission by Wantrup that he authorised the creation of such a ledger for such a purpose or purposes, or that he reviewed and approved that ledger for a specific purpose, I accept Wantrup’s submission that neither the consolidated trust ledger,[107] or the Braham ledger,[108] nor the other documents relied upon by the plaintiff,[109] amount to admissions against Wantrup’s interest for the reasons that I have earlier outlined.
[106]Wantrup explained the evidence of Ms Naumovski; T9.12–17 and T324.6–16; CB1348, CB1351, CB1355 and CB1339.
[107]CB2026.
[108]CB603.
[109]Plaintiff’s Closing Submissions, 19 April 2016, [39]–[41].

Further, given Wantrup’s evidence, which I wholly accept, the reference in the email dated 15 March 2013 to the ‘WA Trust Ledger for Simon Braham/Sovereign,[110] and the trust account receipts dated 29 November 2011 and 6 December 2011,[111] and the bank reconciliation,[112] in my view all yield to Wantrup’s evidence concerning the true nature of the receipt and placement of the first payment, the second payment and the third payment by Braham to Wantrup & Associates.
[110]CB1123.
[111]CB480.
[112]CB593.

Liability under the LPA

As its second cause of action, the plaintiff relies upon s 3.3.14 of the LPA, and asserts a private cause of action arising in relation to a breach by Wantrup of that section.

Section 3.3.14, which was in force at all material times, provided that a law practice must hold money deposited in a general trust account exclusively for the person on whose behalf it is received, and must only disburse the trust money in accordance with that person’s direction.

Section 3.3.14 of the LPA is in the following terms:

Holding, disbursing and accounting for trust money
1. A law practice or an approved clerk must—
(a)hold trust money deposited in a general trust account of the practice or clerk exclusively for the person on whose behalf it is received; and
(b)disburse the trust money only in accordance with a direction given by the person.

Penalty: 120 penalty units.
2.Subsection (1) applies subject to an order of a court of competent jurisdiction or as authorised by law.
3.A law practice or an approved clerk must account for the trust money as required by the regulations.
Penalty: 60 penalty units.

It is to be noted that s 3.3.3 of the LPA also provides:

Money involved in financial services or instruments
1.Money that is entrusted to or held by a law practice for or in connection with—
(a)a financial service provided by the practice or an associate of the practice in circumstances where the practice or associate is required to hold an Australian financial services licence covering the provision of the service (whether or not such a licence is held at any relevant time); or
(b)a financial service provided by the practice or an associate of the practice in circumstances where the practice or associate provides the service as a representative of another person who carries on a financial services business (whether or not the practice or associate is an authorised representative at any relevant time)—

is not trust money for the purposes of this Act.
2.Without limiting subsection (1), money that is entrusted to or held by a law practice for or in connection with—
(a)       a managed investment scheme; or
(b)       mortgage financing—
undertaken by the practice is not trust money for the purposes of this Act.
3.Without limiting subsection (1) or (2), money that is entrusted to or held by a law practice for investment purposes, whether on its own account or as agent, is not trust money for the purposes of this Act, unless—
(a)       the money was entrusted to or held by the practice—
(i)        in the ordinary course of legal practice; and
(ii)primarily in connection with the provision of legal services to or at the direction of the client; and

(b) the investment is or is to be made—
(i) in the ordinary course of legal practice; and
(ii)for the ancillary purpose of maintaining or enhancing the value of the money or property pending completion of the matter or further stages of the matter or pending payment or delivery of the money or property to or at the direction of the client.

4.In this section Australian financial services licence, authorised representative, financial services and financial services business have the same meanings as in Chapter 7 of the Corporations Act.

I further note that a similar exception is contained in s 129(2)(d) of the Legal Profession Uniform Law Application Act 2014 (Vic). That section provides that ‘money received by a law practice for investment purposes’ is not trust money, unless ‘the law practice received the money in the ordinary course of legal practice and primarily in connection with the provision of legal services at the direction of the client’ and ‘the investment is or is to be made in the ordinary course of legal practice and for the ancillary purpose of maintaining or enhancing the value of the money or property’.

The plaintiff asserts that Wantrup received each of the three payments in issue as trust money for or on behalf of the plaintiff, and that therefore his statutory obligation was ‘to hold trust money deposited in [his] general trust account exclusively for the benefit of the person … on whose behalf the money was received by the law practice and to disburse that money only at the direction of that person …’.[113]
[113]Legal Services Board v Gillespie-Jones (2013) 249 CLR 493, 520 [100].

The question arising as a result of the plaintiff’s pleaded second cause of action is whether s 3.3.14 entitles the plaintiff to bring a private right of action. The plaintiff contends that the provision confers such a right because the LPA does not provide any alternative remedies to the plaintiff,[114] and the terms, scope and policy of the legislation in question indicate so.[115]
[114]Plaintiff’s Closing Submissions, 19 April 2016, [43].
[115]Plaintiff’s Opening Submissions, 10 March 2016, [6].

The plaintiff relies upon O’Connor v SP Bray Ltd,[116] where Dixon J says:

Whatever wider rule may ultimately be deduced, I think it may be said that a provision prescribing a specific precaution for the safety of others in a matter where the person upon whom the duty laid is, under the general law of negligence, bound to exercise due care, the duty will give rise to a correlative private right, unless from the nature of the provision or from the scope of the legislation of which it forms a part a contrary intention appears. The effect of such a provision is to define specifically what must be done in furtherance of the general duty to protect the safety of those affected by the operations carried on.[117]

[116](1937) 56 CLR 464.

[117]Ibid, 478.

In his submission against the existence of a private cause of action in respect of the above legislative obligations, Wantrup contends that the LPA, as the Explanatory Memorandum for that legislation states, is intended ‘to implement a new regulatory framework for the legal profession in Victoria’, rather than to protect the class of persons who entrust moneys to their solicitors.[118]
[118]Explanatory Memorandum, Legal Profession Bill 2004, 1. See also Third Defendant’s Closing Submissions, 8 April 2016, citing Legal Profession Act 2004 s 1.1.1; and Victoria, Parliamentary Debates, Legislative Assembly, 16 November 2004, 1541 (Rob Hulls, Attorney-General). The Explanatory Memorandum Legal Profession Bill 2004 refers to ‘protecting the interests of consumers’.

Wantrup also contends that a range of remedies afforded to the plaintiff, and those persons which such provisions are intended to protect, are potentially available for breach of the relevant provision and that this renders the private right of action unnecessary, and unlikely to exist.

Wantrup also submits that even when new trust money offences were created at the time of the passing of the LPA, a private right of action was not introduced. In this regard, Wantrup cites Gardiner v Victoria,[119] where Phillips JA observes that:

if the statute as a whole can fairly be characterised as passed primarily for the general good rather than for the benefit or protection of some only within the wide community, that is nowadays regarded as pointing strongly against a Parliamentary intention that an individual should be able to sue for non-compliance with some particular provision;[120]

[119](1999) 2 VR 461,

[120]Ibid, 469 [24]–[25].

In Gardiner, Phillips JA also explains,

a penal sanction will commonly be found attached to the legislative prescription, and prima facie that excludes the implication of additional civil liability. But if there is no such penalty or other remedy for breach of the statutory duty, or if the penalty which is fixed is considered inadequate (as in Groves v Lord Wimborne [1898] 2QB 402), that can point towards the individual’s right to sue for breach.[121]

[121]Ibid, 469.

Wantrup further contends that the statutory duty, if it were to exist, would give rise to ‘theoretical and practical problems’,[122] such as where a purchaser entrusts funds to a law practice to defray the price of land purchased under a contract in respect to which the vendor asserts an entitlement to specific performance. Such a scenario Wantrup submits would give the vendor an interest as beneficiary of the funds entrusted to the law practice for that purpose. Should the vendor then claim the funds pursuant to a Quistclose trust, and the purchaser rescind the contract and demand that the law practice return the funds, the legislature would have facilitated a conflict of duty by the law practice, a result that Parliament could not have intended.[123] Wantrup also points out that such a duty is inconsistent with a solicitor’s fiduciary obligation to act solely in the client’s interest.[124]
[122]Legal Services Board v Gillespie-Jones (2013) 249 CLR 493, 527 [126].
[123]Ibid.
[124]Wik Peoples v Queensland (1996) 187 CLR 1, 95–6.

Wantrup also argues that ‘there is no suggestion that the existing law for the regulation of legal practitioners handling trust money … is inadequate’.[125]
[125]Third Defendant’s Closing Submissions, 8 April 2016, [5]–[8].

Wantrup argues that the moneys in question are not ‘trust moneys’ within the statutory meaning, because s 3.3.3(3) excludes moneys entrusted to a solicitor’s trust account for investment purposes where the requirements set out in that section are not satisfied. It is submitted by Wantrup that in this case the requirements in s 3.3.3(3)(a) and (b) have not been satisfied.[126]
[126]T518.17–30.

Wantrup submits that the three payments cannot be trust moneys because, on the plaintiff’s case, s 3.3.3(3) of the LPA is confined to forming a basis for the plaintiff’s claim of breach of a statutory duty, but no wider.[127]
[127]T519.24–27.

Further, Wantrup submits that because the plaintiff relies on a statutory cause of action, which requires there to be trust money held within the meaning of the LPA, if s 3.3.3(3)(a) of the LPA applies, then the subject money is not trust money within the meaning of the LPA and accordingly the plaintiff’s second cause of action must fail.[128]
[128]T519.10–15.

Further, with respect to the third payment Wantrup submits that the statutory cause of action under s 3.3.14 fails because that money was not held in a trust account, a condition precedent for the application of that part of the statute to be invoked.[129]
[129]T520.5-19.

Standard of proof in relation to grave allegations

Wantrup’s closing submissions also contended that a ‘cause of action alleging a breach of statutory duty has very serious consequences’, and for that reason the plaintiff in this proceeding must establish its allegations to a higher standard.[130]
[130]Third Defendant’s Closing Submissions, 8 April 2016, [4]. Wantrup notes at para [3] and T505.28-31 and T511.14.21 that the Court may take into account the gravity of the matters alleged; refer ss 3.3.14 and 3.3.21 of the LPA; Briginshaw v Briginshaw (1938) 60 CLR 336, 361; Morley v ASIC (2010) 274 ALR 205; 81 ACSR 285, 422 [745]–[746]; Evidence Act 2008, s 140(2)(c).

The plaintiff’s submission in response contends that there is no higher standard. The plaintiff submits that ‘all one needs to look for under the test posed by s 140 of the Evidence Act 2008 is the gravity of the matter and, if there are serious allegations in a Briginshaw sense, one simply needs to be satisfied before making findings that there is a preponderance of evidence. It has got nothing to do about raising the standard of proof, it is just looking for a preponderance of evidence’.[131]
[131]T594.4-12. See also Third Defendant’s oral submissions at T505.21-31; Plaintiff’s oral submissions at T594.4-12.

Relief sought by the plaintiff

As indicated by the plaintiff’s submissions summarised above, it claims breach of trust, breach of statutory duty or breach of fiduciary duty, and seeks:

(a) equitable compensation;

(b) equitable damages;

(c) a declaration that Wantrup, to the extent that he holds or continues to hold the sum of $1.1 million or any part thereof, holds that sum on trust for the plaintiff;

(d) an order that Wantrup pay to the plaintiff the sum so held on trust by him;

(e) payment or restitution of the sum of $1.1 million or part thereof;

(f) interest pursuant to statute;

(g) such other or further orders as the Court considers fit; and

(h) costs.[132]

[132]Plaintiff’s Further Amended Statement of Claim, 15 March 2016.

Considerations
Preliminary matters – standard of proof

As I have noted, Wantrup submits that the court is entitled to take into account the gravity of the matters alleged or the consequences which may flow from a particular finding, when deciding whether a matter has been established to the requisite standard.[133]
[133]Evidence Act 2008 (Vic), s 140; Briginshaw v Briginshaw (1938) 60 CLR 336, 361.

Further, Wantrup submits that the cause of action here alleging a breach of statutory duty may have serious consequences for him and, for that reason it is appropriate to require that the plaintiff establish its allegations of breach of statutory duty to a higher standard.

Section 3.3.14 of the LPA imposes an obligation regarding the receipt and handling of trust moneys in the context of the conduct and practice of a law practice. The obligation the plaintiff asserts arises pursuant to s 3.3.14 of the LPA where trust moneys were deposited in a law practice’s or approved clerk’s ‘general trust account’ and requires that the law practice or approved clerk hold such moneys exclusively for the person for whose benefit the trust moneys are received and to disburse the money only in accordance with a direction given by that person. The section further provides that a law practice or approved clerk must account for the trust money as required by the relevant regulations in relation to the LPA.[134]
[134]Legal Profession Act 2004, s 3.3.14.

I consider that because the plaintiff’s case does not plead fraud or dishonesty and because I have ultimately concluded for reasons which follow that the plaintiff’s second cause of action involving alleged contravention of s 3.3.14(1) of the LPA need not be decided, because my findings in relation to the plaintiff’s express trust and associated alleged breaches of that section are not made out, and are unsustainable respectively, the remaining determinative issues in this proceeding should be considered and determined to the normal civil test of the balance of probabilities. Here, in my view, no more burdensome level of satisfaction is required.

I note, however, that had it been necessary to consider the position as to whether or not Wantrup contravened s 3.3.14 of the LPA, that is, were I not satisfied on the balance of probabilities that the subject three payments were not impressed with a trust, and that for that reason, and in the circumstances, s 3.3.14 of the LPA is not applicable and has not been contravened, it may well have been appropriate and necessary for me to require the establishment of such a contravention on the basis submitted by Wantrup, and to a higher degree of satisfaction than would ordinarily be the case.

Admissions against interest

I have earlier determined these issues raised by the plaintiff.

The plaintiff’s claims for relief against the first and the second defendants

The plaintiff’s Prayer for Relief, in particular its claim for declaratory relief in C and the orders for payment in D, specifically make claims against the first and second defendants. However, these claims were not pressed, or indeed addressed by the plaintiff at trial.[135]
[135]Sovereign went into liquidation on 24 May 2013. Eos went into liquidation on 24 July 2014. On 7 October 2013 Sifris J granted leave to the plaintiff to proceed against Sovereign MF Ltd (in Liquidation) and the plaintiff gave an undertaking it will not seek to enforce any judgment which it may obtain against the first defendant without obtaining leave of the Court. On 19 June 2014 Sifris J’s Orders, in Other Matters, recorded that the proceeding was stayed as against Eos Janus Capital Pty Ltd pursuant to s 440D of the Corporations Act 2001 (Cth); and Plaintiff’s Submissions, 10 March 2016, [1] and [63].

The only case or submission ultimately made in relation to the first and second defendants, Sovereign and Eos, was in relation to the third defendant’s apportionment claim referred to above.

In any event, I consider that my findings below and conclusions in relation to the plaintiff’s claims against Wantrup would result in the claims the plaintiff has pleaded against Sovereign and Eos being similarly unsuccessful.

The Law – Express Trusts – The Requirement for Intent

The plaintiff in its case emphasised on a number of occasions that the key determinative question in this proceeding is what intention did the plaintiff have when it made the relevant transfers.[136]
[136]T554.26-28; T555.2-5; T556.17-24; T557.1–T558.2; T564.6-8.

Wantrup argues that to succeed in this case in its express trust claim the plaintiff must establish the necessary intention from the conduct of parties, here as alleged by the plaintiff and Wantrup.[137] Wantrup submits that this is especially so in this case, as put by the plaintiff, which alleges the relevance of a course of conduct, including in relation to Wantrup’s knowledge of the dealings and transactions pursuant to which Wantrup received the three payments in issue.
[137]Commissioner of State Revenue v Snowy Hydro Ltd [2012] VSCA 145 at 130 [83]; Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491, 502; T521.4-23.

Wantrup also submits that the intention to create a trust must be communicated to the trustee, here alleged to be Wantrup.

In Williams v Lloyd,[138] and in particular the passage in Dixon J’s judgment citing Jessel M.R. Richards v Delbridge,[139] his Honour relevantly says as follows:
It is true he need not use the words, ‘I declare myself a trustee,’ but he must do something which is equivalent to it, and use expressions which have that meaning; for, however anxious the Court may be to carry out a man’s intention, it is not at liberty to construe words otherwise than according to their proper meaning’… ‘the true distinction appears to me to be plain, and beyond dispute: for a man to make himself a trustee there must be an expression on intention to become a trustee, whereas words of present gift show an intention to give over property to another, and not retain it in the donor’s own hands for any purpose, fiduciary or otherwise.[140]
[138](1934) 50 CLR 341.
[139](1874) L.R. 18 Eq., at pp. 14,15.
[140](1934) 50 CLR 341 at 369 (emphasis added).
In its submissions the plaintiff relies heavily on the decision in George v Webb [2011] NSWSC 1608, in which Ward J stated the following at [203]–[210], [252]:

203.As with the determination of the existence and scope of an express trust that (unlike a Quistclose trust) is not said to arise from the purpose for which moneys are paid over, the question as to the existence of any Quistclose trust must be answered by reference to intention. The relevant intention is to be inferred from the language employed by the parties in question (per Gummow J in Elizabethan Theatre Trust, at 502-505; Re Wall ; Ex parte Official Receiver v Kemmis (1979) 25 ALR 615, at 624-5 ). For that purpose the Court is entitled to look into the nature of the transaction and the circumstances of the relevant parties and their relationship (Walker v Corboy (1990) 19 NSWLR 382; Re Australian Elizabethan Theatre Trust, at 503).
204.Spigelman CJ summarised the relevant principles bearing on the formation of an express trust in Mario Salvo v New Tel Ltd [2005] NSWCA 281 at [33], as follows:
It is well established that an intention to create an express trust can be inferred from the full range of relevant circumstances, including the nature of the transaction and the construction of the words used. (See Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 120; Walker v Corboy (1990) 19 NSWLR 382 esp at 395-399; Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (In Liq) (2000) 202 CLR 588 at [34]; Tito v Waddell (No 2) [1977] Ch 106 at 211. The relevant case law has been summarised by Campbell J in Commonwealth v Booker International Pty Ltd [2002] NSWSC 292 at [34]-[45].) There are cases in which it is pertinent to consider the mutual intention of the parties to a transaction. (See Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 at 580B; Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (In liq) (1978) 141 CLR 335 at 353; Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491 at 502-503; Re Goldcorp Exchange Ltd; Kensington v Liggett [1995] 1 AC 74 at 100.)

205.His Honour referred, at [34], with approval to the passage from the judgment of Gummow J in Re Australian Elizabethan Theatre Trust at 503 that:
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: Walker v Corboy (1990) 19 NSWLR 382; Scott, The Law of Trusts , 4th ed, 1987, s25.2. There is no need for particular caution in drawing the inference that a trust was intended: Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 618-19. However, it also is important to appreciate both the flexibility of the institution of the express trust and the range of equitable institutions which fall short of but have some of the characteristics of a trust.

206.In On Equity (Young, Smith and Croft, LawBook Co, 2009 , at [6.1020]), the learned authors note that:
Cases in this area will often depend on a close analysis of the facts, and in particular, whether the person who provided the money annexed a trust or equitable obligation that it was only to be used for the nominated purpose. The mutual intention of the parties and ‘the essence’ of their bargain will be important. A trust will not necessarily arise just because a lender inquires into the purpose for which a loan is sought and money is paid over for that particular purpose. (my emphasis)

207.Pausing there, when reference is made to the mutual intention of the parties and the essence of their bargain, this seems to be in the context of payments made in circumstances where the bargain as such is between payer and payee (hence the reference to enquiry by the lender as to the purpose for which the loan was sought). Here, the antecedent bargain is that which was reached on 13 October 2008 between Mr George (whether or not acting as agent for his wife) and Mr Burke. It is not suggested that Mr Webb was privy to that bargain (although on his own evidence he was made aware by Mr Burke that some form of arrangement had been reached with Mr George and in summary terms the nature of that transaction).
208.In those circumstances, as between Mrs George (the payer of the money) and Mr Webb (into whose trust account the money was transferred) it would seem that the relevant intention is that of Mrs George as evidenced by the email from her husband in which Mr Webb was informed of the basis of the payment and instructed as to the purpose for which the moneys were to be used (ie to ask whether the person who provided the money annexed to it a trust or equitable obligation, in the words of the authors of On Equity ). In Mario Salvo , at [49] Spigelman CJ noted that:
In this case, as in EVTR, it was the intention of the supplier of funds, relevantly the Appellants, that the money was to be applied and applied only for a specific purpose (ie the purchase of the equipment in EVTR or the Digiplus acquisition in the present case). The money was applied towards a deposit in partial fulfilment of the purpose which was not fulfilled (ie the failure of the equipment purchase in EVTR or the Digiplus acquisition in the present case). The return of the deposit in each case meant that the beneficial interest in the funds of the supplier became an express trust of the deposit in the hands of the recipient. (my emphasis)

209.In Re Australian Elizabethan Theatre Trust, Gummow J said:
The question as to the existence of any express trust will always have to be answered by reference to intention. An example of that basic proposition at work in this court is the decision of Lockhart J in Re Wall; Ex parte Official Receiver v Kemmis (1979) 25 ALR 615 at 624-5. 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 to the mutual intention of settlor and trustee . This is consistent with the approach by Deane J to a similar question in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 80 ALR 574 ; 165 CLR 107 at 149, but cf Mason CJ, Wilson J at 121. At all events, and as I have said, in Quistclose, supra, at 580, Lord Wilberforce looked to ‘the mutual intention’ of Quistclose and Rolls Razor and to ‘the essence’ of their bargain. (my emphasis)

210.In the present case, the relevant intention as to the creation of the trust must be that of the party in the position of the settlor of the trust (Mrs George or her husband acting on her behalf). Where there is no contractual arrangement between the settlor and the alleged trustee, the intention of the latter must be irrelevant.

…
219.Payment into a trust account (and, in particular, a trust account maintained by a solicitor who is bound by the rules and regulations imposed by the Law Society in relation to the control of such accounts including the separation of such funds) seems to me to be sufficient to indicate an intention that the moneys be dealt with as trust moneys. (Had the moneys been paid as the purchase price owing to Mr Burke in his personal capacity then one would have expected the email to make that clear and it would not then have been necessary for there to be any authorisation given by Mrs George for him to direct the disbursement of the funds - indeed that would be otiose.)

…
252.I find that the funds paid to Grogan Webb were impressed with a trust, that being that they were to be held and paid out (albeit at the direction, properly issued, of Mr Burke) for the purposes of the Elderslie/Allco HIT acquisition (and by that, having regard to the underlying agreement between Mr George and Mr Burke, whether or not that was for Mrs George as principal, was meant for the purposes of acquiring one or more of the assets of those companies for the purposes of the particular project then being contemplated - as Mr Burke conceded in the witness box).[141]
[141]George v Webb [2011] NSWSC 1608 (20 December 2011) [203]–[210]. 219 and 252 (‘George v Webb’).

The relevant intention

The determination as to the existence and scope of an express trust must always be answered by reference to intention. The relevant intention is principally to be inferred from the language and conduct of the parties in question.[142] For that purpose the court is entitled to look to the nature of the transaction and the circumstances of the relevant parties and their relationship.[143]
[142]Re Australian Elizabethan Theatre Trust (1991) 30 FCR 491, 502-503 (‘Re Australian Elizabethan’); Re Wall; Ex parte Official receiver v Kemmis (1979) 25 ALR 615, 624-5.
[143]George v Webb, 203; Salvo v New Tel Ltd [2005] NSWCA 281 (25 August 2005) [33] (‘Salvo v New Tel Ltd’); Walter v Corboy (1990) 19 NSWLR 382; Re Australian Elizabethan, 502–503.

Let me put this proposition to you before moving on: the amount of the proposed note investment in Krema was half a million dollars?---600.
Do you disagree with me saying half a million dollars?---Well, Dr Braham provided 500 and then 100, so how it was dealt with - I can’t recall the thought process behind the way that Mr Wantrup wanted to - - -
And the reference to principal amount in the draft note deed, to which I have taken you a moment ago, that being half a million dollars, that sum was consistent with the amount that Mr Braham had paid into Mr Wantrup’s trust account on 8 December 2011; correct?---Yes.[348]

[348]T475.2–T476.12.

Similarly, the email from Walton to Wantrup and Braham of 23 October 2012 (12.19pm) and the attached email from Wantrup of 19 October 2012 (6:04pm)[349] mentioning Krema Pty Ltd investment is far from conclusive in my view.
[349]CB691.

The document at CB794, which is relied on by the plaintiff, in my view does not advance the plaintiff’s argument in any substantial way, notwithstanding it appears to relate to the Tarneit Land Fund investment.[350]
[350]CB788 (Condition).

This is because, as submitted by Wantrup, the contemporaneous text messages exchanged between Giorgio and Braham on 20 August 2012 confirmed that the relevant money was required for a settlement.[351] Further, the evidence confirmed that Sovereign was involved in three projects namely the Glen Waverley retirement home, the Tarneit investment and the Kush Café.
[351]CB954.

As I have earlier observed as persuasive on this issue, the only project which was about to settle, or in respect of which there was a proposal to settle in August 2012, was the ‘Kush’ project. This is confirmed at CB627 and CB632, and this position is confirmed in the discussions that Braham gave evidence about that he had with Giorgio.[352]
[352]T197.8-13.

I am on the above bases satisfied that, consistent with Braham’s email of 18 September 2012 to Giorgio and Wantrup expressly referring to ‘… $100k due at settlement of Kush …’,[353] at the time Braham made the $100,000 second payment in late August 2012, he made the payment with the understanding that it was to go towards the Kush investment.
[353]CB632.

Accordingly, I do not consider there to be a cogent basis to impugn Giorgio’s evidence in relation to the purpose for which the second payment of $100,000 was made. It was in my view made by Braham in relation to the Kush project.

Concomitantly, I find that there is insufficient evidence to establish that Braham intended the second payment to be used for the Tarneit investment and Tarneit investment alone.

Finally I note that none of the documents relied upon by the plaintiff, in my view establish that the second payment was for the Tarneit investment, each of the documents relied on by the plaintiff is imprecise and equivocal in that regard.

Conclusions

In my view the evidence establishes that Braham provided the funds in relation to the first, the second and the third payments expecting and intending that those funds would be utilised very promptly by Sovereign and expecting and intending that the finalisation of agreement and security related documents would occur at some stage after he made the subject advances but that immediate access and utilisation of the funds concerned, by Sovereign, would occur before that and would not require any instruction from him.

Further, contrary to the plaintiff’s submission that ‘the plaintiff remained the beneficial owner of the moneys (notwithstanding inaccuracies in Wantrup’s trust account records)’,[354] I find that the payment by Braham into Wantrup & Associates’ trust account of the first, and second payments, and into a Wantrup & Associates account of the third payment, and the effect of Wantrup’s trust account records in respect of those moneys, is not determinative of either the beneficial ownership of those funds or the true arrangement and intent.
[354]Plaintiff’s Closing Submissions, 19 April 2016, [7] and [9], subject to the possible significance of any relevant admissions against interest which may be established by Wantrup’s trust records.

Further, in my view it is of no ultimate consequence in this case that Wantrup did not expressly plead that the plaintiff authorised or agreed to Sovereign using the relevant funds freely once they reached the Wantrup & Associates Trust Account. It is for the plaintiff to discharge its burden to establish its pleaded causes of action. It is not incumbent on Wantrup to plead the detail of what he contended in fact occurred in this regard.

Further, I do not accept the plaintiff’s contention that from a commercial perspective Wantrup’s case is implausible and unlikely because the plaintiff would not have intended to make an unsecured loan to Sovereign, or any other party, and if the plaintiff had that intention there would be no necessity to pay the relevant moneys into the Wantrup & Associates’ trust account.

Here, what might, uninformed by the facts and circumstances, appear somewhat implausible and unlikely yields to the facts and circumstances which the evidence establishes, and in particular the arrangements and dealings which I have found Braham intended and expected in relation to the moneys he advanced. Here, in my view, the evidence referred to demonstrates Braham’s conduct in relation to the three payments was fast and loose and exhibited considerable and imprudent financial bravado on each occasion.

Earlier course of conduct relied on by the plaintiff

I also reject as non-probative the plaintiff’s reliance upon previous negotiations in 2010 and 2011 during the course of which Wantrup received moneys from the plaintiff.[355]
[355]Plaintiff’s Closing Submissions, 19 April 2016, [13].

I consider that the dealings in relation to the Aged Care Property Fund and the Tarneit Land Fund were discrete and distinguishable dealings between the plaintiff and Wantrup and Sovereign for the reasons I have earlier explained.

I consider that the ‘course of conduct’ sought to be relied on by the plaintiff in 2010 and part way through 2011, was constituted by dealings of a more defined and controlled nature in which Braham, and his solicitor Walton, were astute and careful to ensure that the arrangements in relation to such dealings were recorded and legally documented.[356]
[356]Reasons for Judgment, [35],[36]-[37], [40]–[41] and [43]–[44].

In my view the approach exhibited by Braham in relation to the three transactions concerning the three payments in issue was quite distinct and different. In relation to the three payments, Braham was not astute or careful to record and legally document matters, but addressed those dealings with a fast and loose approach and with the impudent financial bravado to which I have referred.

Accordingly, for the above reasons I consider that the nature of earlier transactions in late 2010 and in 2011 relied upon, in part, by the plaintiff as giving rise to the plaintiff’s money being received and held by Wantrup ‘pursuant to an express trust for the purpose of funding the proposed loan’,[357] was quite different to the nature of the three payment transactions in issue, as established in the evidence outlined by the third defendant in its closing submissions,[358] including the documents referred to above which reflect the caution Braham applied in relation to the earlier 2010 and 2011 ‘course of conduct’ dealings.[359] Further, in contradistinction to the three transactions and payments in issue, Wantrup, in relation to the historic transactions which the plaintiff alleges established a ‘course of conduct’, acknowledged that he understood the plaintiff’s money in respect of those earlier transactions was not to be released until he received instructions from the plaintiff to that effect.[360]
[357]Plaintiff’s Closing Submissions, 19 April 2016, [13] and [17].
[358]Third Defendant’s Submissions, 8 April 2016, [20].
[359]T132.18; Reasons for Judgment[36]-[37], [40]–[41] and [43]–[44].
[360]T276.15; T331.

I also consider that Braham’s conduct in relation to the earlier transactions demonstrates that he was able to confirm expressly when he wanted to impose a condition as to the use of the money, and he did so. Braham did so in earlier transactions by clear written communications. Braham also appears to have done so without referring such communications to his solicitor for advice.[361]
[361]Reasons for Judgment, [36]-[37], [40]–[41] and [43]–[44].

In stark contrast, Braham’s conduct in relation to the first, second and third payments was very different. On the evidence as I consider it established, the true position in relation to the first, second and third payments, was that Braham did not stipulate, in any sustained or consistent way, for any constraint in relation to either the need for his instructions to release or disburse the money he had provided, or that such funds could not be released or disbursed before execution of suitable agreements and security documentation. On the contrary, Braham’s conduct conveyed an intent and acceptance that the money provided by the three payments to Wantrup & Associates should be immediately utilised by Sovereign in relation to the investments concerned.

Urgency — of access to funds

Further, I reject the plaintiff’s assertion in relation to the three payments in issue that even if Braham accepted or acknowledged that Sovereign needed the money it required urgently, that acceptance or acknowledgement did not amount to an intention by the plaintiff to transfer beneficial ownership of the subject moneys to Sovereign, or another entity, immediately upon payment into Wantrup’s trust account, without satisfactory legal documentation and security in place.

The plaintiff contends that Braham considered that there was urgency associated with both the payment of cleared funds into the Wantrup account and also the provision, consideration and completion of documents governing the proposed investment agreement and security documentation.[362]
[362]Plaintiff’s Closing Submissions, 19 April 2016, [22]–[24].

The plaintiff contends that the contemporaneous documents demonstrate objectively that the plaintiff’s intention was that the subject moneys were to be kept safe until applied for the purpose nominated, namely an investment based on finalised documents and securities rather than application on a broader basis.

However, I do not accept the plaintiff’s submission referred to in the last three preceding paragraphs. On the facts as I have found them, Braham’s conduct clearly evinces that he did not require the finalisation of the investment agreement and securities related documentation before the moneys which he provided were transferred from the Wantrup Trust Account and applied by Sovereign.

Therefore, in my view, there is no substance to the plaintiff’s submission that it is less plausible that the plaintiff knowingly paid over a considerable sums unconditionally for the benefit of Sovereign on the basis of no written documentation in support of such investment where, on the plaintiff’s assertion, settlement was not imminent. Ultimately, for the reasons I have addressed, I do not accept this submission by the plaintiff and consider it to be at stark odds with Braham’s conduct, which I have highlighted and explained elsewhere.

Further, I have found that Braham, and the plaintiff which he controlled, were imprudent and very willing to accept the risks associated with allowing the utilisation of the sums of money which Braham provided in December 2011 and August and September 2012 even though related documentation and securities had not been finalised.

Convenience of Wantrup Trust Account

I do not accept as probative or persuasive the submissions made by the plaintiff that if the plaintiff agreed to give Sovereign or other entities immediate access to the moneys which it was providing it did not need to use the trust account as a ‘clearing account’ and the plaintiff could have paid the moneys it was providing direct to Eos.

I consider that it is neither anomalous nor supportive of the plaintiff’s case that, in the circumstances, the plaintiff’s funds were paid into the Wantrup & Associates Trust Account. This is because, as explained by Giorgio, Sovereign, for which the moneys were intended, did not have a bank account and it was considered more convenient to utilise the Wantrup Trust Account as a clearing account. Giorgio’s evidence in that regard was as follows:

DR HANAK: Why was the direction to pay to EOS rather than Sovereign or Krema?---EOS Janus was acting as Sovereign’s treasury and, as stated earlier, we conducted all of Sovereign’s administrative expenses out of EOS Janus for quite some time, given that we were dealing with a significant number of Sovereign legacy issues and that we didn’t really have a bank account in place until much later on.
HIS HONOUR: I see Sovereign didn’t have a bank account, but EOS Janus had bank accounts in the normal way?---Yes, Your Honour.
DR HANAK: Why would investors’ money not conveniently be able to be paid into the EOS Janus’ accounts rather than the Wantrup Trust Account?---I guess from the outset, Your Honour, we began to use Wantrup’s trust account from day one and we just continued it. In fact, there was no reason why we couldn’t open a Sovereign bank account, but we were spending 80 hours a week on Sovereign business and we just tried to keep it simplistic at that stage, and given that most of our costs consisted of mainly legal fees, we just left it at that. [363]
[363]T395.5-24; T380.13-17; T386.26-28; T416.112-14; T420.12-14; CB464 and CB622.

Wantrup not a trusted adviser

I also consider that Wantrup was most unlikely to be considered by Braham to be his ‘trusted advisor’ as submitted by the plaintiff. I do not accept that Wantrup held himself out as such or that the Wantrup Trust Account was used in this context or way, as also submitted by the plaintiff.

I also reject the plaintiff’s submission that Braham treated Wantrup as a trusted advisor. I accept the Wantrup submission that this is not supported by evidence from either Braham or Wantrup. Furthermore, Braham had his own solicitor, Walton, acting at all material times, including in relation to the Managed Investment Scheme matters.[364]
[364]T269.4, T274.3–18.

Accordingly I reject the plaintiff’s submissions in relation to Wantrup’s duties to his client Sovereign.[365] Wantrup was, at all material times, acting for Sovereign, and the plaintiff submits, probably Eos.[366]
[365]Plaintiff’s Closing Submissions, 19 April 2016, [29].
[366]T17.20-22 per Heath ‘It is likely that Wantrup was also acting for EOS at the time.’ (In reference to November 2010).

The plaintiff also submits that Wantrup, in all the circumstances, was acting in a way which was unsafe and flawed, in that he treated Sovereign as the person on whose behalf he received and held moneys.[367]
[367]Plaintiff’s Closing Submissions, 19 April 2016, [30]; T355.20.

The plaintiff submits that in the circumstances there was a presumption that Wantrup received the funds paid by the plaintiff for the plaintiff’s benefit, and that Wantrup should have known as much, and further that Wantrup’s evidence is incapable of displacing that presumption.[368]
[368]Plaintiff’s Closing Submissions, 19 April 2016, [30].

On the basis of my above finding in relation to the basis upon which the three payments in issue were received and held by Wantrup, I also reject the plaintiff’s submissions outlined in the two preceding paragraphs.

Plaintiff’s second cause of action based on contraventions of the LPA

The plaintiff’s second cause of action is one based on a private right of action in respect of contraventions of s 3.3.14 of the LPA.

The plaintiff expressly relies upon the evidence supporting its express trust related first cause of action to support this second cause of action.[369] The plaintiff both relies upon its arguments advanced in support of the application made by it to amend its pleadings to add such a claim and relies also upon the evidence it contends has been established in support of its claim based on the formation of an express trust in favour of the plaintiff in relation to each of the three payments in issue. In this way, the plaintiff seeks to support the second cause of action on the basis of the same evidence and assertions as it advanced on its express trust claims .[370]
[369]The plaintiff expressly concedes that the evidence upon which it relied in respect of its second cause of action based on contraventions of s 3.3.14 of the LPA is the same evidence which it identifies and relies upon in support of its primary cause of action based on the formation of an express trust in favour of the plaintiff; see Plaintiff’s Closing Submissions, 19 April 2016, [2] and [3].
[370]Plaintiff’s Closing Submissions, 19 April 2016, [3] and [43].

Accordingly, the plaintiff’s factual assertions including, critically, the factual assertions advanced in seeking to establish its express trust, founds its claims in relation to both the contravention, and a private cause of action, in respect of s 3.3.14 of the LPA.

In light of my above findings and conclusions as to the plaintiff’s express trust claim, I do not consider it to be necessary to deal further with the plaintiff’s asserted private cause of action based on s 3.3.14 of the LPA. That is, beyond noting the plaintiff seeks to support its statutory cause of action on the assumption that its factual case is made out in relation to its express trust case. For the reasons I have outlined above, the plaintiff has failed to persuade me that any express, or other form of trust is established in relation to the three payments.

For the reasons which I have addressed I have found and concluded that the first, the second, and the third payments were not ‘trust money’ when provided by Braham to Wantrup & Associates. Those payments were not in any way impressed with a trust when received and held by Wantrup & Associates in December 2011 and August and September 2012. Furthermore, because the third payment was not deposited into a general purpose trust account, that payment was not the subject of an obligation imposed upon Wantrup under s 3.3.14 of the LPA.

Accordingly, the three payments were not trust moneys and are therefore not within the scope or stipulations of ss 3.3.2 (‘trust money’), 3.3.3(1) and (2) and 3.3.14(1) of the LPA.

Further, in my view, if contrary to my conclusion it was necessary for me to deal with the plaintiff’s asserted private cause of action based on s 3.3.14(1) of the LPA, and such a private cause of action existed [which I have not decided] then, in any event in my view the three subject payments were not in the nature of ‘trust money’ by reason, or as a consequence, of s 3.3.3(3) of the LPA. This is because the money which Braham provided by the three payments in issue was, for the reasons I have outlined above:

(a) not intended by him to be held in trust by Wantrup & Associates;

(b) intended by Braham to be placed in Wantrup’s Trust Account simply as a clearing account so as to enable Wantrup to disburse such money on Sovereign’s instructions;

(c) not money entrusted to Wantrup in the course of or in connection with the provision of legal services by Wantrup & Associates; and

(d) held by Wantrup & Associates for investment purpose, to be so invested by Sovereign[371] via and at the direction of Sovereign, and were not established to have been money which fell within any of the exceptions in s 3.3.3(3)(a) and (b) of the LPA.

[371]Wantrup’s evidence at T579.22-23, T277.16-22 and T277.26-27 is confined to his evidence and as to him not investing in moneys.

Further, and in my view, the third payment was not the subject of any obligation on the part of Wantrup under s 3.3.14(1) of the LPA including because that payment was not deposited into a general purpose trust account.

Even if I had concluded that Braham did intend the third payment to be deposited into the Wantrup & Associates Trust Account (which I have not), I have found that Braham’s overarching intent was that the three payments would be deposited in and cleared through Wantrup & Associates Trust Account only because Wantrup & Associates’ trust account provided the most convenient clearing account, and so as to facilitate those funds being disbursed to the Sovereign investments in which Braham was interested. In my view, as I have explained, s 3.3.14 of the LPA is of no application to any of the three payments and of no application to the third payment for these same reasons, and also because the third payment was not deposited into the Wantrup general trust account.

Summary of key conclusions and findings

I reject the plaintiff’s case and its claims in these proceedings for the following reasons.

In summary I find the following in relation to the key questions for determination posed by the plaintiff, and in relation to associated questions:

(a) Braham did not intend Wantrup to receive and hold in trust for the plaintiff or Braham the three payments Braham provided to Wantrup and Associates;

(b) Braham and the plaintiff intended to transfer beneficial ownership of the moneys provided by each of the three payments to Sovereign;

(c) at the time of each of the three payments, and the receipt of those payments by Wantrup, Sovereign was the beneficial owner of the funds thereby provided;

(d) Braham and the plaintiff provided each of the three payments in issue to Wantrup to be held on behalf of Sovereign, and to be disbursed in accordance with Sovereign’s direction in respect of Braham’s investments;

(e) Wantrup’s client at all material times was Sovereign, and accordingly the ‘default position’[372] in the factual setting of this proceeding is that the moneys the subject of the three payments was provided to Wantrup as agent for Sovereign and not in Wantrup’s own right or as agent for the payer, or anyone else;
[372]Third Defendant’s Reply Submissions, 21 April 2016, [3]; T528.5-10.

(f) in relation to the three payments in issue at no time did the plaintiff or Braham communicate an intention to create a trust in respect of those payments to Wantrup and at no time did Wantrup accept or agree to receiving and holding those payments as trustee for the plaintiff or Braham;

(g) the three payments were not the subject of an express trust, in respect of which Braham was the settlor and Wantrup was trustee;

(h) the three payments provided by Braham were not subject to any effective stipulation from Braham or constraint that those moneys could only be released at Braham’s direction;

(i) the three payments provided by Braham were not subject to any stipulation or constraint that those moneys could only be released upon completion of and entry into an acceptable agreement and security in relation to those investments;

(j) the receipt by Wantrup of the three payments was not the receipt of trust moneys within the meaning, or as a consequence, of ss 3.3.2 or 3.3.14 of the LPA, and those moneys were therefore not moneys received or held by Wantrup as trust money within the meaning of s 3.3.14 of the LPA;

(k) as a result of my findings rejecting the plaintiff’s case in support of an express trust, the plaintiff’s second asserted private cause of action based on Wantrup’s contravention of s 3.3.14 of the LPA, need not be decided;

(l) if contrary to my conclusion it were necessary to decide the existence of the plaintiff’s asserted private cause of action based on breaches of s 3.3.14 of the LPA, and such a cause of action was found to exist (which I have not decided) the three payment would not be trust moneys by reason of the operation of s 3.3.3(3) of the LPA.

Proportionate liability

Given my above findings and conclusions to the effect that the plaintiff has not established the liability that it has sought to attach to Wantrup it is unnecessary for me to decide any questions of apportionment pursuant to Part IVAA of the Wrongs Act 1958 (Vic).

Decision

For the foregoing reasons I shall dismiss the plaintiff’s proceeding and claims for relief.

Orders

I shall order that the plaintiff’s proceeding and claims be dismissed and that there be judgment for Wantrup.

I shall hear Counsel, if necessary, as to the form of final orders, including any orders as to costs.

[2017] VSC 801

22 December 2017