Campos v Lopes
[2021] QSC 42
•10 March 2021
SUPREME COURT OF QUEENSLAND
CITATION:
Campos v Lopes [2021] QSC 42
PARTIES:
MANUEL JOSE CAMPOS IN HIS CAPACITY AS TRUSTEE OF THE I’D RATHER BE SURFING TRUST
(applicant)
v
SERGIO LOPES(respondent)
FILE NO/S:
8135 of 2020
DIVISION:
Trial
PROCEEDING:
Originating Application
ORIGINATING COURT:
Supreme Court at Brisbane
DELIVERED ON:
10 March 2021
DELIVERED AT:
Brisbane
HEARING DATES:
28 October 2020
Applicant’s written closing submissions: 12 November 2020, Agreed chronology: 25 November 2020, Respondent’s written closing submissions: 2 December 2020JUDGE:
Flanagan J
ORDER:
1. Pursuant to s 82(1) of the Trusts Act 1973 (Qld), the Court orders that 85,400 shares in Paradigm Biopharmaceuticals Ltd currently registered in the name of the respondent are vested in the applicant.
2. I will hear the parties as to costs.
CATCHWORDS:
EQUITY – TRUSTS AND TRUSTEES – EXPRESS TRUSTS CONSTITUTED INTER VIVOS – DECLARATION OF TRUST – NECESSITY FOR INTENTION – OTHER MATTERS – where the applicant and respondent were co-directors – where shares were purchased in the name of the company – where shares were also purchased by the respondent in his own name – where the respondent purchased the shares using funds loaned from the company – where the respondent’s subsequent words and actions evidence an intention that the shares were held on trust for the applicant – whether that evidence is admissible as admissions contrary to interest
Trusts Act 1973 (Qld), s 82, s 90
Calverley v Green (1984) 155 CLR 242, applied
Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353, applied
Kauter v Hilton (1953) 90 CLR 86, cited
Korda v Australian Executor Trustees (SA) Limited (2015) 255 CLR 62, cited
Re Tresdar Pty Ltd [2019] NSWSC 179, cited
Trustees of the Property of Cummins v Cummins (2006) 227 CLR 278, consideredCOUNSEL:
M C Long for the applicant
C Templeton for the respondent
SOLICITORS:
HWL Ebsworth Lawyers for the applicant
Law Central Legal for the respondent
Mr Campos, the applicant, and Mr Lopes, the respondent, are both accountants. On 3 May 2013 Odyssey (WA) Pty Ltd (Odyssey) was incorporated. Odyssey carried on a business known as Odyssey Business Knowledge (OBK) which delivered accounting and bookkeeping services as well as tax and wealth planning services.[1]
[1]T 1-6, lines 1-4.
From its incorporation until October 2019 Mr Campos and Mr Lopes were co‑directors of Odyssey and each held 50 per cent of the shares in the company. Mr Campos held his shares in his capacity as trustee for the I’d Rather Be Surfing Trust and Mr Lopes held his shares in his capacity as trustee for the Lopes Family Trust.
When Odyssey was incorporated both Mr Campos and Mr Lopes were resident in Western Australia. In 2014 Mr Campos moved to Queensland. OBK conducted business primarily in Western Australia and Queensland, with Mr Lopes being based in Western Australia and maintaining a predominantly Western Australia client base and Mr Campos being based in Queensland and maintaining a predominantly Queensland client base.
Mr Campos and Mr Lopes in their capacity as trustees of their respective trusts operated loan accounts with Odyssey. Dividends declared by Odyssey in favour of Mr Lopes and Mr Campos as trustees of their respective trusts would be set off against the loan accounts. Mr Campos and Mr Lopes maintained separate profit and loss statements within Odyssey. Odyssey used an accounting program called Xero.
In 2018 Mr Lopes, through his investment club, was informed of a potentially profitable investment opportunity, being the purchase of shares in an ASX-listed company, Paradigm Biopharmaceuticals Ltd (PAR Shares).
In or about June 2018 Mr Lopes informed Mr Campos of this investment opportunity. Mr Campos had previously purchased PAR Shares in his own right as early as April 2018 using a CommSec account in the name of Manuel Campos.[2]
[2]T 1-14, lines 14-23; Exhibit 1.
Between October 2018 and May 2019, Mr Lopes purchased a total of 170,800 PAR Shares as follows:
(a)23,801 shares on 12 October 2018;
(b)16,724 shares on 15 October 2018;
(c)16,000 shares on 4 December 2018;
(d)77,519 shares on 13 December 2018;
(e)20,000 shares on 18 April 2019; and
(f)16,756 shares on 13 May 2019.
Those shares were purchased using the following funds:
(a)12 October 2018 – $50,000 transferred from the Odyssey bank account;
(b)4 December 2018 – $18,900 transferred from Mr Lopes’ personal account;
(c)13 December 2018 – $100,500 transferred from the Odyssey bank account;
(d)16 April 2019 – $31,000 transferred from the Odyssey bank account; and
(e)13 May 2019 – $25,134 transferred from the Odyssey bank account.
On 17 October 2018 Odyssey purchased 22,000 PAR Shares in its own right.
Mr Campos traded PAR Shares in his own name in 2018 as follows:
(a)purchased 3,030 shares on 13 April 2018;
(b)purchased 8,888 shares on 10 May 2018;
(c)sold 3,030 shares on 4 June 2018;
(d)purchased 8,771 shares on 6 June 2018; and
(e)purchased 5,813 shares on 19 July 2018.
On 21 October 2019 Mr Lopes sent an email to Mr Campos stating inter alia:
“I am advising you that I have made the decision that I am going to leave Odyssey Business Knowledge effective immediately.”[3]
[3]Exhibit MJC-20 to the affidavit of Manuel Jose Campos filed 20 August 2020, page 182.
On 20 November 2019, a Form 370 ‘Notification by Officeholder of Resignation or Retirement’ was filed with ASIC in relation to Odyssey. Prior to Mr Lopes’ departure from Odyssey and OBK he and Mr Campos spoke on a daily basis.
On 12 December 2019, after Mr Lopes’ resignation, Mr Campos purchased a further 17,605 PAR Shares in his own name.
The PAR Shares purchased in the names of Mr Campos and Odyssey are not the subject of any relief sought in this proceeding. The applicant, Mr Campos in his capacity as trustee of the I’d Rather Be Surfing Trust, seeks relief in relation to 85,400 PAR Shares, being half of the number of shares purchased by Mr Lopes outlined in paragraph [7] above. The issue, according to Mr Campos, is whether Mr Lopes holds half the PAR Shares purchased by Mr Lopes on trust for Mr Campos. As the PAR Shares were purchased in six separate parcels, Mr Lopes identifies the issue as being whether he holds half of each (or any) of those six parcels on trust for Mr Campos. Mr Campos’ primary case is that the PAR Shares were purchased pursuant to an express trust, half for himself as trustee for the I’d Rather Be Surfing Trust and half for Mr Lopes as trustee for the Lopes Family Trust. Mr Campos submits that the intention to create the express trust can be inferred from the parties’ language and conduct before and when the shares were purchased and from Mr Lopes’ subsequent language and conduct. Mr Lopes’ contrary contention is that the PAR Shares were purchased wholly for the benefit of the Lopes Family Trust.
The relevant legal principles
The parties are largely agreed as to the applicable legal principles.
In Kauter v Hilton,[4] Dixon CJ, Williams and Fullagar JJ identified:
“… the established rule that in order to constitute a trust the intention to do so must be clear and that it must also be clear what property is subject to the trust and reasonably certain who are the beneficiaries.”
[4](1953) 90 CLR 86, 97.
In Korda v Australian Executor Trustees (SA) Limited,[5] French CJ stated:
“The question whether an express trust exists must always be answered by reference to intention. An express trust cannot be created unless the person or persons creating it can be taken to have intended to do so. Absent, as in this case, an explicit declaration of such an intention, the court must determine whether intention is to be imputed. It does so by reference to the language of the documents or oral dealings having regard to the nature of the transactions and the circumstances attending the relationship between the parties.”
[5](2015) 255 CLR 62, [3].
The relevant principles as to whether an express trust exists were stated by the authors of Jacobs’ Law of Trusts in Australia as follows:[6]
“A court cannot hold that an express trust exists unless it is satisfied that there was the intention to create such a trust. The question will be whether there is language or conduct which shows a sufficiently clear intention to create such a trust. No formal or technical words are required; any apt expression of intention will do. The conclusion that the intention existed may be drawn as an inference from the available evidence. In order to infer intention, the court may look to the nature of the transaction and the whole of the circumstances attending the relationship between the parties and known to them, including commercial necessity.”
[6]J D Heydon and M J Leeming, Jacobs’ Law of Trusts in Australia (LexisNexis Butterworths, 8th ed, 2016) [5-02].
The test of intention is objective; the settlor’s subjective intentions are irrelevant.[7] The onus of proving the requisite intention rests on Mr Campos as the party alleging the existence of the trust.[8]
[7]Byrnes v Kendle (2011) 243 CLR 253, 274 [55]-[56], 275 [59], 277 [65] (Gummow and Hayne JJ); Applicant’s Closing Submissions, paragraph 23.
[8]Hyhonie Holdings Pty Ltd v Leroy [2004] NSWCA 72 at [45] (Hodgson JA).
In Calverley v Green,[9] Mason and Brennan JJ observed:
“The evidentiary material from which the court might have drawn an inference as to the intention of the parties included their acts and declarations before or at the time of the purchase, or so immediately after it as to constitute a part of the transaction. Evidence of those acts and declarations were admissible either for or against the party who did the act or made the declaration, but any subsequent declarations would have been admissible only as admissions against interest: Shephard v Cartwright; Charles Marshall Pty Ltd v Grimsley.”
[9](1984) 155 CLR 242, 262.
In Charles Marshall Pty Ltd v Grimsley,[10] Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ stated:
“Apart from admissions the only evidence that is relevant and admissible comprises the acts and declarations of the parties before or at the time of the purchase (in this case before or at the time of the acquisition of the shares by allotment) or so immediately thereafter as to constitute a part of the transaction.”
[10](1956) 95 CLR 353, 365.
This passage was considered by the High Court in Trustees of the Property of Cummins v Cummins (Cummins):[11]
“However, as Malayan Credit Ltd v Jack Chia-MPH Ltd [1986] AC 549 at 559-560 illustrates, whilst evidence of subsequent statements of intention, not being admissions against interest, are inadmissible, evidence of facts as to subsequent dealings and of surrounding circumstances of the transaction may be received.”
[11](2006) 227 CLR 278, [65] (the Court).
This passage from Cummins was considered and explained by Rees J in Re Tresdar Pty Ltd:[12]
“[7] … The Court considered that if evidence was limited to the date at which the asset was purchased, it ‘would produce a distorted and artificial result, at odds with practical and commercial realities’…
[8]Statements to like effect can be found in Hyhonie Holdings Pty Ltd v Leroy [2004] NSWCA 72 at [46] (Hodgson JA, Mason P and Handley JA agreeing); Buffrey v Buffrey [2006] NSWSC 1349 per Palmer J at [14]; Owens v Lofthouse [2007] FCA 1968 at [51] (Weinberg J); Strang v Strang [2009] NSWSC 760 at [68] (Nicholas J); Stillisano v Adami [2010] SASC 351 at [70] (White J); and McEvoy v McEvoy [2012] NSWSC 1494 per Pembroke J at [3].
[9]As such, the Court may have regard to events which occurred after the alleged creation of a trust as either confirming or denying the existence of the trust. …”
[12][2019] NSWSC 179, [7]-[9].
Here, it is uncontested that:
(a)the property that is alleged to be subject to the trust is half the PAR Shares purchased by Mr Lopes; and
(b)the beneficiary of the trust would be Mr Campos as trustee for the I’d Rather Be Surfing Trust.
The issue to be determined is whether there was an intention to create an express trust. As is evident from a consideration of the chronology of events below, there are statements made by Mr Lopes which are, in my view, inconsistent with the PAR Shares being purchased wholly for the benefit of the Lopes Family Trust. These statements constitute admissions against interest and are admissible on the more limited basis identified in Calverley v Green and Charles Marshall Pty Ltd v Grimsley.
Chronology of events
After the hearing of the matter the parties produced an agreed chronology. The evidence-in-chief was by way of affidavit with both Mr Campos and Mr Lopes being cross‑examined. I consider the chronology of events by references to the parties’ evidence and submissions. This consideration supports a finding that the parties intended that 85,400 PAR Shares, being half of the 170,800 PAR Shares purchased by Mr Lopes, were to be held on trust for Mr Campos as trustee for the I’d Rather Be Surfing Trust.
As noted at [6] above, in or about June 2018 Mr Lopes discussed with Mr Campos the possibility of buying PAR Shares. Prior to 12 October 2018 Mr Lopes had established a CommSec account, “Lopes family A/C” (Lopes Family CommSec Account), for share trading for his family trust. He also caused a separate CommSec account to be established for Odyssey. Mr Lopes informed Mr Campos of this fact by text message on 12 October 2018. The message included a screenshot of the Odyssey CommSec account and stated:
“All set up ready to go!.......OBK will be on your personal Commsec log in just as another account.” [13]
[13]Agreed Chronology, Item 7.
That same day Mr Lopes purchased 23,801 PAR Shares. A further 16,724 PAR Shares were purchased by Mr Lopes on 15 October 2018. These two parcels of PAR Shares were purchased through the Lopes Family CommSec Account using $50,000 worth of funds that had been transferred from the Odyssey bank account to the Commonwealth Direct Investment Account (CDIA) held in the name of the Lopes Family Trust.[14] The withdrawal of $50,000 from the Odyssey bank account automatically generated a “spend money” entry in the Xero software and was assigned to Mr Lopes’ Odyssey loan account with the description “Sergio Lopes – PAR”. Using the Xero software, Mr Lopes then created manual entries in the loan account, referred to as “assignments”, to differentiate between the two separate purchases. The assignments were made by Mr Lopes with the description “PAR purchases – PAR purchases 23,801” for the 12 October purchase and the description “PAR purchase – PAR purchase 16,724” for the 15 October purchase.
[14]Affidavit of Sergio Paul Lopes filed 2 October 2020, CD9, paragraphs 36 and 37.
On 17 October 2018 Odyssey purchased 22,000 PAR Shares. Mr Lopes submits that the establishment of an account in Odyssey’s name and its use in purchasing PAR Shares on 17 October 2018 “tends strongly against the proposition that shares meant to be held jointly would be purchased in one individual’s name”.[15] Mr Campos accepted that the PAR Shares purchased by Odyssey would be held in equal shares commensurate with each party’s shareholding. Mr Campos explained that the intention was for Odyssey to hold shares “from an asset protection point of view”.[16] Mr Campos consistently denied that there was an arrangement whereby any PAR Shares which were to be held by both him and Mr Lopes would only be purchased through the Odyssey CommSec account.[17] I accept Mr Campos’ denials. Mr Campos was a credible witness. In cross‑examination his answers were succinct and responsive, irrespective of whether the proposition put was favourable or unfavourable to his case. For example, Mr Campos readily conceded that he had no particular recollection of the time, dates or details of his conversations with Mr Lopes concerning the purchase of PAR Shares. Mr Campos further conceded that he could not give specific evidence about a particular phone call in which it was agreed that half the shares would be held in trust.[18] He also conceded that there were no text messages in evidence that proved any agreement in advance of the purchase of PAR Shares on 12 and 15 October 2018.[19]
[15]Respondent’s Closing Submissions, paragraph 24.
[16]T 1-17, lines 23-25.
[17]T 1-17, lines 20-34; T 1-18, lines 17-20 and T 1-32, lines 10-13.
[18]T 1-20, lines 38-45.
[19]T 1-22, lines 6-14.
According to Mr Campos, in or around the period July to October 2018, he and Mr Lopes discussed, over the course of several telephone conversations, an arrangement whereby Mr Lopes would purchase parcels of PAR Shares and set off the purchase price against funds which had been drawn by Mr Lopes from the Odyssey account and hold half those shares on trust for Mr Campos.[20] The fact that Mr Campos cannot recall specific telephone conversations is unsurprising. He and Mr Lopes would generally speak over the phone daily regarding business and personal matters and their discussions of any arrangement in relation to the purchase of PAR Shares was, according to Mr Campos, “just one of many topics [they] discussed during that period”.[21] Mr Campos’ evidence was that he and Mr Lopes were speaking on the phone “probably 10 times a day”.[22]
[20]Affidavit of Manuel Jose Campos filed 20 August 2020, CD3, paragraph 6.
[21]Affidavit of Manuel Jose Campos filed 20 August 2020, CD3, paragraph 7.
[22]T 1-22, line 1.
According to Mr Campos:
“After the purchase of the initial parcel of Trust Shares on 12 October 2018, [Mr Lopes] and I periodically discussed, via telephone conversations and text messages, the purchase of additional Trust Shares. On each occasion that a further parcel of Trust Shares was purchased, the purchase was agreed to in advance between [Mr Lopes] and I via phone conversations and text messages. I cannot recall the dates and details of the phone conversations because [Mr Lopes] and I spoke to each other so frequently on the phone and in relation to numerous issues.” [23]
[23]Affidavit of Manuel Jose Campos filed 20 August 2020, CD3, paragraph 10.
Mr Campos refers to 11 text messages, discussed below, to support his contention that half the shares are held on trust. Mr Lopes’ evidence was that all of the PAR Shares were purchased by him in his capacity as trustee of the Lopes Family Trust and he rejects the assertion made by Mr Campos that the PAR Shares were purchased in accordance with any trust arrangement.[24]
[24]Affidavit of Sergio Paul Lopes filed 2 October 2020, CD9, paragraphs 34, 65 and 67.
Mr Lopes submits that Mr Campos’ evidence that half the PAR Shares were purchased on trust for him is unreliable:
“(a)Firstly, the evidence is unspecific and vague in that no particular conversations have been recalled, and nor is there any evidence of what was actually said, or even the effect of what was said; the applicant specifically says that he cannot recall details of the conversations;
(b)Secondly, the applicant did not specify which of the six parcels was agreed to by phone, and which was agreed to by text message;
(c)Thirdly, the applicant’s evidence that the purchase of the shares on 4 December 2018 was agreed to in advance (either by phone or text) was demonstrably wrong by reference to the incontrovertible evidence, a matter which the applicant conceded.”[25]
[25]Respondent’s Closing Submissions, paragraph 16.
If the analysis was limited to the parties’ language and conduct before and at the times the PAR Shares were purchased, there would be force in Mr Lopes’ submission. The Odyssey bank account withdrawals used to purchase the PAR Shares were recorded in Mr Lopes’ Odyssey loan account. The PAR Shares were purchased utilising both the Lopes Family Trust’s CDIA and the Lopes Family CommSec Account. Further, Mr Campos was unable to give evidence of any specific conversation where it was expressly stated that half of the PAR Shares purchased would be held on trust for him. The relevant analysis is not, however, limited to the parties’ language and conduct before and at the times the shares were purchased. The Court is required to consider Mr Lopes’ subsequent language and conduct as constituting admissions against interest. This language and conduct is not confined to text messages but includes how Mr Lopes subsequently recorded the purchase of the PAR Shares in Odyssey’s books and records. The relevant entries are consistent with half the PAR Shares being purchased for Mr Campos’ family trust. Mr Lopes does not dispute that he made the relevant entries.
Mr Lopes submits that, in circumstances where both he and Mr Campos were accountants, the fact that Mr Campos has advanced no commercial justification for any trust arrangement, for example to reduce tax liabilities or for asset protection, tells against the existence of a trust.[26] I do not accept this submission. While a commercial purpose may be relevant to the existence of an intention to create a trust, the absence of such a purpose is not determinative. The absence of a commercial purpose in the context of the present case says nothing about the intention of the parties.[27]
[26]Respondent’s Closing Submissions, paragraphs 69-72.
[27]Korda v Australian Executor Trustees (SA) Limited (2015) 255 CLR 62, [53] (French CJ).
On 4 December 2018 Mr Lopes purchased 16,000 PAR Shares through the Lopes Family CommSec Account using money from Mr Lopes’ personal bank account. This was the only purchase of PAR Shares where the funds did not originate from Odyssey’s bank account.
On the same day the following text message exchange occurred:
“Mr Campos: ‘It’s at 1.17 now you loser’
Mr Lopes:[Screenshot of CommSec brokerage receipt for 4 December 2018 PAR purchase]
Mr Lopes:‘I know loser’
Mr Campos:‘Sis you buy that for yourself or for us?’
‘Did’
Mr Lopes:‘Me’
‘You didn’t want to’
Mr Campos:‘You’re weird. Let me know next time’
Mr Lopes:‘I told you I wanted to buy more .. u dismissed it …. so I bought it myself’
‘Been telling you I wanted more for the last 2 weeks’
Mr Campos:‘I told you I was ok with it, we were supposedly waiting for the price to drop because of some bullshit investors getting cheap shares.’
Mr Lopes:‘Just got told by Scott the people behind benA (they produce the drug and have the agreement with par) have all bought in personally into par … … so now the last concern for Scott has been cleared as those benA people won’t stuff par around now because they also own part of the company …
‘And Scott is 2nd biggest shareholder in the company when you include the fund’
‘We can do a deed of trust for this batch too and then do OMT to move it formally into OBK account’” [28]
[28]Agreed Chronology, Item 14. The letters ‘OMT’ stand for ‘off market transfer’: T 1-31, lines 38-39.
Mr Campos accepted that he had not agreed in advance with Mr Lopes as to the purchase of PAR Shares on 4 December 2018.[29] This concession is inconsistent with Mr Campos’ statement in paragraph 10 of his affidavit.[30] Mr Campos did, however, recall in evidence that there was one parcel of PAR Shares which he and Mr Lopes “agreed after the event to add it to the lot of shares that we purchased together”.[31] This evidence is consistent with the part of the text message exchange on 4 December 2018 where Mr Lopes states “[w]e can do a deed of trust for this batch too and then do OMT to move it formally into OBK account”. The text message exchange on 4 December 2018 is, in my view, consistent with Mr Lopes discussing with Mr Campos the joint purchase of PAR Shares. The words of Mr Lopes, “[w]e can do a deed of trust for this batch too”, suggest that the parties had agreed that the shares purchased on 12 and 15 October 2018 would be held pursuant to a trust arrangement. There was no need to discuss any trust arrangement in relation to the shares purchased by Odyssey in its own right on 17 October 2018 as both Mr Lopes and Mr Campos were equal shareholders in the company.
[29]T 1-30, lines 41-42.
[30]See [31] above.
[31]T 1-22, lines 31-32.
That Mr Campos asked Mr Lopes whether Mr Lopes purchased the shares for himself or for both of them is consistent with them having discussed a potential purchase of further PAR Shares in December 2018. Mr Campos’ reaction to Mr Lopes stating that he had purchased the shares for himself, namely, “You’re weird. Let me know next time”, suggests that there was a previous conversation between them whereby Mr Campos was imbued with an expectation that the PAR Shares purchased on 4 December 2018 would be purchased jointly. Mr Campos’ expectation is reinforced by Mr Lopes’ suggestion in the same exchange that they could do a deed of trust for the shares purchased on 4 December 2018.
Mr Lopes denies that any of the PAR Shares were purchased through a trust arrangement.[32] He states:
“At no point did I inform Mr Campos that the [PAR Shares] were purchased for Odyssey or for the two of us jointly.” [33]
[32]Affidavit of Sergio Paul Lopes filed 2 October 2020, CD9, paragraph 65.
[33]Affidavit of Sergio Paul Lopes filed 2 October 2020, CD9, paragraph 67.
He refers to part of the text message exchange on 4 December 2018 at paragraph 87 of his affidavit:
“I had a number of communications with Mr Campos in which I told him that I had purchased shares in Paradigm in my personal capacity rather than for Mr Campos and I on a joint basis. By way of example, I refer to the text message exchange of 4 December 2018 on page 177 of the exhibits to the Campos Affidavit whereby Mr Campos and myself engaged in the following exchange:
Mr Campos: ‘Sis you buy that for yourself or for us?’
Mr Campos: ‘Did’
Myself: ‘Me’
Myself: ‘You didn’t want to’
Mr Campos: ‘You’re weird. Let me know next time’.”
This was not, of course, the whole of the exchange. Even though Mr Campos cannot recall the dates, times and specifics of telephone conversations, the text message exchange on 4 December 2018 is consistent with the parties discussing the joint purchase of PAR Shares.
Neither in his affidavit nor in his oral evidence was Mr Lopes able to explain what he meant by the words “We can do a deed of trust for this batch too …”:
“And when you say: We can do a deed of trust for this batch too – what you meant was an acceptance that Mr Campos wanted half of those shares and that you would do a deed of trust for that batch
too?--- That’s not what I meant, no.
… Before the 4th of December 2018 you and Mr Campos had discussed doing deeds of trust for the shares that you had bought on the 12th and 15th of October 2018?--- No.
And you had discussed – those deeds of trust that had been discussed is what you refer to when you say: We can do a deed of trust for this batch too?--- No. No.
…
Because you had discussed doing a deed of trust for the previous batches?--- No.”[34]
[34]T 1-65, lines 9-32.
I do not accept Mr Lopes’ denials. He was not, in my view, a witness of credit. Even though no deeds of trust were entered into for the parcels of shares purchased on 12 and 15 October 2018 and 4 December 2018, the mention of entering into a deed of trust is consistent with Mr Campos’ evidence that Mr Lopes would hold half of the shares purchased on trust for him. If it was Mr Lopes’ intention to hold the PAR Shares as trustee for the Lopes Family Trust alone, it would not have been necessary to discuss a deed of trust at all.[35]
[35]Applicant’s Closing Submissions, paragraph 55.
I do not accept Mr Lopes’ submission that an objective reading of the text message exchange of 4 December 2018 supports a finding that Mr Lopes purchased the shares in his own right. Mr Lopes’ statement, “… so I bought it myself”, must be considered in context.
On 6 December 2018 Mr Lopes sent a text message to Mr Campos:
“John paid his loan back?? Buy more PAR? … Serious …”[36]
[36]Agreed Chronology, Item 15.
Five days later, on 11 December 2018, Mr Lopes texted Mr Campos:
“Bought $70k worth of PAR … I don’t have at least $35k in OBK then?”[37]
[37]Agreed Chronology, Item 16.
On the same day a further text message exchange occurred:
“Mr Campos: ‘Are you using my cash to buy? Or you have yours?’
Mr Lopes: ‘Our cash’
‘I haven’t taken anything from the company’
‘All left there’
Mr Campos: ‘Our cash is 50/50 ours or might be more mine?’
Mr Lopes: ‘Huh? Company invests = 50/50’.
‘I am happy to invest mine in my trust but need to work out profit/PL’”[38]
[38]Agreed Chronology, Item 17.
There was, in fact, no purchase of $70,000 of PAR Shares on 11 December 2018. What is significant about these exchanges, however, is that Mr Lopes continued to communicate with Mr Campos about the purchase of further PAR Shares. The words used by Mr Lopes in the exchange of 11 December 2018, “I don’t have at least $35k in OBK then?”, is a reference to half the amount that was required to purchase $70,000 worth of PAR Shares. With one exception, the sources of funds for the purchase by Mr Lopes of PAR Shares was Odyssey’s bank account. For each purchase, Mr Lopes would make an estimate of his entitlement to profits from Odyssey.[39]
[39]Affidavit of Sergio Paul Lopes filed 2 October 2020, CD9, paragraph 43.
As at 11 December 2018 Mr Lopes appears to be questioning whether he had an entitlement to $35,000 of profits in Odyssey in order to purchase $70,000 worth of PAR Shares. This exchange, when read together with the text messages of 11 December 2018, is consistent with a joint purchase. Mr Lopes expressly accepted that the proposed purchase of $70,000 worth of PAR Shares was a joint purchase between himself and Mr Campos as at 11 December 2018.[40] Mr Lopes, however, submits that his statement, “Huh? Company invests = 50/50”, in the text message exchange of 11 December 2018 is equally consistent with the general proposition that any “joint” investments were to be done through the company, Odyssey.[41] If Odyssey was the intended vehicle for the proposed purchase of shares on 11 December 2018, the question arises why Mr Lopes would have asked Mr Campos about whether he had $35,000 available in Odyssey in connection with the purchase of $70,000 worth of PAR Shares. According to paragraph 43 of Mr Lopes’ affidavit, the necessity for estimating his entitlement to profits from Odyssey arose when he was purchasing shares through the Lopes Family CommSec Account.
[40]T 1-70, lines 16-18.
[41]Respondent’s Closing Submissions, paragraph 34.
While the purchase of $70,000 worth of PAR Shares did not proceed on 11 December 2018, Mr Lopes purchased 77,519 PAR Shares on 13 December 2018. The cost of these shares was $100,119.51.[42] This corresponds with the $100,500 which was transferred from the Odyssey bank account to the Lopes Family Trust CDIA account. A debit entry for the latter amount was made in Mr Lopes’ loan account with Odyssey.[43]
[42]Exhibit MJC-20 to the affidavit of Manuel Jose Campos filed 20 August 2020, page 10.
[43]Affidavit of Sergio Paul Lopes filed 2 October 2020, CD9, paragraph 49.
On the same day as the shares were purchased Mr Lopes sent two text messages to Mr Campos. The first text message stated, “Change it to 1.31?”[44] The second text message stated, “We are in … glass half full … when it’s $3 you won’t care about 3c.”[45] These text messages support a finding that the parties, having discussed a joint purchase on 11 December 2018, were still communicating about a purchase of PAR Shares on 13 December 2018. While Mr Lopes accepts that the purchase of $70,000 worth of PAR Shares on 11 December 2018 was to be a joint purchase, he asserts that, only two days later, the purchase of approximately $100,000 worth of PAR Shares on 13 December 2018 was solely for himself as trustee of his family trust. Mr Lopes gave the following explanation in evidence:
“His Honour: … So two days later, when 100,000 worth of PAR shares is purchased, it’s purchased, you say, on your case solely by you with no recourse to Mr Campos; is that correct?---Correct.
His Honour: So in those circumstances I will ask you again, why would you be informing Mr Campos, who wanted to do a joint deal of $70,000 as at 11 December 2018, that you were doing a solo deal as of 13 December 2018?---For two – for two reasons, your Honour. The 70,000 one was put on the screen, obviously didn’t get hit, because I’m assuming the price of the market went up on that day. That’s why the order didn’t get hit. We – obviously, the order gets cancelled, so we go, ‘Well, I still want to buy it; do you still want to buy it? Yeah. I’m going to load up.’ Mr Campos was a little bit more hesitant with the amount, and I said, ‘Well, I’m going to swing hard at it, which is $100,000 of my own – of my own balance, and he’s saying, ‘I’ll – I’ll – I’ll work out what I’m going to buy,’ and that’s why we were trying to confer, ‘Well, I’m buying it at $1.31; what are you buying it at?’ And I did not know he did not proceed with it. That doesn’t surprise me because that’s – there – there was all this hesitancy in committing to a [indistinct] purchase. So I bought mine, happy to pay $1.31 or the end up – number ending up being.”[46]
[44]Agreed Chronology, Item 18.
[45]Agreed Chronology, Item 19.
[46]T 1-70, lines 27-44.
I do not accept Mr Lopes’ explanation. There is no evidence that Mr Campos purchased any PAR Shares on or about 13 December 2018. If Mr Lopes was purchasing shares in his own right he would not be asking Mr Campos on the same day about whether to “[c]hange it to $1.31?”[47] He also would not have stated, “We are in … glass half full … when it’s $3 you won’t care about 3c”, as he did in the second text message of 13 December 2018.[48] These communications are consistent with a joint purchase.
[47]Agreed Chronology, Item 18.
[48]Agreed Chronology, Item 19.
There is a further difficulty with Mr Lopes’ evidence that he purchased the PAR Shares on 13 December 2018 in his own right. In his text message to Mr Campos on 11 December 2018[49] Mr Lopes was querying whether he had $35,000 in Odyssey for the purposes of purchasing his half of $70,000 worth of PAR Shares. Only two days later Mr Lopes, on his case, was utilising $100,500 from Odyssey’s bank account for the purchase on 13 December 2018. He offered the following explanation in evidence:
“His Honour: And one final thing: for the purchase on the 13th of December 2018 of – for a price of around $100,000, that required you to draw on your loan account, and in drawing on your loan account with the company Odyssey for that purpose, were you aware at the time that you did not have sufficient – I think you used the term ‘immediate profits’ available for the purposes of making such a large purchase of PAR shares?---On the day, I had known – I knew what my balance was at the end of the financial year that year, so June 2018. We had already sort of [indistinct] on our books, but I knew what was undrawn – undrawn then. I had an idea of what – what profit was from July until December ’18, and, when I purchased it, it was there thereabouts in terms of when you add up my opening balance plus my profit. And then I knew I still have six months of un‑invoiced work that was – I was going to have enough by the end of it.”[50]
[49]Agreed Chronology, Item 16.
[50]T 1-70, line 46 to T 1-71, line 10.
I do not accept this explanation. On 11 December 2018, Mr Lopes was in exactly the same position to determine the amount of profit available to him in Odyssey as he was on 13 December 2018. If his estimate as at 13 December was that he had over $100,000 profit in Odyssey, he would not, as at 11 December, be questioning whether he had “at least $35k”.[51]
[51]Agreed Chronology, Item 16.
On 8 March 2019 Mr Lopes sent a text message to Mr Campos:
“PAR is all green for us again now”.[52]
[52]Agreed Chronology, Item 21.
In another text message sent on 12 March 2019 Mr Lopes said to Mr Campos, “Down $13k today and still up $51k overall”.[53] This text message contains a screenshot of the Odyssey CommSec account showing the 22,000 shares purchased by Odyssey on 17 October 2018 as well as the first four parcels of shares purchased by Mr Lopes on 12 and 15 October 2018 and 4 and 13 December 2018. The rise in value of PAR Shares of approximately $51,000 is calculated by reference to the shares held by Odyssey and the four parcels of shares purchased by Mr Lopes. Mr Lopes admitted that he either “possibly” or “probably” manually entered the four parcels of PAR Shares purchased by him into the Odyssey CommSec account.[54] When informing Mr Campos on 12 March 2019 that the PAR Shares were up $51,000 overall, Mr Lopes did not distinguish between the 22,000 shares held by Odyssey and the four parcels of shares held by him. If these four parcels were held solely by Mr Lopes, he would not be informing Mr Campos, “Down $13k today and still up $51k overall”.
[53]Agreed Chronology, Item 22; Exhibit 3.
[54]T 1-58, line 21.
On 27 March 2019 Mr Lopes sent two text messages to Mr Campos which read:
“Up $27k just today campos” and “$58k in one day campos!!!!!!”[55]
[55]Agreed Chronology, Items 23 and 24.
In a similar vein, on 1 April 2019 Mr Lopes sent a text message to Mr Campos saying, “Another lazy $36k today campos”,[56] and then on 2 April 2019 another text message saying, “We have officially doubled our money in PAR”.[57] Mr Lopes accepted that, when he was informing Mr Campos of how much the shares were earning, he was referring to all the shares shown in the screenshot and not only to the 22,000 shares purchased by Odyssey on 17 October 2018. Mr Lopes offered an explanation as to why he did not differentiate between the PAR Shares purchased by Odyssey and the PAR Shares purchased by him:
“You don’t differentiate between the OBK shares which you and Mr Campos shared and your shares that you say you were solely entitled to?--- No. It was a common discussion with Mr Campos how – and he was up as well. He was telling me, ‘I’m up [indistinct] as well.’ Yep. Collective use. I – I would just screenshot or snap my view, and I wasn’t going to split through and split hairs on – on it. You know? But I’m just going, ‘It’s up.’”[58]
[56]Agreed Chronology, Item 25.
[57]Agreed Chronology, Item 26.
[58]T 1-72, lines 37-42.
Mr Lopes’ explanation strains the plain meaning of the text messages sent on 12 March, 27 March, 1 April and 2 April 2019.
On 18 April 2019 Mr Lopes purchased a further 20,000 PAR Shares and a further 16,756 PAR Shares on 13 May 2019.[59] These purchases were the subject of text message exchanges between Mr Lopes and Mr Campos on 15 and 16 April 2019. Text messages from Mr Lopes to Mr Campos on 15 April 2019 state:
“‘We can get more PAR at $1.50 thru Scott as a placement … want more?’
‘Scott is saying we can sell our current shares on the market knowing we can get the same back at $1.50’
‘It’s what he is doing with his holdings’
‘Call me… he needs to know a number’.”[60]
[59]Agreed Chronology, Items 29 and 30.
[60]Agreed Chronology, Item 27.
The text message exchange of 16 April 2019 states:
“Mr Lopes: ‘we are getting 20,000 = $30k’
‘I’ll move the $30k into my CDIA account where the purchase settles to now…’
Mr Campos: ‘Cdia?’
Mr Lopes:‘the commsec account that is set up for settling trade… but my trust one as the 20,000 I am adding via trust’
‘OBK has a CDIA account too but that’s just for if/when we buy/sell shares for OBK’
Mr Campos:‘Cool, an transfer the money for he rights issue as well’
Mr Lopes:‘i’ll work that out because OBK will have 2750 shares and the rest of the rights will be via my FT account’.”[61]
[61]Agreed Chronology, Item 28.
Mr Lopes submits that an objective analysis of these text messages does not reveal any intention to purchase these shares on trust. In support of this submission Mr Lopes emphasises the following words in the message of 16 April 2019:
·“the commsec account that is set up for settling trade … but my trust one as the 20,000 I am adding via trust”; and
·“OBK has a CDIA account too but that’s just for if/when we buy/sell shares for OBK”.
Mr Lopes submits that these words evidence an intention to make those purchases individually.[62] The difficulty with this submission is that, in his text messages on 15 and 16 April 2019, Mr Lopes consistently uses the first-person plural personal pronoun, ‘we’. If Mr Lopes was purchasing the shares in his own right, he would not be informing Mr Campos that they could obtain more PAR Shares at $1.50. Similarly, he would not be informing Mr Campos that the purchase price of $30,000 would be moved into Mr Lopes’ CDIA account. In relation to the rights issue, he would not inform Mr Campos that Odyssey would have 2,750 shares from the rights issue “and the rest of the rights will be via my FT account”. Acceptance of this submission requires a strained construction of the ordinary words of the text messages of 15 and 16 April 2019. The language of the text messages is consistent with a joint purchase. Mr Lopes accepted that Mr Campos, in the text message exchange, had responded to him in relation to the purchase of an additional 20,000 PAR Shares and the rights issue.[63] Mr Lopes also agreed that Odyssey and his family trust took up the full quota of the rights issues.[64] The purchase of 16,756 PAR Shares on 13 May 2019 was through the rights issue.[65]
[62]Respondent’s Closing Submissions, paragraphs 43 and 44.
[63]T 1-76, lines 43-45.
[64]T 1-77, line 7.
[65]Affidavit of Sergio Paul Lopes filed 2 October 2020, CD9, paragraphs 41 and 86.
Throughout his exchanges Mr Lopes consistently used the word ‘we’.[66] Mr Lopes’ explanation for using the word ‘we’ was that it referred to the fact that PAR Shares had been purchased in Odyssey’s own right and that either he or Mr Campos would be personally purchasing PAR Shares.[67] According to Mr Lopes, shares would only be purchased jointly if three conditions, referred to in his affidavit as “Joint Basis Conditions”, were satisfied:
“(a)Mr Campos and I had expressly agreed to the number of shares in Paradigm to be purchased;
(b)Mr Campos and I had expressly agreed to the price to be paid for the shares in Paradigm; and
(c)the shares in Paradigm were purchased in Odyssey’s own CommSec account …”[68]
[66]Agreed Chronology, Items 11, 12, 14, 19, 26, 27 and 28.
[67]Affidavit of Sergio Paul Lopes filed 2 October 2020, CD9, paragraph 97.
[68]Affidavit of Sergio Paul Lopes filed 2 October 2020, CD9, paragraph 80.
I do not accept this evidence. Mr Lopes’ explanation for the use of the word ‘we’ in communications between him and Mr Campos is inconsistent with an ordinary and natural reading of the words of the text message exchanges. Mr Lopes’ evidence was that he used the word ‘we’ not because the shares were to be owned jointly, but because Odyssey and Mr Campos also owned PAR Shares.[69]
[69]Affidavit of Sergio Paul Lopes filed 2 October 2020, CD9, paragraph 97.
Mr Lopes sought to explain this in cross-examination:
“In concluding at paragraph 97, you say ‘we’ because Odyssey and Mr Campos also own shares in PAR ---?--- Yeah.
---that is, Odyssey had invested about $17,000?--- Yeah.
Mr Campos had invested about $14,000?--- Yeah.
And your trust, you say, in the end had invested about $200,000?--- Yes.”[70]
[70]T 1-77, lines 39-46.
This explanation is not credible. If, as Mr Lopes asserts, $200,000 worth of PAR Shares were being purchased in his own right, the use of the word ‘we’ in communications cannot be explained away by the mere fact that Odyssey purchased one parcel of shares as early as 17 October 2018 and Mr Campos had purchased shares in his own right from 13 April 2018 to 19 July 2018.
On 2 June 2019 Mr Lopes recorded “the specific purchase of the Paradigm Shares in the Xero account for Odyssey by manual journal entries” by re-coding each transaction from the loan account “880-Loan-S Lopes” to the asset account “6091‑Shares-at cost (trust)” and uploading brokerage receipts with file names as follows:
“12 October 2018: 20181012_BUY 23,801 PAR for MC & SL Trust.pdf
15 October 2018: 20181015_BUY 16,724 PAR for MC & SL Trust.pdf
4 December 2018: 20181204_BUY 16,000 PAR for MC & SL Trust.pdf
13 December 2018: 20181213_BUY 77,519 PAR for MC & SL Trust.pdf.”[71]
[71]Agreed Chronology, Item 31; Exhibit MJC-20 to the affidavit of Manuel Jose Campos filed 20 August 2020, pages 2, 5, 7, 9.
These book entries, on their face, record that the first four parcels of shares were purchased for the family trusts of Mr Campos and Mr Lopes. Mr Lopes’ evidence was that he did not recall how or why the file name for the brokerage receipts was edited to include the words “PAR for MC & SL Trust”.[72] Even though he had no recollection, Mr Lopes provided the following possible explanation:
“… but it may have been because Mr Campos and I discussed allocating some of my Paradigm shares to him to reduce my taxation liabilities which I was calculating on 2 June 2019. However I made it very clear that it would require further discussion and documentation and at no point was it something that was confirmed or committed to.”[73]
[72]Affidavit of Sergio Paul Lopes filed 2 October 2020, CD9, paragraph 59.
[73]Affidavit of Sergio Paul Lopes filed 2 October 2020, CD9, paragraph 59.
It is somewhat surprising that, in circumstances where Mr Lopes has no recollection as to how these entries came about, he is nonetheless able to offer a possible explanation concerning his tax liabilities coupled with an actual recollection that he “made it very clear” to Mr Campos that further discussion and documentation would be required. This evidence is not credible. Each of the relevant journal entries and the relevant receipts with the file names including the words “PAR for MC & SL Trust” are stated to have been uploaded by Mr Lopes.[74] Mr Lopes accepted this in cross-examination.[75]
[74]Exhibit MJC-20 to the affidavit of Manuel Jose Campos filed 20 August 2020, pages 2-10.
[75]T 1-79, lines 4-27.
I accept the following submission of Mr Campos:
“Therefore, on 2 June 2019, at the time Mr Lopes ‘recorded the specific purchase of the Paradigm Shares in the Xero account for Odyssey by manual journal entries’, by re-coding each transaction from the loan account ‘880-Loan-S Lopes’ to the asset account ‘6091‑Shares-at cost (trust)’, he also uploaded copies of the brokerage receipts for those 2 transactions with the file names ‘20181012 _BUY 23,801 PAR for MC & SL Trust’ and ‘20181015_BUY 16,724 PAR for MC & SL Trust’. Such evidence unequivocally supports the existence of the trust arrangement as asserted by Mr Campos. Mr Lopes’ speculative evidence as to the possible explanation as to ‘how or why the file name for the brokerage receipts were edited to include the works [sic] ‘PAR for MC & SL Trust’ at paragraph 59 is irrelevant, and of no weight in any event.”[76]
[76]Applicant’s Closing Submissions, paragraph 64.
In 2019 the relationship between Mr Lopes and Mr Campos began to deteriorate.[77] Prior to Mr Lopes deciding to leave OBK on 21 October 2019, some heated text messages were exchanged between the parties.[78] After his decision to leave, Mr Lopes sent a number of emails to Mr Campos to finalise the relevant accounts.[79] On 30 October 2019 Mr Lopes sent the following email to Mr Campos:
[77]Affidavit of Sergio Paul Lopes filed 2 October 2020, CD9, paragraph 100; T 1-44 lines 18-20.
[78]Agreed Chronology, Items 32 and 33.
[79]Agreed Chronology, Items 35 and 36.
“Have you had a chance to review?
Also are the following items being recorded/treated in the accounts? There will obviously need to be documentation to OMT, loan etc. and however you choose to record it in OBK for yourself will be consistent with how I reflect it also.
Shares-at cost
Opening Balance
19 Oct 2018 Spend Money Commsec 17,299.95 30 Apr 2019 Spend Money Commsec 4,125.00 Total Shares - at cost 21,424.95
Closing Balance 21,424.95
Shares - at cost (trust)
Opening Balance
12 Oct 2018 Manual Journal PAR purchases - PAR purchases 23,801 #4432 18,665.72 15 Oct 2018 Manual Journal PAR purchase - PAR purchase 16,724 #4433 13,409.15 4 Dec 2018 Manual Journal PAR purchase - PAR purchase 16,000 #4434 18,909.32 13 Dec 2018 Manual Journal PAR purchase - PAR purchase 77,519 #4435 100,119.51 26 Apr 2019 Manual Journal PAR purchases - PAR purchases 20,000
Placement
#4436 30,000.00 13 May 2019 Manual Journal PAR Purchase - PAR Purchase 16,756 Rights #4437 25,134.00 Total Shares – at cost
(trust)
206,237.70
Closing Balance 206,237.70
Total 227,662.65
Once all the below/above is confirmed, I can finalise the matter.” [80]
[80]Agreed Chronology, Item 36.
On 20 November 2019 Mr Campos sent the following email to Mr Lopes:
“The PAR shares that are not purchase in the company name need to be accounted as debit loans for both of us in your excel calculations. Please update this so we can finalise the matter.” [81]
[81]Agreed Chronology, Item 37.
On 21 November 2019 Mr Lopes made the journal entry #5483 recording “Drawings for shares” from account “5091-Shares-at cost (trust)” and “Mr Campos paying 50% of the purchase price for the Paradigm Shares.”[82]
[82]Agreed Chronology, Item 39.
On 22 November 2019 further heated emails were exchanged between Mr Lopes and Mr Campos commencing with an email sent by Mr Campos to Mr Lopes with the subject line, “Better come up with a good explanation why this isn’t coded to your loan account”.[83] In an email of the same date Mr Lopes informed Mr Campos, “Police are now involved mate”.[84]
[83]Agreed Chronology, Item 40.
[84]Exhibit MJC-20 to the affidavit of Manuel Jose Campos filed 20 August 2020, page 194.
On 22 November 2019 Mr Lopes attended a police station and reported Mr Campos’ conduct to police.[85]
[85]Agreed Chronology, Item 41.
On 27 November 2019 Mr Lopes sent the following email to Mr Campos:
“In order to finalise the matter of my Odyssey shareholding, I suggest the following occur:
1) You confirm the workings I have sent you are correct (see attachment ‘OBK P&L 1 July 18-21 October 19.pdf’), which shows:
a.My undrawn profits/retained earnings left in the company as at 21 October.
b.Confirmation of the dividends due and payable to me as shareholder to clear my retained earnings in the company and proposed dividends (note: you will need to prepare the relevant dividend documentation as per these workings).
c.Confirmation of my director’s loan account (see attachment ‘20191126 OBK_Loan Account Details.pdf’).
d.As you can see from the workings, the dividends owed to me will pay back the director’s loan account in full and leave approximately $54,000 remaining to be paid to me in cash to finalise the matter.
e.If you do not agree with my workings with respect to paragraphs a)-d) above, please advise and provide detailed commentary and documentation to confirm your position.
2) Two off-market transfer forms will need to be completed and executed for the following 50:50 allocation of the PAR shares:
a.12,375 ORD PAR shares held in Odyssey Commsec/HIN transferred TO my trust (being 50% of the shares currently held in Odyssey).
b.85,400 ORD PAR shares held in my trust Commsec/HIN transferred TO Odyssey or your trust (being 50% of the shares currently held in my trust).
c.Any costs for this OMT shall be borne equally between us.
The above two matters will equitably finalise the financial matters relating to my exit from Odyssey. My retained earnings will have been paid out in full, director’s loan account paid out in full and the PAR assets will have been equally allocated. Once both items have been completed, the required OBK share documents can be prepared to return the shares to the company and/or transfer them as you see fit and executed and lodged with ASIC. You will then have 100% ownership and control of Odyssey.” [86]
[86]Agreed Chronology, Item 42.
As is evident from these email exchanges, it was Mr Lopes who raised the question of how the PAR Shares purchased were to be treated. When Mr Campos informed Mr Lopes on 20 November 2019 that the PAR Shares not purchased in the company name needed to be accounted as debit loans for both of them there is no suggestion that Mr Lopes disagreed with this approach. In the email of 27 November 2019 Mr Lopes expressly acknowledges that 85,400 PAR Shares are to be transferred either to Odyssey or Mr Campos’ trust.
The journal entry #5483 made by Mr Lopes on 21 November 2019 also expressly records “Mr Campos paying 50% of the purchase price for the Paradigm Shares”.[87] Mr Lopes accepts that he made this journal entry.[88] Mr Lopes however asserts that the journal entry is incorrect.[89] His explanation for why the journal entry is incorrect is that for the period May 2019 through to October 2019 he had become increasingly concerned with Mr Campos’ aggressive communications.[90] He found Mr Campos to be aggressive and threatening in several telephone conversations. Mr Lopes refers specifically to a text message exchange on 4 October 2019:
“Mr Campos: ‘You badmouth me with a client again and I’ll fucking bash your head in. Weak [c***]. I accept you being a weak piece of shit with me internally, but the moment you tell clients negative things about me as a professional is when defamation kicks in. Don’t push me to the edge because by now you will be very clear that I don’t fear jumping it.’
Mr Lopes:‘John asked where it was at and I told him the clear truth …I am waiting for you to complete FC etc entities fees and calendar …. that's not bad mouthing pal it's factual information’
Mr Campos:‘Fuck off, you're a piece of shit. And I'll make sure Scott and John get a very detailed email on all the shit that you have done’.” [91]
[87]Agreed Chronology, Item 39.
[88]Affidavit of Sergio Paul Lopes filed 2 October 2020, CD9, paragraph 99.
[89]Affidavit of Sergio Paul Lopes filed 2 October 2020, CD9, paragraph 99.
[90]Affidavit of Sergio Paul Lopes filed 2 October 2020, CD9, paragraph 101.
[91]Agreed Chronology, Item 33.
According to Mr Lopes, Mr Campos had, on several occasions, told him that he had contacts with associates of motorcycle clubs who had previously been engaged in criminal activity.[92] When Mr Campos sent the email on 20 November 2019 stating that the PAR Shares not purchased by Odyssey needed to be accounted as debit loans for both himself and Mr Lopes in the Excel calculations, Mr Lopes interpreted that as a threat.[93] According to Mr Lopes this resulted in him making the incorrect journal entry:
“I thought that if I made the Disputed Journal Entry, I would be able to calculate the amounts Mr Campos and I would receive upon separation, in accordance with my suggested manner of separation… and thereby accelerate my exit from Odyssey.”[94]
[92]Affidavit of Sergio Paul Lopes filed 2 October 2020, CD9, paragraph 105.
[93]T 1-81, lines 14-17.
[94]Affidavit of Sergio Paul Lopes filed 2 October 2020, CD9, paragraph 110.
The effect of Mr Lopes’ evidence is that he intentionally incorrectly recorded Mr Campos paying 50 per cent of the purchase price of the PAR Shares out of concern for his personal safety and the safety of his family and to accelerate his exit from the business.[95]
[95]Respondent’s Closing Submissions, paragraph 57; Affidavit of Sergio Paul Lopes filed 2 October 2020, CD9, paragraph 110.
The same explanation appears to apply to Mr Lopes’ email to Mr Campos of 27 November 2019 in which the PAR Shares are treated as joint purchases. Mr Lopes submits that his email of 27 November 2019 seeking to finalise his involvement with Odyssey and Mr Campos “[m]ust be understood from the perspective of a person who, over several months, [had] been the subject of abuse and threats seeking to extract himself from that situation as quickly as possible.”[96]
[96]Respondent’s Closing Submissions, paragraph 59.
I reject Mr Lopes’ explanation as implausible. Mr Campos’ email dated 20 November 2019 was sent in response to Mr Lopes’ earlier emails of 21, 23 and 30 October 2019. Mr Lopes had already communicated his intention to leave OBK at least four weeks prior to Mr Campos sending the email on 20 November 2019.
The email sent by Mr Campos to Mr Lopes on 20 November 2019 cannot be construed as a threat. The journal entry made by Mr Lopes on 21 November 2019 is consistent with what he was proposing to Mr Campos in his email of 27 November 2019. The language used by Mr Lopes in this email does not support his explanation. Rather, it suggests that he was seeking an equitable finalisation of his exit from Odyssey.
From the above analysis of the chronological events, I find that the language of the text message and email exchanges and the way in which Mr Lopes dealt with the PAR share purchases in Odyssey’s books and records are consistent with half the shares being held on trust for Mr Campos as trustee of his family trust. That is, I find that, on an objective analysis of the evidence, the parties’ intended to create a trust arrangement of the kind submitted by Mr Campos.
Relief
Mr Campos seeks an order pursuant to s 82(2)(h) of the Trusts Act 1973 (Qld) that 85,400 PAR Shares currently registered in the name of Mr Lopes are vested in Mr Campos as trustee for the I’d Rather Be Surfing Trust. In the alternative, Mr Campos seeks a declaration that Mr Lopes holds 85,400 PAR Shares currently registered in the name of Mr Lopes on trust for Mr Campos as trustee for the I’d Rather Be Surfing Trust. A further order is sought that Mr Lopes take all steps necessary to transfer the 85,400 PAR Shares registered in the name of Mr Lopes to Mr Campos as trustee for the I’d Rather Be Surfing Trust. As I have determined that the PAR Shares purchased on 12 and 15 October 2018, 4 and 13 December 2018, 18 April 2019 and 13 May 2019 were purchased on an express trust, half for the Lopes Family Trust and half for Mr Campos as trustee for the I’d Rather Be Surfing Trust, it is not necessary to consider the two alternative bases for the existence of an express trust identified in paragraphs 115 to 122 of Mr Campos’ written submissions.
As to the vesting order sought, s 82(1) of the Trusts Act provides that the Court may make a vesting order which has effect as provided in s 90. In accordance with s 90(1), a vesting order vests the property to which it relates in the persons named in the order without any conveyance, transfer or assignment. Section 82(2)(h) provides that a vesting order may be made where, relevantly, a trustee neglects or refuses to convey any property “according to the direction of the person absolutely entitled to the same for 28 days next after a request in writing has been made to the trustee by that person”. In the period 21 May 2020 to 21 July 2020 Mr Campos’ solicitors wrote to Mr Lopes requiring the transfer of half the PAR Shares. Mr Lopes has refused to transfer the PAR Shares. While neither party made submissions in relation to the appropriateness of a vesting order, there appears to be no good reason why such an order should not be made in the circumstances of the present case.
I note that, in his Originating Application, Mr Campos seeks the costs of the application on the indemnity basis.
Disposition
1.Pursuant to s 82(1) of the Trusts Act 1973 (Qld), the Court orders that 85,400 shares in Paradigm Biopharmaceuticals Ltd currently registered in the name of the respondent are vested in the applicant.
2. I will hear the parties as to costs.
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