Chen v Eumeralla Estate Pty Ltd
[2021] VCC 453
•12 May 2021
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Expedited List
Case No. CI-20-02509
| ZHIYING CHEN | First Plaintiff |
| XIUFENG CHEN | Second Plaintiff |
| v | |
| EUMERALLA ESTATE PTY LTD (ACN 622 510 276) and Ors | Defendants |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 1−5, 8−10 February & 31 March 2021 | |
DATE OF JUDGMENT: | 12 May 2021 | |
CASE MAY BE CITED AS: | Chen and Anor v Eumeralla Estate Pty Ltd and Ors | |
MEDIUM NEUTRAL CITATION: | [2021] VCC 453 | |
REASONS FOR JUDGMENT
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Subject:Breach of trust; knowing assistance and knowing receipt
Catchwords: Abortive real estate venture; whether joint venture via corporate vehicle (1st defendant) or on-sale from 2nd defendant to 1st plaintiff; whether subsequent agreement authorised disposition of funds invested by plaintiffs; breach of resulting trust in favour of plaintiffs by trustee 1st defendant; whether 2nd and 3rd defendants knowingly assisted breaches or knowingly received trust property; tracing; whether misappropriated money may be traced into real estate purchased via (inter alia) such funds by 2nd defendant.
Legislation Cited: Evidence Act 2008, s140; Property Law Act 1958, Part IV ss228, 234
Cases Cited:Barnes v Addy, (1874) LR 9 Ch App 244; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; Baden v Société Générale pour Favoriser le Développement du Commerce et de l’Industrie en France SA [1993] 1 WLR 509; Briginshaw v Briginshaw (1938) 60 CLR 336; Armory v Delamirie (1722) 1 Stra 505; Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46; Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567; Foskett v McKeown [2001] 1 AC 102; Fistar v Riverwood Legion & Community Club Ltd (2016) 91 NSWLR 732; Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; Sino Iron Pty Ltd v Worldwide Wagering Pty Ltd (2017) 52 VR 664; AE Brighton Holdings Pty Ltd v UDP Holdings Pty Ltd [2020] VSCA 235
Judgment: 1. Within 14 days of this day the parties must bring in short minutes to give effect to these reasons.
2. Costs reserved.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr N Paterson | Jem Lawyers |
| For the Defendants | Mr B Guzzo | F Butera & Co |
HIS HONOUR:
Background
1The first plaintiff, who was born in the People’s Republic of China and is known in English-speaking society as ‘Jessica’, is the sister-in‑law of the second plaintiff, who was also born in the People’s Republic and is known in English-speaking society as ‘Lance’. In this proceeding, the plaintiffs claim to be entitled to a range of relief from the defendants relative to an abortive proposal to redevelop a single dwelling house at No 4 Eumeralla Avenue, Lower Templestowe, by demolishing the existing dwelling and replacing it with seven or nine townhouses. The defendants deny liability and allege a radically different arrangement from the one which the plaintiffs say was entered into between the parties.
2There are no agreements in writing. The plaintiffs allege the existence of one partly-executed agreement which they say is in possession of the defendants. The defendants deny that any such written agreement ever existed. The parties are at odds as to what transpired at meetings which they agree occurred. Some meetings are alleged by the one side and denied by the other. Typically, even in complex legal disputes, most of the relevant facts are common between the parties, with only disagreements about relatively limited, although crucial, matters. In this proceeding very little is common ground, and nearly everything seems to be disputed. The task of setting out the background to the dispute is therefore difficult.
3The second defendant, Bo Xuan, was born in Shanghai in the People’s Republic and is known in English-speaking society as ‘Bo’. She is the wife of the third defendant, Chi Yung Chan, who was born in Hong Kong and is known in English-speaking society as ‘Jeff’.
4The first plaintiff, Jessica, arrived in Australia in 2007 and is a native Mandarin speaker. (Transcript (“T”) 62, Lines (“L”) 23−29) She gave her evidence via an interpreter. She was educated to high school standard and has since obtained a Certificate IV in “massage”. She said that she had “an elementary certificate for being an [estate] agent”. (T63, L2−15) She said that in the past she had operated a massage shop but the pandemic had brought its operations to a close. (T157, L28–T158, L5) She said she works part-time in the real estate business for an organisation known as ‘City Sunny’ [Sunny City], whose principal is known in English-speaking circles as ‘Gary’. This company operates from the CBD and sells largely, though not exclusively, to members of the Chinese community. (T158, L6−21) This agency sells residential properties as well as development sites. (Ibid, L23−29)
5In 2016, one of Jessica’s friends introduced her and her sister to the second defendant, Bo. The friend, Zhang Ying, told Jessica “she has a very good friend with rich experience in development as well as purchasing property”. (T64, L3−16) In 2016, when Jessica met Bo, her brother-in‑law Lance was keen to enter the property development field. She said Bo introduced her and her friend to a possible development property in Ivanhoe, on the basis that she (Jessica), her sister Eva, Bo, and the mutual friend Zhang Ying, would each hold 25 per cent interest in the project. (Ibid, L17−30) The proposal entailed the four joint venturers borrowing 80 per cent of the acquisition and development costs. The proposal was to use a company to carry out the development (presumably with the venturers each holding 25 per cent of the share capital) (T65, L3−16). In the event, that project did not proceed. (Ibid, L17)
6Following these discussions, Jessica and Bo became good friends. According to Jessica, “After we met ... very often we shared a meal, chat together ... going out ... telephone each other.” She said they discussed “very inspiring topics such as making more money and educate our children well – with our life and how to improve; things like that.” (T66, L2−8) They spoke by telephone and the Chinese social medium ‘WeChat’. Jessica said she thought of Bo “as a very smart, successful lady”. (Ibid, L9−12)
7Bo had obtained a Master’s Degree in Information Technology and Business Analysis from Monash University, graduating in 2003. (T394, L10−19) She worked in the telecommunications field, being employed first by a company known as Australian Cable and Telephony, and later by Optus. She said she then started her own company. (Ibid, L24−29) She said her company’s business related to “data assistance ... e‑commerce gateway, payment gateway” etc. (T395, L4−6) She said she designed “web-based” software systems for customers. (Ibid, L14−24) She said that after 2013 she “became more [a] freelancer” (T400, L24−25) providing a consultancy service. (Ibid, L26−31) After 2016 she continued this work, also providing consultation and training. (T401, L10−16)
8Bo said she had entered a joint venture with a friend, John, in 2009 or 2010 (Ibid, L24−30), but she said she met Jessica through her friend Vivienne, that is, Ying Zhang, whom Jessica said had introduced her to Bo. According to Bo, the contact was made initially via Lance, Jessica’s brother-in‑law, who was a plumber by trade. Vivienne introduced him to Bo as someone who could fix a problem with her shower. (T402, L7−22) She said she met Jessica at a karaoke party organised by Jessica and Lance. (T403, L2−4) Bo said that Jessica seemed to be interested “in all kind of business. All different opportunities. And then she, like, often telling, like, in showing interesting in investment, real estate, finance, like – I think, whatever makes money, she all interesting.” (Ibid, L26−30) Bo said that Vivienne was interested in joint investment projects and “So, we do sit on coffees and we talking about things that interesting” [presumably business opportunities]. (T404, L11−13)
9Bo said that the Ivanhoe property was originally identified as a possible house for Lance, who lived in a small house in Epping. This was a prestige site “next to the river” [presumably the Yarra]. (T404−5) They identified a surplus company known as ‘AOIG’, controlled by Bo’s husband Jeff, which could be used for the development. (T405, L22−25) Bo said Jeff arranged to transfer the shares to “each party”. (T406, L1) According to Bo, the development proposal did not proceed because of planning restrictions. She said the existing residence was “a beautiful big old house. I would not knock that down.” (T407, L1−6)
10Bo said that since Jessica worked in the property business, she referred a number of potential property investments to Bo for her consideration. (Ibid, L18−21)
11According to Bo, in September 2017 she signed a contract to purchase a property at No 4 Eumeralla Avenue, Templestowe Lower. Asked how she was introduced to that property she said, “I have a local agent next to my house and he always came to talking about the property around in my area, so he give me a few list during August”. She made an unsuccessful offer to purchase another property, “and then 30 August he sent me a message regarding this Eumeralla. I think that time Eumeralla is not on the market so I couldn’t access much information from internet. So I asked this agent to email me the sections that – 32 – to have a look.” (T408, L11−23) The agent was known as Wajee, who was part of the ‘First National’ agency. (Ibid, L24−30)
12She attended the agent’s office and signed the contract on 1 September. (T409, L14−18) The contract in the standard form was published by the Law Institute of Victoria Ltd and the Real Estate Institute of Victoria Ltd. It is at Court Book (“CB”) 190−202. Bo signed as purchaser, describing the purchaser as “Bo Xuan and or nominee”. The vendors were shown as Hany Hassan Hegazy and Wahiba Ibrahim Sarhan. (CB 190−191) The purchase price was shown as $3,180,000, with a 5 per cent deposit of $159,000 payable by 8 September, with $3,000 already having been paid. (CB 192) The contract included the usual standard printed conditions as prescribed by the Estate Agents (Contracts) Regulations 2008. There were two additional general conditions added in handwriting as follows:
“28.6 The vendor agrees to give the purchaser reasonable access to the site for townplanning purposes prior to settlement.
28.7 The vendor agrees to hand over all relevant plans and council documents relating to the site once the sale is deemed unconditional.” (CB 201)
13This second additional condition seems problematic because there does not appear to be any condition or clause rendering the contract “conditional” in the first place. (CB 201) General condition 18, a printed standard condition, provided:
“18. NOMINEE
The purchaser may nominate a substitute or additional transferee, but the named purchaser remains personally liable for the due performance of all the purchaser’s obligations under this contract.” (CB 199)
14In their Amended Defence to this proceeding, to which I will turn in greater detail below, the defendants admit:
“that on or about 1 September 2017, Bo signed a contract to purchase the Property [viz 4 Eumeralla Avenue, Templestowe Lower]. The contract was conditional upon approval of a planning permits (sic) by Christmas 2017 ... for the construction of seven townhouses.” (CB 18, paragraph 3(d))
15It will be seen that the additional clauses 28.6 and 28.7 do not appear to have this effect, though Bo conceded that there were no other clauses in the contract apart from these which could be regarded as rendering the contract conditional. (T635, L1−6)
16Jeff, Bo’s husband, swore an affidavit in a proceeding to recover the deposit paid to the vendors, stating that he attended the First National office on 1 September when his wife signed the contract. According to the affidavit, Bo had told him that in late August, Wajee Yamak, the selling agent, had told her:
“there was a planning application in and a permit would be approved soon, for the building of seven townhouses.” (CB 845, paragraph 3)
17Describing what transpired at the agent’s office on 1 September 2017, he said:
“Both Bo and I said to Wajee, at various times in the conversation, that if there was not going to be a permit we were not interested in buying the land, and would not buy it. We said that the purchase price (more than $3 million) was only worth it with an approved permit. We said that without an approved permit the land was only worth between $1 and $2 million.” (CB 846, paragraph 7)
18He said that he and Bo asked the agent to insert:
“a clause to secure us, so that the contract would not be effective if the permits were not issued.” (Ibid, paragraph 10)
19He continued:
“At that point, Wajee wrote in clauses 28.6 and 28.7 into the contract.” (Ibid, paragraph 11)
20According to Jessica, Bo broached the subject of her joining Bo in a development project for 4 Eumeralla Avenue. It was first mentioned in late August 2017. She referred to a WeChat text which she sent to Bo on 26 August 2017:
“When will you sign the contract with him? And when can the contract with this side be signed?” (CB 83)
21According to Jessica, on 31 August 2017 she, her sister Eva, her brother-in‑law Lance, and Bo had a group chat on the WeChat platform. (CB 110) Jessica said that she and Bo “had a coffee together in Doncaster” where she asked Jessica “if it’s possible we work together on the project”. (T73, L24−26) This referred to the property at 4 Eumeralla Avenue, Templestowe Lower, and the discussion took place at the end of August 2017. (T74, L6−10) According to Jessica:
“Bo said it is a very good investment opportunity, even better than the Ivanhoe project. The land was initially was said more than 4,000 square metres with seven townhouse unit permits, and the price is over $3m.” (Ibid, L11−15)
22The four members of the group discussion agreed to meet at Lance’s house on 31 August. (CB 111; T75, L25−31) The meeting consisted of Eva, Lance, Jessica and Bo. (T76, L8−9) According to Jessica, “[Bo] said that the property would cost $3.6m, and she [Bo] would have a two-thirds share, and we [presumably Jessica and Lance] would have one-third of the share and we work together to develop it.” (Ibid, L26−29) The suggestion was to borrow 80 per cent of the cost, with the venturers putting in the remaining 20 per cent, one-third for Jessica and two-thirds for Bo. (T77, L4−7) The $3.6m was the price of the land. (Ibid, L8−9) There would be further costs for the erection of the seven units totalling $2.8m, an allowance for stamp duty at the rate of 5.5 per cent, and a year’s prepaid interest. This would require total contributions from the venturers of $1.65m additional to the 80 per cent borrowing from the bank. She said the proposal was that she, Jessica, would pay $550,000 with the balance from Bo. (T77) As to the issue of title, according to Jessica this was discussed:
“At that time, my understanding was I did not understand very well. She said we would purchase it together – then she is going to do the operation and set up company and the four of us name would be in that company.” (T78, L2−8)
23The four referred to were Bo, Jeff, Jessica and Lance. (Ibid, L9−10)
24At 15.02 (that is, 3.02pm) on 1 September, Bo sent by WeChat a photograph of her signing the contract. (CB 120) Bo agreed that she and Jessica and others met at Lance’s house on the evening of 31 August 2017. They went there to play computer games and word games. (T422, L2−22) Bo said there was no discussion about the Eumeralla Avenue property at that meeting at all. Jessica was involved in looking after her son, who suffered coughing and a fever. (Ibid, L19−26) She said she remembered there were other people present, whom she believed were Lance’s friends, who were there to join in the game. (Ibid, L28−30)
25According to Bo, some time later there were discussions relative to the cost of the development. She gave Jessica a cost estimate for the erection of the townhouses at $300,000 each. She said she gave Jessica the name of the selling agent: “she’s free to contact the agent if she want to get all the informations.” (T423, L1−18) Bo said she photographed the first few pages of the contract but did not transmit them by WeChat; rather, she showed Jessica these pages on her (that is Bo’s) mobile phone. (T424, L8−16) Bo said:
“I think she don’t have problem to read it because ... she’s a real estate agent. She reads sales contract all the time.” (T424, L31–T425, L2)
26Jessica and Bo met at a coffee shop in Templestowe on 4 September, but according to Bo they had no discussions relative to the Eumeralla Avenue project. (T424, L4−8)
27According to Bo, there was a gathering at Lance’s home on 6 September in the nature of a party for the children. There were some discussions relative to the cost of building the townhouses on the Eumeralla site, but no discussions about one‑third and two-thirds interests. Bo took no serious part in those discussions because, on her account, she was to have no involvement in carrying out the development. She was merely to take the profit generated by purchasing the property for $3.18m and on‑selling it to Jessica and Lance for $3.6m. (T425−6) Jessica told Bo, according to Bo, that she, Jessica, needed assistance in raising loan funds. Bo said she replied:
“I say I can enquiry [sic] the broker I know see whether she could give some further assistance.” (T426, L23‑25)
28The brokerage company was known as Howe Finance, and the individual broker was known as Ming Xia. (T426−7) Ming was unable to render assistance because with the proposed redevelopment, the transaction would be characterised as commercial rather than residential. Ming referred Lance and Jessica, according to Bo, to the manager of a Westpac branch. Ming had no further involvement, but, according to Bo, the expectation was that if the loan had gone through, her company would nevertheless be entitled to a commission. (T427, L30–T428, L14) The broker herself gave evidence to similar effect. (T646)
29According to Jessica, at the gathering of 6 September at Lance’s house, Bo told her: “this contract will have seven permits and the vendor was going to apply for it. And Bo will be – would be responsible for the – the mortgage – the loan.” (T80, L25−28) On 3 September, Bo had sent a series of photographs of exteriors and interiors of townhouses. (CB 125−127) There was an email exchange between Bo, Jessica and Lance, the upshot of which was, according to Jessica, that these photographs were samples of the townhouse developments which might be implemented on the Eumeralla Avenue site. (T81−2)
30A further email exchange on 5−6 September 2017 had Bo asking Jessica, “Have you gone to get the cheque?”, and Lance and Jessica enquire to whom the relevant cheque or cheques should be payable. Bo advised: “Billchlink realestate trust” (CB 131−2) In the same exchange, the meeting for 6 September was arranged. According to Jessica, this discussion related to her and Lance providing their one-third share of a 10 per cent deposit on a purchase for $3.6m. (T82−3)
31It is common ground that on 8 September, Jessica paid $120,000 to First National Real Estate in Templestowe, the vendors’ agents for the sale of the Eumeralla Avenue property, by way of $90,000 from Jessica and $30,000 from Lance by cheques payable to ‘Billchlink Realestate Trust’. (Statement of Claim, paragraph 5(b); Amended Defence, paragraph 5(b))
32Again, it is common ground that on 27 October 2017 Jeff arranged for the incorporation of the first defendant, Eumeralla Estate Pty Ltd, with him as sole director, and the company controlled by him, JBMB Investments Pty Ltd, as its sole shareholder. (Statement of Claim, paragraphs 1 and 2, CB 4; Amended Defence, paragraphs 1 and 2, CB 17)
33On 7 December 2017, there was a series of email exchanges between Bo and Jessica. Some were in text, others were audio. Bo said:
“Hey, the situation now is that the bank also wants Lance’s report for the previous year; the bank wants two years’ reports. You need to contact the accountant and see if he/she can help Lance prepare one. There is no problem with this year’s report; but another report for the previous year needs to be prepared. You can see how to prepare …to complete one. You must do it as soon as possible. Time is very tight.”
34Jessica replied:
“Can you create a report for last year? For 2015−2016?”
35And Bo replied:
“Yes.”
36Bo continued in an audio message:
“Anyway, you must find a way to do it. You must do it even you cannot because the bank wants it now. Ask him/her if he/she can find a way or not.”
37And so the exchange continued. (CB 84−85) Bo said:
“The settlement is on 27th December, so time is very tight, hurry up to get it done and send it to me.”
38Jessica asked if there could be a postponement, and Bo replied:
“It needs to be done based on the time without postponement. As for the settlement date, whether it is on the 6th or on another date, let us talk about it later. Currently the bank is doing things according to the settlement time of 27 December on the contract, okay? Hurry up, postponement is another issue. Because they have done a back-to-back contract, which means they are buying another house, they need to settle for another house. Do not worry that much, we just need to get this done urgently now.”
39Jessica asked:
“Does our next payment, 430,000, need to all be paid on 27 December? Or can we pay 200,000 first, and pay the other 230,000 when construction commences?”
40According to Jessica, Bo responded by telephone, saying:
“because the whole package including the interest and the construction fees, so we had to send the money as one lump sum otherwise the bank is not going to approve the loan.” (T94, L9−12)
41On 7 January 2018, Bo sent Jessica two Notices of Assessment of Income for Jessica, and two for Lance. (CB 93) Bo asked Jessica to provide them to the bank. (T96, L7−10) As will appear, there is a debate between the parties as to the origin, genuineness, and purpose of the transmission of these documents, to which I will turn below.
42It is common ground that on 28 December, Jessica and Lance were accompanied by Jeff to a meeting at the Westpac branch at The Pines Shopping Centre in Doncaster East. (CB 52, paragraph 12) Jessica says she attended this meeting along with Jeff and Lance. She said that the bank “has people there”. According to her, the meeting was arranged by Bo, and one of those attending was the bank manager. Jessica said Bo warned her not to “talk too much during the meeting, is a merely a formality to check the IDs and after that the loan will be approved.” (T108, L23‑26) She said the meeting was conducted in English, and Jeff “and the bank staff member” did most of the talking. (T109, L5−8) According to Lance, the bank representative was a “tall skinny good looking Aussie” (T336, L12−13, 27−29) Lance said he could not recall how long the meeting lasted. (Ibid, L16−17) Ming Xia recollects referring the loan application to a bank officer known as ‘Patricia’. (T647, L22−25) Jeff agreed that the bank’s sole representative at the meeting was ‘Patricia’. (T733, L15−17) Jeff said he had no role in setting up the meeting, and just stayed outside after having made initial introductions. (T733, L21–T734, L2) It will be necessary to say more about this meeting and the inconsistent accounts as to what transpired and who attended in due course.
43The result was, according to Jeff, that whilst he was the sole director of Eumeralla Estate Pty Ltd, that company was not seeking to borrow any funds. He was present merely to effect an introduction, and otherwise had nothing to do with the loan application. (T734, L24–T735, L2)
44It is common ground that Bo deposited with the estate agent’s trust fund the $36,000 necessary to make a total deposit of $159,000 in accordance with the terms of the contract with the vendors on 8 September 2017. (Amended Defence, paragraph 19(b) CB 23; Plaintiffs’ Reply, paragraph 5 CB 33) In the period 20 December to 27 December 2017 the plaintiffs deposited some $430,000 into Eumeralla’s bank account (CB 342−346; CB 924) which is constituted by a Westpac Business One statement of the account of the first defendant, Eumeralla Estate Pty Ltd.
45Whilst the attendance and outcome of the meeting at Westpac on 28 December 2017 remains shrouded in mystery, the upshot is not. No loan monies were raised to fund the acquisition of No 4 Eumeralla Avenue by the plaintiffs, the defendants, or any combination of them. The vendors served 14‑day rescission notices dated 12 and 21 February 2018. (CB 375 and 388) The sale contract was never settled. By then, Eumeralla had been nominated as the party to take title under the purchase contract signed by Bo, and, in accordance with general condition 18, that nomination occurred by a written instrument dated 20 December 2017. (CB 354)
46According to Jeff, on New Year’s Eve 2017 his family and Lance’s family boarded a boat to go for a fishing trip from Portsea/. Lance approached him privately, and according to Jeff:
“he say he got, like, difficulty on the money he just put in and then asking if there’s some sort of solution that ... he can have that back asap. ... The money he say is 130,000.” (T664, L4−20)
47Jeff said that he assured Lance that he could be repaid the $130,000 from Jeff’s share of the profit of a company, Uberfix Pty Ltd, whose history and significance will be described below. Lance agreed that the fishing trip occurred on New Year’s Eve. He denied, however, saying he had changed his mind relative to the Eumeralla project or that he asked for the return of his money. (T275−6)
48The sale contract remained uncompleted despite the rescission notices. The vendors’ solicitors sent an email to Bo’s solicitors dated 7 May 2018 stating:
“We confirm again that this contract was terminated pursuant to the Notice of Default and Rescission dated 21 February 2018.” (CB 404)
49According to Bo and Jeff, in light of the rescission notices and the apparent inability to settle the purchase, what might be described as a “crisis” meeting was held at their residence on the evening of 21 February 2018, running over to the early hours of 22 February 2018. They said that following lengthy discussion, a series of resolutions were reached at a meeting attended by Jeff and Bo and Jessica, but not Lance. They were recorded in a document signed by Jeff, and styled “Minutes of a Meeting, Eumeralla Estate Pty Ltd”. Jeff, Bo and Jessica were recorded as having attended the meeting. The text of these resolutions is set out as Annexure A to these reasons.
50Jessica denies that this meeting took place. She says that all that occurred was that she visited Jeff and Bo’s to babysit their children whilst they were out at a social engagement. She referred to WeChat transmissions at 23:27pm from her to Bo saying, “I have arrived”, and at half-past midnight on 22 February asking, “Can I eat the buns in the refrigerator?”, to which she received the response: “You can. You can eat anything, ha-ha.” (CB 97) A later exchange at 1.58am, following discussion about dumplings, asked “What time will you come back? Son woke up”, leading to a response from Bo at 2.14am, “Okay.” (CB 98)
51On 5 March 2018, Jessica sent a WeChat text to Bo which in translation stated:
“Is the house here going to be settled when the owner confirms? Has the bank loan been approved? I have not done my tax return last year, can I do it now or do I need to wait until after the settlement to do my tax return?”
52Bo responded, according to the translation:
“I will ask.” (CB 101)
53According to the Westpac Business One bank statement, on 19 March 2018 $100,000 cash was withdrawn from the Eumeralla Estate Pty Ltd account via the Westpac branch at Caroline Springs. Jeff agreed that he made this withdrawal. (T766, L31–T767, L2) Jeff said that Lance and Jessica were aware of this withdrawal, first because of Jessica’s minuted agreement to the “redeployment” of Eumeralla’s funds, and secondly because of his belief that Bo would have told Jessica. (T768, L21−29) As to why Jeff adopted this rather unusual mode of withdrawal, with the nefarious connotations that these days attend large cash transactions, he replied, “I forgot.” (Ibid, L5−19) As to what happened to the $100,000 cash, Jeff initially said: “For whatever we agree on the minutes”, though he was unable to be more specific. (T767, L24–T768, L2)
54On 3 May 2018, Bo entered into a contract to purchase a property at 695 Toorak Road, Kooyong, which showed the purchaser as herself “or nominee”. The price was $1.575m. (CB 399) On the same day, a deposit of $78,750 was paid under the terms of that contract to selling agents Marshall White. (CB 405) On 15 May 2018, Bo nominated Jeff as the purchaser of the Kooyong property.
55Meanwhile, Butera & Co, Bo’s solicitors in the abortive purchase of 4 Eumeralla Avenue, in response to the email from the vendors’ solicitors advising that the contract had been terminated in accordance with the Notice of Default and Rescission dated 21 February 2018, requested return of the deposit of $159,000, failing which proceedings would be issued in this court. (CB 407)
56On 20 July 2018 there was a further withdrawal of funds from Eumeralla Estate Pty Ltd in the sum of $150,000, this time online. The descriptor was “Pymt chi yung c Loan Eumeralla”. (CB 970) This money seems to have been transferred “online” to a Bankwest account in the name of Jeff under the descriptor “Eumeralla Estate loan Eumeralla” on the same day. Jeff agreed that he thought that money was his (T770, L11−12) but said he “forgot” why the descriptor described the transaction as a “loan”. (Ibid, L13)
57The same day there was another online withdrawal from the Eumeralla account, $150,000, designated as “Pymt Whitenigh Loan to Wk” (CB 970). Jeff agreed that this was a withdrawal of funds from Eumeralla and their transfer to a company known as White Knight which was controlled by him. (T769−70) I enquired as to the reference to a “loan”, asking: “Well, who was the lender under this loan and who was the borrower?” Jeff replied, “Well, didn’t mean to that ...” (T769, L25−26) He continued, “Didn’t mean to really a loan, but just put as a reference for – it’s just what I put.” I asked, “So it wasn’t really a loan?”, and he replied “Yeah. No, sir.”
58Also on the same day there was a payment into White Knight’s account of some $100,000, described as “WHITEKNIGHT BUSI Loan WK”. (CB 1195) As to the withdrawals from the account of Eumeralla Estate, Jeff agreed he had not told Lance and Jessica but he should have. He forgot. (T771, L19−21)
59On 2 August there was a further cash withdrawal from the Eumeralla account in the sum of $5,000 (CB 770), and a week later on 9 August a withdrawal of $23,999 from the account, which went into Jeff’s personal account at Bankwest. (CB 970, 1195) As to this withdrawal, Jeff said, “Yeah, because I need to make the ah withdrawal in cash to Lance on that day.” (T772, L24−25) Shortly afterward, Jeff appeared to alter his account, agreeing that he gave Lance $24,000 in cash, but denying that this could be seen as the same money as the $23,999 withdrawn from Eumeralla Estate and transferred to his personal account. (T774, L2−19)
60Meanwhile, there was a deposit into Jeff’s personal account of $100,000 from a friend referred to as ‘Spiro’. (CB 1195; T775, L3−6) Jeff said that this was for personal use, but, despite being pressed, did not elaborate. (T775, L22−27)
61Next, on 14 August, there was a withdrawal from Jeff’s account of $348,000. (CB 1196) This money went into a solicitor’s bank account for the purpose of settling the purchase of the property at 695 Toorak Road, Kooyong, by Jeff. (T776, L30–T777, L3) Jeff denied that these transactions could lead to the conclusion that the funds from Eumeralla’s bank account which the plaintiffs say was their money was used to purchase his house in Kooyong. (T779)
62On 15 November 2018, Jessica sent a WeChat text to Bo which in translation read:
“Regarding eumeralla, what did the other party say? There is still 43.6 remaining; shall we transfer 30 out first? We can put it back when it is needed. Putting it in the offset account can save interest of 2000.”
63Bo replied:
“2000?”
64The discussion seems to have remained unresolved. (CB 103)
65By late 2019 Lance said he had become disenchanted with the scheme to acquire and redevelop the Eumeralla Avenue property. He said, “It ... took too long to settle and I need my money back.” (T324, L1−4) He said that he and his wife knocked on the door of No 4 Eumeralla Avenue, Templestowe. He said, “the owner coming out and tell us that the sale was finished. They already send the letter to them, says they tooking the money [sic].” (Ibid, L22−31) It seems the owner of No 4 showed Lance some documents, but he was not sure which documents they were, in particular whether he showed him the sale contract (T326), but, according to Lance, “Vendor showed me a lot of things on the mobile phone” (T327, L5−6), including “some paperwork relate to the sales of the ah Eumeralla [property].” (Ibid, L7−8)
66Lance said he told the vendor (owner of No 4) that he (Lance) had purchased the property for $3.6m, to which the vendor replied “no, ... this was priced as 3.18 million”. (T328, L6−8) Lance also said he told the vendor that he had paid a 10 per cent deposit, viz $360,000, and the vendor “told me it was 5 per cent of the 3.18 million.” (Ibid, L8−10) According to Lance, the vendor told him “to get a solicitor to get [any further information] from the real estate agent and he told me the contact of the real estate agent.” (Ibid, L12−16) Lance said he was shocked, and when he told Jessica, “She wouldn’t believe me.” (Ibid, L17−20) The conversation, as best he recollected, was very early in 2020 or very late in 2019. (Ibid, L21−25)
67At CB 642 there is an item of CCTV footage showing Lance removing files, documents and computers from the offices of Uberfix on 2 January 2020. (T347) At that time, following the execution of a lease by Uberfix Pty Ltd in late 2019, its offices were at Huntingdale Road, Burwood. (T351) According to Lance, he “realised Jeff is doing something silly. I want to get my stuff back and slowly research them.” (T348, L19−21) Lance said, “It’s my personal computers for the Uberfix and other stuff and games as well.” (Ibid, L23−24) Lance agreed that he deleted documents and files from the computers which he removed. The items deleted were, according to him, mostly invoices. (Ibid, L27−31)
68According to Jeff, the contentious minutes of meeting of 21 February 2018 were created on one of the computers which Lance removed in January 2020. (T349, L22−27) Lance agreed, if that were so, that the minutes might be amongst the documents which he deleted from the computers. (T352, L16−22) Whether this is so, and whether an analysis of the relevant computer can prove or disprove this account of events, was the subject of a report from an expert computer analyst. Regrettably, the expert conclusion was inconclusive on this point.
69By early 2020, relations between the plaintiffs and the defendants had soured, both because of what had or had not happened relative to the Eumeralla Avenue property, and transactions relative to the Uberfix companies. As the director of Uberfix Cleaning, Jessica had cancelled Bo’s authority to operate that company’s account at Bendigo Bank. (T148)
70The plaintiffs put into evidence what purported to be a translation of a telephone conversation in Mandarin between Bo and Jessica (T643−650), which, according to Jessica, took place on 31 January 2020. (T148, L3−9) According to this transcript, Bo discussed the Eumeralla Avenue property transaction as if the contract remained in force and might yet proceed to settlement. For instance, when Jessica pressed for a refund of deposit monies, Bo said: “Nothing was refunded. What if I want to force the settlement? What if I force the settlement and both of you cannot take out the money?” According to the transcript, Jessica replied: “The possibility of forcing the settlement does not exist”, and Bo replied: “Why doesn’t it exist? If we make the offer to her/him, she/he will ... will agree to it.” (CB 645) [Apparently in Mandarin the third person singular pronoun can refer to either the masculine or the feminine.]
71Cross-examined as to this alleged exchange, Bo replied: “I didn’t say that.” She had complained more generally about inaccuracies in translations from the Mandarin relied on by the plaintiffs. Her objection to this translation, however, was more fundamental. She said, “No, I think my conversation with her [viz Jessica] only one, two minutes. And this telephone conversation without my consent is about 10 minutes. And I never recall I have that long conversation with her in that time of period.” (T598, L9−15) The result, therefore, was that this was not merely an inaccurate translation: it was fictitious, totally invented. (Ibid, L16−21)
72The plaintiffs’ counsel, Mr Paterson, then played from a mobile phone what he said was the Mandarin original recording of the 31 January 2020 telephone conversation. Bo denied that this was a conversation which she had with Jessica on 31 January 2020. She said, “This is not my voice. ... It could be my cousin by [scil but] it’s not my voice.” (T601, L9−14) Asked further about the transcript, she said, “I said it’s not my voice so I don’t have this conversation with her.” (Ibid, L19−20) Ultimately, she said, this was not a case of a real conversation with additional dialogue added, but the transcript was entirely fictitious or an invention. (Ibid, L21−29)
73On 19 March 2020, solicitors acting for Bo brought proceedings against the vendors of the Eumeralla Avenue property, commencing proceeding CI‑20‑01200. The defendants were the vendors and Fakhri Real Estate Pty Ltd. The statement of claim alleged misleading or deceptive conduct by the selling agent. It sought rectification of the contract on the basis of an alleged common mistake to the effect that the contract should have been expressed to be conditional upon the grant of the planning permit. The Statement of Claim sought damages, alternatively compensation under the Australian Consumer Law. (CB 658−674) That proceeding was ultimately compromised by consent orders of the court made 28 January 2021 with the effect that Bo accepted $50,000 inclusive of costs in full and final settlement of her claims. (CB 1234–1240) Her counsel in this proceeding, Mr Guzzo, agreed that this could be regarded as a “Pyrrhic victory”.
Uberfix
74Contemporaneous with the events referred to above, the plaintiffs and the defendants engaged in dealings involving a group of companies sharing the name ‘Uberfix’. These dealings constitute a major part of the defendants’ defences in these proceedings.
75Uberfix Pty Ltd was incorporated on 21 September 2017. The initial directors were Jeff and Lance. According to Lance:
“Uberfix the name has come from Jeff, and is very, very good name. The reason why I want to operate at Uberfix, because I’m a plumber, the time I’m spending on the work, maybe it’s only 30 per cent during the day, and another 70 per cent is by driving from one job to another, so I was so tired. I’m thinking why don’t I make a platform? Everyone can get a job from one platform nearby, and save everyone the driving time. That’s how I becoming to do a tradie platform.” (T284, L23−31)
76In further explanation, Lance said:
“If I set up a platform, a client can use this platform to post their job on the platform, and with the address or the – or the suburbs, and a tradesman like me, plumber or electrician, can find a job nearby. So, when I do the job in, for example, if I do the job in Coburg, and I can find there’s another job near Coburg, so I can just do the next job in the Coburg.” (T285, L5−11)
77I asked:
“So, the platform is to enable you to concentrate all of your jobs near one another and thereby minimise travelling time?”
78Lance replied:
“That was the major reason I’ve created at the beginning.” (Ibid, L12−15)
79Presumably, the name was chosen to associate the service with the renowned international ride-sharing service ‘Uber’, with the suffix ‘fix’ referring to various building trades doing maintenance work. According to Lance, Uberfix turned first to plumbing because that was his trade. (T287, L5−8) As to plumbing jobs, he said that he, Lance, would take 80 per cent, with Jeff taking 20 per cent. He continued:
“And later on, Bo says have to reschedule the share structures because if Uberfix want to – the Uberfix need to be a great company. The most important is not who’s doing the job, is who’s investing the company, do the marketing. So ah Bo told me Jeff will take 51 per cent, I’ll take 49 per cent. Then I ask Bo what are you doing in this company, you get nothing, and she says she don’t need anything. I say I can give you 11 per cent from my 49 per cent so I [have] 38 per cent of it and they agreed to it.” (T287, L24–T288, L2)
80Lance had been conducting his plumbing business as a sole trader under the style ‘Water Element Plumbing’. (T288, L24) Lance then says he carried on his former business under the name of Uberfix. (T289, L4−9) He said that Jeff and Bo told him:
“if they need to get investor, we need to show the investor for the um company’s financing goings, like how much money coming in and how much money going out, to pretend that Uberfix has lot of income they give me a very technical word, it’s called due diligence. If the investor need to do the due diligence for the company, the company must have something. And that’s why they ask me to put my Water Element Plumbing’s turnover into Uberfix and says because it’s my money so they won’t touch it. That’s how we operate it.” (Ibid, L11−22)
81When this arrangement was implemented, Lance’s customers were invoiced by Uberfix rather than Water Element Plumbing. (T289, L26–T290, L2) The money thereby generated, according to Lance, was his money, and was conceded to be so by Bo and Jeff. He used it to pay his plumbing business expenses; for instance, to pay his apprentice, though in that case the money had to be transferred first to the Water Element account. (T290, L7−17) The customers were from Lance’s stepfather and from “Chinese advertising”. (Ibid, L18−23) Lance said that he and Jeff controlled the Uberfix bank account, and he undertook the transactions to defray the expenses of the plumbing business. (T291, L2−9)
82Whilst it was contemplated that investors would be invited to “buy into” Uberfix, in fact at the relevant time no investors bought into Uberfix Pty Ltd. The plan was that the profit which they would make would be derived from monies outlaid or subscribed by new investors who would buy them out. The precise nature of these contemplated transactions was not explained, but it sounded rather like pyramid selling. (T291, L10−28)
83For the year ended 30 June 2018, according to Lance, Uberfix had no income from any source other than Lance’s plumbing business. (T292, L3−4; T293, L1−15) This included, according to Lance, his stepfather’s business known as ‘Freeway Plumbing’. Likewise, the expenses shown on the Uberfix taxation return for the same period were expenses incurred by Lance’s plumbing business and his stepfather’s plumbing business, Freeway Plumbing. (T293, L14−30)
84Lance said that in the period January 2018 to August 2018 the withdrawals from Uberfix’s Westpac Business One bank account (CB 927 ff) were made by him, and they totalled at least triple $130,000, a figure whose significance will be mentioned below. (T296, L9−15) These amounts, totalling $413,758.10, and covering the period 13 October 2017 to 9 September 2019 (CB 1254–1259), were, according to Lance, “the money I’ve transferred out from Uberfix account to my Water Element Plumbing account”. (T296, L20−22) He made these transfers, he said, because:
“Jeff told me he wouldn’t touch it [viz that money]. It’s my business, my customer, my payment and my, like, my account.” (T297, L27−29)
85It will be recalled that according to Jeff, though this is denied by Lance, during the fishing trip on New Year’s Eve 2017 Lance had approached Jeff privately and sought the refund of the $130,000 that he had deposited with Eumeralla. According to Jeff, he authorised repayment of that amount from Uberfix’s account. (T664–T666) The amounts are set out in the schedule at CB 1109–1110, totalling $130,560, and including a cash payment of $24,000 which Jeff said he made to Lance on 9 August 2018. Jeff said, “it’s my profit”. (T664, L28) He said he told Lance during the fishing trip:
“we can do it from the profit from Uberfix because by then we have been, you know, the Uberfix was set up in three months’ time there and then was doing good, you know, so – yes.” (Ibid, L21−25)
86Lance denied this. He said:
“This was my money anyway.” (T298, L12)
87Lance denied that there was any discussion of the Eumeralla project on the New Year’s Eve fishing trip. (T277, L13−14)
88Lance denied receiving $24,000 in cash. (T310, L16−19)
89According to Jeff, the effect of the disputed minute of Eumeralla Estate Pty Ltd dated 21 February 2018 was that Jessica wanted “to actually invest into Uberfix business model” (T670, L8−11), and this purpose was to be found reflected in the minutes. (Ibid, L26−28)
90On 2 July 2019, a number of “subsidiary” companies were incorporated, namely Uberfix Plumbing Pty Ltd, Uberfix Cleaning Pty Ltd, and Protecty Group Pty Ltd. Lance was the sole shareholder of Uberfix Plumbing Pty Ltd (CB 1063), but his shareholding was subject to a declaration of trust in favour of Uberfix. (T677, L23−31; CB 482)
91In contradiction of Lance’s statement that the plumbing business carried on by Uberfix, or Uberfix Plumbing Pty Ltd for that matter, represented merely his Water Element business and his stepfather’s plumbing business and nothing else, according to Bo in the period 2018 to 2019: “We register about 37 plumbers in the company”, all of whom did Uberfix plumbing jobs. (T448, L21−25) She said that there were 20 or 30 plumbers registered with Uberfix Plumbing. (T449, L8−9) According to Bo:
“after July [2019] the Uberfix Plumbing become into [being] – so all the plumbing job goes to Uberfix Plumbing and then there’s 20 per cent pay back to Uberfix and then the rest of 80 per cent leave to the company [Uberfix Plumbing].” (T448, L7−11)
92It is interesting to compare the picture of Uberfix Plumbing painted by Lance, viz a company with no intrinsic customer base, dependent solely upon pre-existing plumbing enterprises running their businesses through the books of Uberfix Plumbing to give it an appearance of substance which it did not possess (a description denied by the defendants), with the situation relative to its sister company, Uberfix Cleaning. According to evidence derived in cross-examination of the plaintiff, Jessica, by Mr Guzzo on behalf of the defendants, Uberfix Cleaning had, during the relevant financial years, some small “private jobs” with a turnover of no more than $1,000 to $2,000, but was otherwise dependent entirely upon business introduced by a company known as Cozy Cleaning Property Management Pty Ltd (CB 1078−1082), with the cost of carrying out that work being invoiced by another company, Cozy Cleaning Pty Ltd, with revenue of $292,770 introduced by Cozy Cleaning Property Management Pty Ltd, and $292,200 as “cost of sales” (CB 707; T186−7), all but $1,000 or $2,000 of which was ultimately paid to Cozy Cleaning (T186, L15−19).
93It will be necessary in due course to make findings as to which view of the Uberfix companies is correct: the plaintiffs’ view, that their business was illusory, or the defendants’ view, that aside from business introduced by outside sources such as Water Element Plumbing and Cozy Cleaning Property Management Pty Ltd, the companies did generate genuine business and have connections with genuine providers beyond “insiders” such as Cozy Cleaning and Water Element Plumbing.
This Proceeding
94In June 2020, solicitors acting for the plaintiffs filed the writ which commenced this proceeding.
Statement of Claim
95By the Amended Statement of Claim filed with the Amended Writ of 22 January 2021 it was alleged first that, “in or about late August 2017 or early September 2017”, Jessica, on her own behalf and as agent for Lance, entered into an agreement with Bo, on her own behalf and on behalf of Jeff, for the acquisition and development of the Eumeralla Avenue property. This agreement was said to be “partly oral and partly in writing”. The particulars referred to several discussions in person and by telephone between Jessica and Bo, and a typewritten document “presented” to Jessica and Lance by Bo, signed by Jessica and Lance, and retained by Bo. (CB 4−5, paragraph 3(h)) This was said to be the “written” portion of the agreement.
96It was said that Bo would “arrange to purchase the [Eumeralla Avenue] property for $3.6 million”, and Bo, Jeff, and Jessica, or Eumeralla, “would develop 7 units on the property”. Eighty per cent of the funds for the acquisition and development were to be borrowed by Bo, Jeff, and Jessica, or Eumeralla, with Bo, Jeff, Jessica, and Lance contributing the remaining equity, in the proportions of one-third by Jessica and Lance, and two-thirds by Bo and Jeff, with similar equity entitlements.
97In accordance with that agreement it was said the plaintiffs contributed the one‑third equity provided for, with Eumeralla nominated as purchaser of the property on 20 December 2017. (CB 7−8) Next, it was said the vendors of the property terminated the sale contract for the Eumeralla property and retained the deposit. At no stage between December 2017 and January 2020, it was said, did Bo inform Jessica that the purchase of the property “was not proceeding”.
98Next, it was said that Eumeralla commenced proceeding CI‑20‑01200 in this court against the vendors for damages or compensation “equivalent to the deposit paid to the vendors”.
99In light of those matters, it was said that Eumeralla held $430,000 on trust for the plaintiffs by way of a ‘Quistclose trust’, and any recovery of the deposit by Bo would be subject to a liability to account to the plaintiffs for $120,000 with “Bo and Jeff ... liable to account to Jessica and Lance for two-thirds of the $120,000 paid by Jessica or on her behalf to the Vendors”. (CB 10, paragraph 10)
100Next, it was said that $428,999 was withdrawn from Eumeralla’s account without Jessica’s knowledge, and Eumeralla had breached the trust which it owed to the plaintiffs, and Jeff and Bo had “knowingly participated” in the breach. (CB 10−11, paragraph 12)
101Next, it was said that on 3 May 2018 Jeff purchased a property at 695 Toorak Road, Kooyong, becoming the registered proprietor of the property on 15 August 2018 (CB 11, paragraph 13), with trust funds being used to “settle on the purchase of the Kooyong property” (CB 12, paragraph 14). $550,000 was demanded by the plaintiffs by letter of 7 February 2020, but remained unpaid. (CB 12, paragraphs 15−17)
102As against Eumeralla, the plaintiffs sought damages or equitable damages “in the sum of $430,000” together with interest under s58 or s60 of the Supreme Court Act 1958 [sic].
103Against Bo, the plaintiffs sought damages or equitable damages of $430,000 plus interest, and a declaration that she held any funds recovered in the proceedings against the vendor “on trust for the plaintiffs to the extent of $120,000”; alternatively, damages of $40,000 by way of contribution.
104Against Jeff, they sought damages or equitable damages, and interest, and “tracing of the sum of $430,000 into the Kooyong Property and a declaration that [Jeff] holds and always held the Kooyong Property on trust for the plaintiffs as to the extent of $430,000.” Further, they sought damages of $40,000 for “[Jeff’s] share by way of contribution towards ... the deposit”.
Amended Defence
105In their Amended Defence, Bo and Jeff admitted the occurrence of some of the meetings alleged by the plaintiff. They admitted that Bo entered into a contract to purchase the Eumeralla Avenue property on 1 September 2017, but said that it was “conditional upon approval of a planning permits [sic] by Christmas 2017 ... for the construction of seven townhouses.” (CB 18, paragraph 3(d))
106They said that on 1 September 2017, Jessica “contacted Bo and inquired about the purchase of the Property.” In that communication, Bo told Jessica that the contract was conditional upon the approval of planning permits and the price was $3.18 million for the property.
107It was said that on 2 September 2017, Jessica “offered to acquire the Property for $3.6 million from Bo, which would result in Bo and her husband making a profit of $420,000, plus a 10% fee to manage the development (with a maximum profit of $500,000) to see through and manage the development of the Property.” It was said that Jessica proposed the incorporation of a company to be nominated as purchaser to hold and develop the property, with the shares in that entity being transferred to Jessica, with the first defendant, Eumeralla Estate Pty Ltd, being incorporated on 27 October 2017. (CB 18, paragraph 3(e))
108The defendants denied that Bo told Jessica the purchase price agreed to be paid by Bo was $3.6m, and denied that Bo told Jessica to pay her share of the 10 per cent deposit, which was $120,000. (CB 18−19, paragraph 3(f))
109They also denied that Bo told Jessica that the estimated development cost for the property would be $2.8m, which would be financed by an 80 per cent borrowing, requiring a contribution of funds of $1.28m plus stamp duty of $200,000 and one year’s loan interest of $0.17m, totalling $1.65m, or that Jessica needed to pay one‑third of that, being $550,000. (CB 19, paragraph 3(g))
110They denied the occurrence of a meeting on 6 September or the existence of a one-page document signed by Jessica and Lance but retained by Bo. (CB 19, paragraphs 3(h) and 3(i))
111The defendants admitted that Bo signed the contract on 1 September 2017 with a purchase price of $3.18m and that, at the direction of Bo, Jessica paid “or caused to be paid” $120,000 to the vendors’ agent. They admitted that Bo and Jeff “caused [the first defendant] Eumeralla to be incorporated.” They denied that Bo and Jeff paid or caused to be paid a further $430,000 to Eumeralla. They admitted that certain amounts were paid “by Jessica to purchase the property” (CB 20−21, paragraph 5) They admitted that Bo nominated Eumeralla as purchaser (CB 21, paragraph 6), and that the vendors “purported to terminate” the contract and retained the deposit. (Ibid, paragraph 7) They denied that Jessica had asked Bo on a number of occasions about the progress of the loan application and settlement of the property over the period December 2017 to January 2020. (Ibid, paragraph 8). They admitted bringing the alleged proceedings in this court. (Ibid, paragraph 9)
112They denied that Eumeralla held $430,000 on trust for Jessica and Lance, or that Bo would be liable to account for any recoveries of the deposit she might make. (CB 21, paragraph 10) They admitted the purchase of the Toorak Road, Kooyong, property by Jeff, but denied that it was affected by any trust in favour of the plaintiffs or that funds held on trust were used to fund its purchase. (CB 22, paragraphs 11−14) They did not admit that Jessica demanded Bo “return ... the sum of $550,000” (Ibid, paragraph 15), saying they had not paid such amount and were not obliged to do so. (Ibid, paragraph 16)
113According to the defendants, Bo entered into a purchase agreement for the Eumeralla property with the vendor, paying a deposit of $159,000. The contract, it was said, was conditional “upon approval of a planning permits [sic] by Christmas 2017 ... for the construction of seven townhouses.” It was said that Bo intended to carry out that development “once council approval was obtained in Christmas 2017.”
114It was said that Jessica entered into an “on‑sale agreement” with respect to the property for a price of $3.6m, with the contract being partly oral and partly to be implied. (CB 22−24, paragraphs 18−22) By this arrangement, “Jessica assumed all of Bo’s rights and obligations” under the purchase contract, including “all the risks and benefits”.
115Eumeralla was to be incorporated and nominated as purchaser, and Bo and Jeff “would make a profit of $420,000, plus a 10% fee to manage the development (with a maximum profit of $500,000) to see through and manage the development of the Property which included the construction of seven townhouses once council approval was obtained.” (CB 24, paragraph 23)
116No planning permits were obtained by Christmas 2017 or at all, and the vendors issued two successive notices of default and rescission in February 2018. (CB 25, paragraphs 26−28)
117Then, it was said, on 21 February 2018, Jeff, Bo, and Jessica had a meeting at Bo’s home, entering into a further agreement “whereby the balance of $420,000 held in Eumeralla’s bank account, less the application of $100,000, which was to be applied in accordance with subparagraph 30.(c) herein, that is, the sum of $320,000, be invested in a new corporate business structure utilising the Uberfix business model”. (CB 26, paragraph 29) This agreement was said to be “partly oral and partly to be implied”. (Ibid, paragraphs 29−30) It was said that $100,000 was to be applied for the purpose of Jessica and Lance continuing “in their endeavours to procure bank finance to enable settlement of the Property despite their difficulty in obtaining finance”. (Ibid, paragraph 30(c))
118It was said that Jessica agreed that $100,000 from the Eumeralla bank account was to be applied as a service fee “for Bo to continue pursuing the completion of [the contract], including managing the default notice disputes”. $25,000 was to be payable to Jeff as a director to remain as a director of “Eumeralla” until settlement, and $20,000 was to be paid to Bo to cover legal costs. $30,000 was payable to Bo to continue pursuing building and planning permits. (CB 27, paragraph 30(e)) $320,000 was to be invested “in a new corporate business structure utilising the Uberfix business model”, with three new entities being established in the plumbing, cleaning, and maintenance business “utilising the brand name, know‑how and reputation of Uberfix Pty Ltd”, those companies to be “wholly owned and controlled by Jessica” in consideration of a payment of $320,000 being made to Bo and Jeff (Ibid). These companies (viz Uberfix Plumbing Pty Ltd, Uberfix Cleaning Pty Ltd, and Protecty Group Pty Ltd) were incorporated on 2 July 2019. (CB 27−28, paragraphs 31−34)
119It was said that “on or about 13 March 2018”, the defendants had “instructed to rescind” the contract. They referred to an email dated 13 March 2018 from Mr Carolan of Patten Robins Lawyers, solicitors for the defendants, to Mr Ferdinando Butera, of F Butera & Co Lawyers, “solicitors for Bo”. [There seems to be a confusion of parties involved here. Butera & Co are the solicitors for the defendants, one of whom is Bo.] (CB 28, paragraph 36) They referred to an email from Patten Robins Lawyers, representing the vendors, to Bo’s solicitors (CB 29, paragraph 37)
120During the period 2 January 2018 to 10 August 2018 it was said that Lance had been repaid $130,560 in pursuance of a mutual agreement reached “at Portsea in or about 31 December 2017 during a fishing trip”. (CB 29, paragraph 38) The effect of the agreement was that when Jeff “had sufficient profits in the Uberfix Pty Ltd account [Lance] could withdraw and transfer the money from the Uberfix bank account” to an account controlled by him (Ibid, paragraph 38(c)), and $106,560 was repaid or paid to Lance by this means. (Ibid, paragraph 38(d)) A final payment of $24,000 was paid “on 9 August 2018 ... in full repayment of [Lance’s] alleged full contribution to the Eumeralla project.” (CB 30, paragraph 38(e)) If the defendants were held liable to the plaintiffs in any amount, it was said these amounts were relied on as a set-off. (Ibid, paragraph 39)
Reply
121In their Reply dated 30 September 2020, the plaintiffs generally joined issue with the defendants’ defence, admitting various matters such as, for instance, the rescission of the contract for the sale of the Eumeralla Avenue property. They denied the occurrence of the meeting and agreement of 21 February 2018. They admitted the incorporation of the Uberfix company, but denied that there was any agreement by Jessica to invest money in Uberfix Cleaning Pty Ltd, Uberfix Plumbing Pty Ltd, or Protecty Group Pty Ltd. They said in fact no investment of $320,000 had been made in the alleged new corporate business venture. (CB 34−36) They denied the meeting said to have occurred 21 February 2018. (CB 34, paragraph 15)
Barnes v Addy
122In 1874 the Court of Appeal in Chancery in England considered the liability of third parties relative to trust breaches committed by the relevant trustee. In a passage which has been endlessly referred to and quoted in the 150 years since, Lord Selborne LC said:
“Now in this case we have to deal with certain persons who are trustees, and with certain other persons who are not trustees. That is a distinction to be borne in mind throughout the case. Those who create a trust clothe the trustee with a legal power and control over the trust property, imposing on him a corresponding responsibility. That responsibility may no doubt be extended in equity to others who are not properly trustees, if they are found either making themselves trustees de son tort, or actually participating in any fraudulent conduct of the trustee to the injury of the cestui que trust. But, on the other hand, strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions, perhaps of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees. Those are the principles, as it seems to me, which we must bear in mind ...” (Barnes v Addy, (1874) LR 9 Ch App 244, 251−2)
123On the basis of his Lordship’s analysis just quoted, liability for breaches of trust by third parties who are regarded as accessories to such breaches of trust is said to exist in two circumstances:
(a) where the third party knowingly receives property dealt with by the trustee in breach of trust, known for short as “knowing receipt”, and
(b) where the third party knowingly assists in a dishonest breach by the trustee, known as “knowing assistance”.
124133 years later, in the 21st century and in the new millennium, the High Court of Australia analysed these matters according to the same framework adopted by Lord Selborne in Barnes v Addy: see Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89. In that case, a unanimous five Justice bench reasserted Lord Selborne’s framework and analysis as the appropriate means of resolving disputes as to these matters. According to their Honours Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ:
“It has become common to describe the first limb [of the liability described by Lord Selborne] as involving ‘knowing receipt’ and the second limb as involving ‘knowing assistance’. Lord Selborne LC did not use the expression ‘knowing receipt’. It seems to have been employed first in 1966 by the editors of Snell’s Principles of Equity.” (2007) 230 CLR 89, 140−1 [112]
125Their Honours held that in the case before them, rejecting the reasoning below by the New South Wales Court of Appeal, there had been no knowing receipt of trust property. The alleged “property” was information as to the development potential of certain land. According to the High Court, this was essentially in the public domain and capable of being acquired by a persistent enquirer of the relevant council planning officers. (2007) 230 CLR 89, 143 [117]
126Turning to the second limb of liability described by Lord Selborne, their Honours said:
“As conventionally understood in Australia, the second limb makes a defendant liable if that defendant assists a trustee or fiduciary with knowledge of a dishonest and fraudulent design on the part of the trustee or fiduciary.” (2007) 230 CLR 89, 159 [160]
127As to what constituted dishonesty for the purposes of this analysis, their Honours said:
“As a matter of ordinary understanding, and as reflected in the criminal law in Australia, a person may have acted dishonestly, judged by the standards of ordinary, decent people, without appreciating that the act in question was dishonest by those standards. Further, as early as 1801, Sir William Grant MR stigmatised those who ‘shut their eyes’ against the receipt of unwelcome information.” (2007) 230 CLR 89, 162 [173]
128Their Honours noted that in the English case Baden v Société Générale pour Favoriser le Développement du Commerce et de l’Industrie en France SA [1993] 1 WLR 509, 575−6, the concept of knowledge was analysed as follows:
“(i) actual knowledge; (ii) wilfully shutting one’s eyes to the obvious; (iii) wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make; (iv) knowledge of circumstances which would indicate the facts to an honest and reasonable man; (v) knowledge of circumstances which would put an honest and reasonable man on inquiry.”
129The High Court concluded that any of those first four categories was “sufficient to answer the requirement of knowledge in the second limb of Barnes v Addy”. (2007) 230 CLR 89, 363 [177] Category (v) knowledge would not be sufficient. Their Honours continued, saying that a “dishonest and fraudulent design” for the purposes of the second limb of liability under Barnes v Addy extended to include “not only breaches of trust but also breaches of fiduciary duty; but any breach of trust or breach of fiduciary duty relied on must be dishonest and fraudulent.” (2007) 230 CLR 89, 164 [179]
Conclusions
On-sale or joint venture?
130The starting point in attempting to determine what transactions were entered into and what their legal effect might be, is to resolve the question as to the nature of the initial contractual arrangements between the parties relative to the Eumeralla Avenue property. As noted above, the plaintiffs say that there was an agreement whereby they and the defendants would enter into a joint venture. According to the defendants, the arrangement was a simple on‑sale or sub-sale by Bo to Jessica.
131When the matter returned to court for closing submissions, each party relied on comprehensive written submissions. Both counsel dealt first with the issue I am now considering. Mr Guzzo, for the defendants, in his written submissions, surveyed the competing evidence on this matter in close detail, noting the points of difference between the plaintiffs’ evidence on the one hand and the defendants’ evidence on the other. In answer to a query from me, he said he did not seek to enlarge upon this survey by offering any suggestions as to whether the one account of the “deal” was more probable than the other.
132There are a number of factors which bear upon the relative probability of the two accounts.
133First, it must be thought to be somewhat improbable that Jessica would wish to enter into an arrangement which locked in, for Bo’s benefit, a profit of some $420,000, representing the difference between $3.6m, the alleged price for which the “on‑sale” from Bo to Jessica was to take place, as against the initial sale price of $3.18m, at which Jessica had agreed to purchase the Eumeralla Avenue property.
134Secondly, there is the establishment of the first defendant company by Jeff (see [32] above). If Bo were simply intending to take her profit and disappear from the scene, why bother with the first defendant, Eumeralla Estate Pty Ltd? If there were to be a development scheme promoted by the plaintiffs, it would be for them to establish whatever corporate vehicle seemed appropriate, whether it be a simple proprietary company or such a company as trustee for a unit or discretionary trust.
135To enter into a “sub-sale” via the shares in Eumeralla Estate Pty Ltd would needlessly have incurred a second heavy impost of what used to be called “stamp duty” under the terms of Chapter 3 Part 2 of the Duties Act 2000, though the possible ignorance of the parties as to the operation of these provisions might preclude the placing of too much weight on this consideration. It would seem plausible to suppose that the second defendant, Eumeralla Estate Pty Ltd, was incorporated as part of a joint venture agreement according to the same model as was envisaged relative to an abortive development proposal for a property near the Yarra River in Ivanhoe (see [8]−[9] above).
136Again, the amounts outlaid by the plaintiffs are consistent with the “deal” which they allege; $120,000 paid by them is one-third of a 10 per cent deposit on a purchase price of $3.6m, and the total contribution by them of $550,000 is one-third of a 20 per cent equity contribution representing the amount required by the venturers in such a proposal, assuming that 80 per cent of the cost of land and buildings could be borrowed from a bank.
137The evidence as to what transpired at a meeting at the Westpac Bank branch at The Pines Shopping Centre on 28 December 2017 was, on any view, unsatisfactory. The parties were in debate as to the purpose for which loan funds were sought to be raised. According to the defendants, the purpose was to raise money to enable a sub-sale to the first defendant, Eumeralla, then under the control and ownership of the second and third defendants, with the expectation of a transfer of shares and change in directorship immediately following completion. It may well have been possible to identify the Westpac representative who attended the meeting. She is apparently known as ‘Patricia’, though of Chinese ethnicity. If that were thought unreasonably to protract proceedings, it would seem likely that some form of documentation would have been generated by the bank to record what transpired, and this documentation could have been the subject of a subpoena to produce. As it is, regrettably none of this was done.
138According to Jeff, he brought Jessica and Lance, perhaps introducing them, but remained outside the meeting. If, as would seem likely, the borrowing vehicle for the proposed loan was Eumeralla, Jeff would seem to have been a necessary party as the then sole director. Even if it were accepted that at the time of advance of funds there would be an “instanter change in ownership and directorship”, it seems likely Jeff would have been expected to attend. To look at it another way, having taken the trouble to attend the branch, and having an interest in facilitating the raising of money so that the sub-sale or on‑sale could be completed, there is no reason why he would not have attended the meeting.
139Whichever, as between the defendants’ and the plaintiffs’ accounts, one considers, the relevant account is wildly improbable, principally for the lack of any documentation at all relative to such a significant transaction. Beyond that, all of the improbabilities seem to stand against the defendants’ account.
140Additionally, Mr Paterson, on behalf of the plaintiffs, said there were numerous reasons why the defendants’ evidence should not, based on credit considerations, be accepted on this or other issues. He said that Bo swore an affidavit in a pre-action discovery application denying payment of $430,000 into Eumeralla’s account, where at trial this was ultimately admitted. He said Bo’s explanation at T526−7 that her affidavit referred only to payments made by or on behalf of Jessica, and not Lance, was unconvincing. He mentioned various other matters which it is at this stage unnecessary to traverse.
141Simply on the basis of the inherent probability of the plaintiffs’ account and the improbability of the defendants’ account, I conclude that the arrangement between the parties was as alleged by the plaintiffs: that is, a joint venture proposal, and not an “on‑sale” or “sub-sale” as alleged by the defendants.
142In his written closing submissions at paragraph 25, Mr Guzzo, for the defendants, admitted the plaintiffs had paid $430,000 into Eumeralla’s bank account.
New Year’s Eve agreement
143This matter is described at [46]−[47] above. This is a simple matter of a clash of evidence between Lance and Jeff. Given the finding that I have already made to the effect that the plaintiffs have given a true account of their agreement with the defendants, and the second and third defendants have not, it would seem inherently likely that Lance’s denial of these events is true, and Jeff’s assertion that they occurred is not. I am fortified in that view by the following additional considerations.
144The New Year’s Eve arrangement was part of a narrative explaining how the payment to Lance of some $130,000 should be seen as a reduction of the $430,000 which had been paid to Eumeralla by the defendants in accordance with an agreement reached between Lance and Jeff. The $130,000 was said to have represented Jeff’s profit share arising out of the operation of Uberfix Pty Ltd, the nature of which is described above at [74]−[93]. In particular, according to Lance, the $130,000 which he received represented money to which he was entitled on the basis that the turnover from his own enterprise, Water Element Plumbing, had been run through the books of Uberfix Pty Ltd to give it a turnover and appearance of substance which it did not in truth have – see [84] According to Jeff’s account, he informed Lance that the payment of $130,000 could be made from the profits of Uberfix. (T664, L21−T665) In the event, there was no share of profit available to Jeff from Uberfix to make the payments totalling $130,000. Its profit for the year ending 30 June 2018 was $6,179 after tax, and for the period ending 30 June 2019 a loss of $966 was transformed into a profit of $5,073 only by reference to retained earnings of $6,039 from the previous financial year. This would seem to mean that only some $300 was available for distribution as a profit to Jeff in those two financial years.
Meeting of 21−22 February 2018
145The competing evidence on this point is to be found at [49]−[50]. Once again, the probabilities are against the defendants’ account of these matters and in favour of the plaintiffs’. The WeChat transmissions referred to in paragraph [50] above are consistent with Jessica’s account of having visited Bo’s house to act as babysitter, and inconsistent with an intense debate on business issues lasting into the early hours of the following morning.
146Again I conclude, based on the evidence reviewed above, that the Uberfix companies were of no substance. They were to some extent a sham, creating an appearance of substance by running turnover from other enterprises through their books. It is inherently unlikely that the plaintiffs would have turned aside from what appeared to be a credible real estate development opportunity to tipping hundreds of thousands of dollars into enterprises which, to their knowledge, lacked any substance.
147The plaintiffs alleged that the minutes were bogus, and sought by computer investigation to demonstrate that they had been brought into existence after the alleged date as recent inventions. A report or reports from an independent computer expert was inconclusive. The expert could not determine the matter one way or another, in light of the installation of new software after the relevant dates.
148The defendants’ explanation for the provenance of these minutes was that they had been generated on a computer which had been removed from Uberfix’s premises in Huntingdale Road, Burwood; an event which admittedly occurred on 2 January 2020 – see [67]. Lance agreed that if the contentious minute had been part of the memory of the computers which he removed in January 2020 he might have deleted it – see [68].
149Jeff was cross-examined at some length on this subject. I found his answers to this cross-examination unimpressive and unconvincing. The computers had, according to Jeff in his evidence-in-chief, been purchased by Uberfix and included in its depreciation schedule. (T681, L11−17) I enquired as to the depreciation schedule, observing “If that register were before me, that would add credibility to [Jeff’s] version of the ownership.” (T682, L4−5) No depreciation schedule was produced. The relevant computer was described by Jeff as an “old Mac”. Apparently, another computer had been acquired which was described as the “new Mac”. (T751, L1−4) The old Mac had been provided by Lance. (Ibid, L5−6)
150Jeff was then taken to an affidavit which he had affirmed on 19 January 2021 in which he described the two computers as being “the Uberfix office computer” and “the Uberfix admin computer” (CB 69, paragraphs 27−28). Mr Paterson, cross‑examining, observed that this account said nothing about the “old Mac”. When I asked about what the depreciation schedule showed, he said “Oh, we should be putting it as expenses together” (T752, L29−30), which I took to mean that the cost of the computer had been deducted as a business expense in one hit. (T753, L31–T754, L2). Jeff said his reference the previous day during evidence-in-chief to the computer’s being on a depreciation schedule was a mistake. (T754, L3−4). Mr Paterson pressed for some sort of accounting record of the relevant computer, but none was produced.
151There are also issues as to the intrinsic plausibility of the view that Jessica, on behalf of herself and her brother-in‑law Lance, would have agreed to the matters recorded in the minutes. One of the items authorised the application of $25,000 of the monies deposited by the plaintiffs with Eumeralla “as management fees to Jeff [to] remain [in] the position as director in the company [viz Eumeralla]”. This would appear to be a payment popularly characterised as “golden handcuffs”. In passing, one might note that this portion of the alleged resolutions would not seem to attempt to bind Jeff to remain as a director of Eumeralla for any particular period of time.
152More fundamentally, however, one asks why would it have been perceived to be in the interests of the plaintiffs for Jeff to continue as a director of Eumeralla? The evidence did not disclose Eumeralla as having taken any active steps at all in the contested transactions. Its role was purely passive, to provide a bank account and to accept nomination as purchaser under the contract for the Eumeralla company. I expressed scepticism as to this during Lance’s examination-in-chief (T283, L15−22). I returned to this issue during Jeff’s cross-examination, asking him what the rationale for his receiving the payment might have been. He replied, “I don’t think is that much money.” (T745, L3−13) He said the figure of $25,000 was agreed to by Bo and Jessica. I asked what explanation had been given to Jessica relative to this payment and the figure chosen, and his reply was: “We made me as a position as a director for Eumeralla.” (Ibid, L15−28) Jeff said, “So, if you ask someone to holding in, like, as in – working in a company as a director so there’s some fees, I think, is reasonable.” (T746, L1−4) The implausibility of all this is emphasised by Jeff’s relative lack of involvement in these transactions. On nobody’s account did he play a leading role. On his own account, he did even less than the plaintiffs allege. He denied attendance at the important meeting at the Westpac branch. He conceded, “Yeah, I didn’t do anything, Your Honour, but Bo was assisting them to – during the time, right?”
153By 21 February 2018 the vendors of the Eumeralla Avenue property had served two rescission notices. The application for finance from Westpac appeared to have failed and there was no alternative on the horizon. What would the rationale be for paying $30,000 to “carry on the process of the permit which includes architecture cost, building permit, planning permit and finance application cost etc”? Whether the transaction between the parties was a joint venture or a simple “on‑sale”, there has been no attempt by the defendants to account for this money to the plaintiffs. Similarly, the $20,000 “estimated legal fees to Bo if apply”.
154Proceedings were commenced on Bo’s behalf seeking to recover the 5 per cent deposit paid to the vendors – see [73] above. These proceedings were taken without reference to the plaintiffs, and there has been no attempt to account to them for the outcome.
155Why, one may ask, would Jessica agree on her own behalf and on behalf of Lance to a $25,000 service charge “to Bo to carry on the purchase with the vendor and pre-project management fees”? On the defendants’ case, Bo, or Eumeralla, was already making a handsome profit via the on‑sale. On this case, Bo was managing dealings with the vendor solely for her own benefit or perhaps for herself, Jeff, and Eumeralla. Why should she receive a management fee? And, more pertinently, is it credible that the plaintiffs, via Jessica, would have agreed to this, particularly since the minute also provides for further fees to Bo “to negotiate the terms with the vendor since the default notice is served”?
156For all these reasons, I accept the plaintiffs’ account of the non-occurrence of the lengthy meeting on the night of 21−22 February 2018, with the consequence that I must regard the minutes being Annexure A to these reasons as bogus.
Withdrawal of funds
157In closing submissions, Mr Guzzo, counsel for the defendants, conceded the evidence established that withdrawals were made from Eumeralla’s bank account totalling $429,591. (Closing submissions, paragraphs 39−41). This matter must therefore be taken as established for the purposes of the proceeding.
Further withdrawals made with the knowledge of each of Bo and Jeff
158In closing submissions, Mr Guzzo noted Jeff’s admission that he had made the withdrawals himself. (Closing submissions, paragraph 42) His knowledge of the withdrawals is therefore established.
159As regards Bo, he noted that she did not have authority to operate the Eumeralla account. (T525, L4−5) Mr Paterson, on behalf of the plaintiffs, noted that Bo and Jeff had been married for eight years and had been a couple for four years before that (T466, L3, L23−25), and that since the birth of their son they had had joint bank accounts (T466, L26–T467, L4).
160Whilst Bo did not have authority to operate the Eumeralla account, she had provided the details to Jessica and Lance to enable them to pay money into it. (T525, L18−29) Mr Paterson noted that Bo said she was aware of the $100,000 cash withdrawal from the Eumeralla account on 19 March 2018 and that she knew the withdrawal was made by Jeff. The withdrawal, she said, was “To do what we been agree to. So, some legal fees and finance and then other things we been agreed to.” (T569, L14−22) The reference to the things that had been agreed to was apparently to the minutes of the alleged agreements on 21 February 2018.
161Bo denied making withdrawals from the Eumeralla account. (T623, L21−23) She added, “But I didn’t take any money from Eumeralla account.” (Ibid, L24−25) This of course is inconsistent with the view that the $100,000 cash withdrawal was applied for the purposes set out in the 21 February 2018 minute, because some of these purposes entailed payments to Bo. When pressed by Mr Paterson on the point, Bo said: “I did know [presumably about the various withdrawals] when I saw the statement ... sometime later on, the end of 2019.” (T623, L24−29)
162On the basis of these matters, it must be taken as established that Bo was aware of the withdrawal no later than “late 2019”. The question posed by the parties, however, enquired inter alia as to whether the withdrawals were made “with the knowledge ... of Bo”. This implies, as I would understand it, prior knowledge. Ex post facto knowledge would be insufficient. The $100,000 cash withdrawal seems to be in a somewhat different situation. According to Bo, this withdrawal was made in accordance with an agreement made inter alia between her and Jessica on the evening and night of 21−22 February 2018. As to the $100,000 cash withdrawal, I conclude that this withdrawal was made with the prior or concurrent knowledge of Bo.
163The evidence relied on as to Bo’s prior or concurrent knowledge relative to the other withdrawals is less definitive. If the plaintiffs’ case is accepted, the actions of Jeff and Bo, if they were taken with Bo’s prior or concurrent knowledge, might constitute criminal offences. Whilst the quantum of proof remains on the balance of probabilities, these are grave matters, and the gravity of what is alleged must be taken into account in considering whether the allegations against Bo with respect to the withdrawals other than the $100,000 cash withdrawal have been made out – see s140 of the Evidence Act 2008. Whilst this section might be regarded as having codified the law on these issues, in my experience the seminal judgment of Dixon J, as he then was, in Briginshaw v Briginshaw (1938) 60 CLR 336, continues to be regarded as providing authoritative guidance on these points. In Briginshaw the issue was the proof, for the purposes of a divorce application, of an allegation of adultery. In that case his Honour denied that there was any third quantum of proof standing between the balance of probabilities in civil proceedings and proof beyond reasonable doubt in criminal proceedings. He said:
“Except upon criminal issues to be proved by the prosecution, it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal. But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal.” ((1938) 60 CLR 336, 361−2)
164His Honour summed these matters up, stating:
“When, in a civil proceeding, a question arises whether a crime has been committed, the standard of persuasion is, according to the better opinion, the same as upon other civil issues ... But, consistently with this opinion, weight is given to the presumption of innocence and exactness of proof is expected.” ((1938) 60 CLR 336, 363)
165Applying these principles, I am satisfied that the $100,000 cash withdrawal was made with the knowledge in the relevant sense of Bo, but that such knowledge is not established with respect to the other withdrawals. Nevertheless, this knowledge, as explained, is insufficient in itself to render her liable for Eumeralla’s breaches of trust.
Were the withdrawn funds (or any of them) applied towards the purchase of Jeff’s property at 695 Toorak Road, Kooyong?
166Mr Guzzo, on behalf of the defendants, conceded that some $173,999, consisting of a withdrawal of $150,000 on 20 July 2018 and $23,999 on 9 August 2018, was paid into Jeff’s bank account. (Closing submissions, paragraph 44)
167Mr Guzzo further conceded that some $348,000 from Jeff’s account was applied, via his solicitors Butera & Co, toward the payment of the purchase price for the property at 695 Toorak Road, Kooyong. More precisely, some $340,740.41 was paid as part of the settlement of the purchase. The balance presumably was paid for legal costs, stamp duty, etc. (Closing submissions, paragraph 47)
168According to Mr Paterson, on behalf of the plaintiffs, the relevant figure was $273,999. The difference between the figure conceded by Mr Guzzo and this larger figure asserted by Mr Paterson was a deposit into Jeff’s account on 20 July 2018 of some $100,000, described on Jeff’s bank statement as “WHITEKNIGHT BUSI Loan WK”. In cross-examination, Mr Paterson put to Jeff, relative to this $100,000 deposit, “This is 100,000 out of the 150,000 that’s come from Eumeralla’s account, isn’t it?---No, that’s not true.” (T776, L10−11) Jeff said that he had $200–$300,000 in the White Knight account at the relevant time. (Ibid, L17−18)
169Fact-finding on this issue is embarrassed by the absence of the White Knight accounts. Jeff’s answer last quoted appears to concede that he controlled the White Knight account. No attempt appears to have been made to obtain the White Knight account records via Jeff whilst he was in the witness box via a notice to produce under Order 35 or a subpoena to produce addressed to the relevant banking institution. Mr Paterson contended that Jeff’s denial on this issue should not be accepted. He did not elaborate as to why this might be.
170Certainly equity makes a number of presumptions against fiduciaries and trustees who are in breach of trust and designated as “wrongdoers”: Meagher, Gummow and Lehane’s Equity: Doctrines & Remedies (5th ed) [23‑260]–[23‑325]. The effect of such presumptions may be to create, in effect, a burden of proof as to exculpation upon the “wrongdoer” such that, in the absence of evidence, a relevant loss is presumed to have been sustained by the innocent party. I was not taken to any authority as to whether similar presumptions applied to accessories to breach of trust, as distinct from the fiduciaries and trustees themselves. Meagher, Gummow and Lehane indicate there is a presumption against wrongdoers who destroy evidence and render it unavailable (op cit [23‑275]), citing Armory v Delamirie (1722) 1 Stra 505 and Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46.
171In the present case, no particular presumption has been identified which would lead to my rejection of Jeff’s evidence. There is no suggestion that he has destroyed White Knight’s records or that straightforward procedural steps could not have had them placed before the court. In those circumstances, in the absence of further evidence linking the $100,000 which entered Jeff’s account via White Knight, it would be wrong to regard it as having emanated from the funds deposited with Eumeralla.
Were the funds withdrawn from Eumeralla (or any of them) applied in accordance with the alleged Change in / Uberfix Investment Agreement?
172The Uberfix Investment Agreement referred to in the subheading to this section is referred to at paragraphs 29−34 of the Defence. According to paragraph 29, this agreement was “partly ... oral and partly to be implied”. It was constituted by discussions between Bo, Jeff and Jessica on or about 21 February 2018. I have already made findings that these alleged discussions did not take place, and that the matters recorded as having been agreed in the Eumeralla corporate minute annexed to these reasons were not agreed upon. In one sense, therefore, this question may be regarded as moot. Since the agreement was not made, none of the funds could have been applied in accordance with it.
Was $106,560 paid by or on behalf of Jeff to Lance through his business Water Element Plumbing between January and August 2018 pursuant to the alleged mutual agreement, or were those funds paid for some other purpose?
173I have already found that the mutual agreement did not occur. Further, I have rejected the evidence of Bo and Jeff on a number of crucial points, including the making of the mutual agreement and the meeting and alleged agreements of 21 February 2018. Their evidence on these and other crucial points is lacking in credibility and implausible. I therefore accept the evidence given by Lance that the payments made to him were made because they represented profits which derived from his efforts and his business, and were nominally passed through the books of Uberfix Pty Ltd or other Uberfix companies for the purpose of lending an air of substance to them which they did not deserve.
Did Jeff pay Lance $24,000 on 9 August 2018 pursuant to the alleged mutual agreement, or were those funds paid for some other purpose?
174According to Jeff’s evidence, he paid $24,000 to Lance pursuant to the mutual agreement . (T773, L22–T775, L2) Eumeralla’s account showed a withdrawal of $23,999 made on 9 August 2018, notation “Withdrawal Mobile ... Pymt chi yung c”, which seems to have been received into Jeff’s bank account. (CB 970, 1195) Jeff said that he had money “lying around”. (T772, L22–T775, L2) Lance denied receipt. (T310, L16−21; T311, L7−15)
175I have rejected the contention that there was a mutual agreement and have already rejected Jeff’s evidence on a number of crucial matters based on implausibility and lack of credibility. There is no written evidence of the payment’s ever having been made. No such payment was made.
Did Jessica demand return from the defendants of $550,000 on 7 February 2020?
176Letters of demand appear at CB 1199 and 1201. The defendants denied receipt of these letters. (T612, L28–T613, L16) Since the making of a demand does not appear to be an element of any of the causes of action relied on in the present proceeding, this matter is not material to the outcome and no finding is required.
Were any withdrawals from the funds held by Eumeralla in breach of any trust owed by Eumeralla to the plaintiffs?
177My findings already made indicate that the funds held by Eumeralla deposited by the plaintiffs were held by Eumeralla for the purposes of completing the purchase of the property in Eumeralla Avenue and carrying out a redevelopment of that property. According to Mr Paterson, the purpose of the trust had failed and as a result the monies were held by Eumeralla on a bare trust for the plaintiffs. Eumeralla was liable to compensate the plaintiffs for the loss of those funds. He referred to Target Holdings Ltd v Redferns (a firm) [1996] 1 AC 421, 434−6, per Lord Browne-Wilkinson.
178In Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567, the House of Lords (Lord Reid, Lord Morris of Borth‑Y‑Gest, Lord Guest, Lord Pearce and Lord Wilberforce) held that where funds had been advanced to a company, Rolls Razor Ltd, for the purpose of paying a dividend which payment was prevented by the company’s going into voluntary liquidation, the funds were held on resulting trust for the lender. The present situation appears to be analogous to the one confronting the House in Rolls Razor. The primary purpose for the advance of funds by the plaintiffs having failed, Eumeralla held those funds on resulting trust for the plaintiffs.
179I have rejected as untrue the defendants’ contentions that their application of the funds held by Eumeralla was in accordance with arrangements agreed to by the plaintiffs. I accept the evidence of the plaintiffs that they did not know or approve of the withdrawals.
Did Bo and Jeff knowingly participate in Eumeralla’s breaches of trust?
180Mr Paterson submitted:
“A person other than the trustee of a trust is liable for any loss incurred to the trust as a result of his or her being a party to a dishonest, fraudulent or improper disposition of trust property in breach of that trust.
That person must have knowledge of the trust itself and of the facts constituting the breach, though the morally obtuse cannot escape liability by failure to recognise an impropriety that would have been apparent to an ordinary person.”
He referred to Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89. (Closing Submissions, paragraphs 116 – 117)
181The evidence established that it was Jeff who effected the withdrawals. His participation in the trust breaches is therefore not in question. Did he participate in those breaches knowingly? Mr Guzzo noted that Jeff was aware that the monies which he withdrew had been paid into Eumeralla’s account by the plaintiffs. (T706, L30–T707, L6) Nevertheless, said Mr Guzzo, Jeff could not be regarded as having knowingly participated in a breach of trust because he believed the withdrawals were justified by the “on‑sale agreement” between Bo and Jessica on 2 September 2017 and the Uberfix Investment Agreement on 21 February 2018.
182I have already recorded my findings that neither of these alleged agreements in fact occurred. Jeff signed the minute recording the alleged agreement on 21 February 2018 which I have found did not occur. Logically, he must have been aware of this. In light of his involvement in these transactions he must also have been aware that there was no “on‑sale agreement”. Jeff’s signature of the bogus minute is intelligible only on the basis that, first, he knew that the funds standing to the credit of Eumeralla could be moved and spent only with the authority of the plaintiffs, and secondly, that being aware that the minute was bogus in the sense of purporting to record a meeting and a set of agreements which never occurred, he must have known that this was wrong. As regards Jeff, therefore, the requirement for liability under the second limb of Barnes v Addy has been made out.
183More specifically, if there had been an on‑sale agreement, the monies held by Eumeralla and contributed by the plaintiffs would have been payable if, and only if, Bo or Eumeralla was able to convey title to the Eumeralla Avenue property. The 21 February 2018 minute referred to the “default notice” which had been served, which would, unless dealt with, preclude completion of the purchase of the Eumeralla Avenue property by Eumeralla or Bo.
184The transcript page relied on by Mr Guzzo, T707, has Jeff saying that Eumeralla was his company, and the money, once deposited, was Eumeralla’s money and therefore his. (T707, L9−10) This does not, to my mind, indicate a belief by Jeff that the “on‑sale agreement” authorised his retention of the money. Precisely what he had in mind remains unclear. Given that I have rejected his evidence on so many points, I would not accept that his account of his state of mind and beliefs as to his entitlement was correct. In my view, Jeff knowingly participated in Eumeralla’s breaches of trust.
185Mr Paterson contended that Bo should be regarded as a knowing participant in the withdrawal of funds, based upon two considerations. First, he said, she was generally aware of what Jeff had done. He said, according to Jeff, he (Jeff) had told Bo about these various matters and assumed she had passed that knowledge on to Jessica and Lance. (Closing submissions, paragraph 61(c); T768, L21−29) Secondly, because of a number of matters which, he said, were set out at paragraph 41 of his outline of closing submissions, and were as follows:
(a) the opportunity to do so, evidenced by Jessica’s evidence that she thought of Bo as like an older sister, Lance’s evidence to the effect that his family was socially friendly with Bo and Jeff; and Bo’s acceptance in cross-examination that she was at least starting to become close to Jessica in August 2017, they were chatting about many things, such as relationships, children, education and fashion, that Jessica wanted to become another Bo; and that Jessica had told her that she saw Bo as a bigger sister;
(b) Bo not having provided Jessica or Lance with a copy of the actual contract of purchase, which would have disclosed the true purchase price and deposit terms;
(c) Bo having taken control of the borrowing process to fund the purchase and development of the property;
(d) Bo having controlled all discussions with the vendor, including in relation to the termination of the sale contract;
(e) Bo having failed to inform Jessica or Lance of the notices of default according to Jessica and Lance, or of the termination of the contract or demand for return of the deposit or of any dispute with the vendor, those last two of which Bo admitted she had not provided to them, though she alleged she told them, and noting that neither Jessica nor Lance were cross-examined about any such conversations;
(f) Bo having continued to converse with Jessica, following and despite being fully aware of the termination of the contract to purchase the property, as if that contract was still on foot; and with Lance, telling him that the delays in settlement were because of hold-ups in increasing the development of the property from 7 to 9 units;
(g) Bo having implied that the plaintiff’s money remained in the Eumeralla account, even though it had then been withdrawn, by saying nothing about the withdrawals:
(i)in 29 August 2018, when Jessica asked if she could take $300,000 of the monies that she had paid into the Eumeralla account and put it back when it was needed;
(ii)similarly on 15 November 2018, when Jessica asked if she could withdraw $300,000 for the purpose of putting it into her mortgage temporarily, Bo said “I will ask”; and
(iii)at some stage more than half a year after settlement was supposed to occur in December 2017, Lance asked for the money back, he and Bo got into an argument and Lance backed down.
(h) Bo having positively asserted on 31 January 2020, in the course of the recorded telephone call, that:
(i)the contract for the purchase of the property could still proceed, despite the vendor having asserted that the contract had been terminated at least by 7 May 2018, and Bo having instructed her lawyers to demand repayment of the deposit from the vendor by 16 May 2018;
(ii)the plaintiff’s monies remained in the Eumeralla Account.
(i) Jessica having taken steps to confront and record Bo’s responses, set out in the translation of that telephone conversation (from CB 643), following the discovery by Lance of the true contract terms, conveyed to Jessica, in January 2020;
(j) Bo having assured Jessica that she and Jeff had contributed their $1.1 million towards the purchase and development costs of the Eumeralla property into the Eumeralla account, when the Eumeralla account statements disclose no such deposits;
(k) Bo having failed to provide the bank statements of Eumeralla, despite promising to do so, and notwithstanding her strained claims that she did not understand what was being asked of her, until she and Jeff were forced to do so, as a result of the plaintiff’s application for pre-action discovery in early 2020.
186In a general sense it must be concluded that Bo and Jeff were “in it together”. Nevertheless, finding against Bo on the basis of the matters referred to by Mr Paterson, nor the general view that as spouses they were likely to know what one another were doing, without more is not, in my view, consistent with the principles laid down in Briginshaw and s140 of the Evidence Act 2008 (which must guide us on fact-finding on matters such as this). None of these matters, alone or in combination, sufficiently establishes Bo’s knowing participation.
The Uberfix agreement
187The next of the questions agreed upon as important by the parties raised a number of issues on the premise that a finding was made to the effect that the alleged “Uberfix agreement” was in fact made. I have found that it was not, and therefore the more particular questions raised do not arise.
188The next question was said to be relevant in light of a finding that the Uberfix agreement was not in fact made.
Fate of recovered deposit
189As identified above, the proceeding brought in Bo’s name was compromised for an all-in figure of $50,000, which, given that the proceeding had run for some time, would have led to a net recovery of nothing, almost nothing, or a negative value. This question, therefore, seems to be academic. Mr Guzzo said that the evidence disclosed a balance of $5,000 as being recovered from the deposit. Both parties agreed that on the stated premises, the appropriate recovery for the plaintiffs would be $3,773.58. (Plaintiffs’ outline of closing submissions, paragraph 150; defendants’ outline of closing submissions, paragraph 87)
Liability of defendants
190Mr Paterson contended that Jeff had caused the withdrawal of the sum of $429,591 from the Eumeralla account, and had knowingly participated in that breach of trust, and should be liable for that amount. Mr Guzzo, at paragraph 88, denied this proposition but gave no reasons.
191Based on the findings which have been made, Jeff should be liable for $429,591 as a knowing participant in Eumeralla’s breaches of trust.
Set-off
192Mr Guzzo contended that the defendants were entitled to a set-off of $130,560, but only upon the premise that the mutual agreement was found to have been made. Since I have found that no such agreement was made, this set-off claim must therefore fail.
Knowing receipt
193In his opening remarks, counsel for the plaintiff, Mr Paterson, said:
“There is a knowing receipt case and that’s not articulated I should say but that’s certainly the case we put. And, I should say, not having put that case formally on the pleadings, it’s only fairly recently in these proceedings that we’ve obtained discovery of these documents in order to be able to follow that money trail.” (T41, L3−9)
194I said:
“Am I to take it that you wish to pursue a case for knowing receipt relative to these items?”
195Mr Paterson said: “Yes.” (Ibid, L10−13)
196In closing submissions, Mr Paterson propounded a proposed Amended Statement of Claim including a knowing receipt claim against Jeff constituted by proposed paragraph 12A. This proposed paragraph mounted a claim against Jeff for knowing receipt in the sum of $273,999. Included amongst the monies allegedly “knowingly received” was $100,000 deposited in Jeff’s account from the White Knight account and designated as “WHITEKNIGHT BUSI Loan WK”.
197Mr Guzzo objected to this late amendment to the plaintiffs’ Statement of Claim. In oral closing submissions, which do not seem to have been transcribed, he mounted the classic objection to such an amendment: namely, that had the pleadings been amended, different evidence might have been adduced. When I asked him specifically to identify some piece of evidence which might have been called, or a line of cross-examination which might have been pursued, he was unable to do so.
198Mr Paterson said the considerations which should inform the court’s discretion as to whether to allow the late amendment had been stated in a joint judgment of Kyrou and McLeish JJA in Northern Health v Kuipers [2015] VSCA 172 at [39]. He relied on the following passage:
“[T]he factors that the High Court in Aon considered as relevant to an application to amend a pleading include:
(a) whether there will be a substantial delay caused by the amendment;
(b) the extent of any wasted costs;
(c) whether there is an irreparable element of unfair prejudice caused by the amendment;
(d) concerns of case management arising from the stage in the proceeding when the amendment is sought;
(e) whether the grant of the amendment will lessen public confidence in the judicial system; and
(f) whether a satisfactory explanation has been given for seeking the amendment at the stage when it is sought.”
199In the present case, a knowing receipt claim appears to be available upon the plaintiffs’ evidence, assuming it is accepted. No delay would be entailed in allowing the amendment, and counsel for the defendants would have to concede that, had this claim been pleaded from the start, it would not have affected the evidence adduced at trial. In summary, therefore, this late amendment has an entirely different effect from the one permitted by the trial judge in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175. I grant leave for the plaintiffs’ Statement of Claim to be amended so as to include a claim for knowing receipt.
Tracing
200Mr Paterson, on behalf of the plaintiffs, seeks a declaration recognising a beneficial interest of the plaintiffs in the Kooyong property. He says this relief should be granted on the basis of “tracing”. He referred to the decision of the House of Lords in Foskett v McKeown [2001] 1 AC 102, in particular in the speech by Lord Millett. Describing the process of tracing, his Lordship observed that the holder of a bank account owns no money “at the bank”. He said:
“Money paid into a bank account belongs legally and beneficially to the bank and not to the account holder. The bank gives value for it, and it is accordingly not usually possible to make the money itself the subject of an adverse claim. Instead a claimant normally sues the account holder rather than the bank and lays claim to the proceeds of the money in his hands. These consist of the debt or part of the debt due to him from the bank. We speak of tracing money into and out of the account, but there is no money in the account. There is merely a single debt of an amount equal to the final balance standing to the credit of the account holder. No money passes from paying bank to receiving bank or through the clearing system (where the money flows may be in the opposite direction). There is simply a series of debits and credits which are causally and transactionally linked. We also speak of tracing one asset into another, but this too is inaccurate. The original asset still exists in the hands of the new owner, or it may have become untraceable. The claimant claims the new asset because it was acquired in whole or in part with the original asset. What he traces, therefore, is not the physical asset itself but the value inherent in it.” [2001] 1 AC 102, 128
201His Lordship continued:
“Tracing is thus neither a claim nor a remedy. It is merely the process by which a claimant demonstrates what has happened to his property, identifies its proceeds and the persons who have handled or received them, and justifies his claim that the proceeds can properly be regarded as representing his property. Tracing is also distinct from claiming. It identifies the traceable proceeds of the claimant’s property. It enables the claimant to substitute the traceable proceeds for the original asset as the subject matter of his claim. But it does not affect or establish his claim.” (Ibid)
202Having reviewed English and US authorities, his Lordship said, in a passage relied on by Mr Paterson:
“Where a trustee wrongfully uses trust money to provide part of the cost of acquiring an asset, the beneficiary is entitled at his option either to claim a proportionate share of the asset or to enforce a lien upon it to secure his personal claim against the trustee for the amount of the misapplied money. It does not matter whether the trustee mixed the trust money with his own in a single fund before using it to acquire the asset, or made separate payments (whether simultaneously or sequentially) out of the differently owned funds to acquire a single asset.” [2001] 1 AC 102, 131
203Mr Paterson stated these principles applied alike to persons such as Jeff, whom he described as “indirect recipients of funds”. He referred to Fistar v Riverwood Legion & Community Club Ltd (2016) 91 NSWLR 732, 746 [62]−[63], per Leeming JA.
204Mr Guzzo referred to the same authorities, namely Foskett v McKeown and Fistar v Riverwood Legion & Community Club Ltd.
205He contended that, at most, $173,999 could be “traced” into the Kooyong property. Necessarily, this entailed a denial that the $100,000 which was paid into Jeff’s account from the White Knight account could be regarded as emanating from Eumeralla. For reasons already given above, I concur in Mr Guzzo’s contentions as to this matter.
206It would follow that, other things being equal, the plaintiffs should be entitled to trace $173,999 into the asset for which the price was partly met by that amount originating as trust monies in the hands of Eumeralla.
207Mr Paterson proposed a form of order that would entail sale of the Kooyong property if the amounts found to be due to the plaintiffs were not paid within 30 days. In the course of closing submissions, I noted that the form of sale which was being sought was the one appropriate in a situation of co‑ownership rather than where the claimant was asserting merely an interest as mortgagee or chargee. Mr Paterson agreed, and said that was properly so in circumstances where an ownership right was asserted via the process of tracing. According to Lord Millett’s analysis in Foskett v McKeown [2001] 1 AC 102, 128, an owner mounting an effective tracing claim may, at his option, lay claim to a share of the asset into which the claimant’s property is placed, or enforce a lien to secure a personal claim against the trustee. (See [202] above.) His Lordship’s statement was quoted with apparent approval by Hargrave J, as he was then, in Sino Iron Pty Ltd v Worldwide Wagering Pty Ltd (2017) 52 VR 664, 763 [366]. That passage, and its approval by Hargrave J, was further approved by the Court of Appeal (Kyrou, Kaye and Sifris JJA) in AE Brighton Holdings Pty Ltd v UDP Holdings Pty Ltd [2020] VSCA 235 [33]. The relief which Mr Paterson sought on behalf of his clients indicates an exercise of option on their part to assert ownership of a proportionate share of the Kooyong property, rather than treating it as a lien to secure a personal claim.
208The jurisdiction over co‑ownership disputes relative to land and goods is by Part IV of the Property Law Act 1958, now granted to the Victorian Civil and Administrative Tribunal. The form of sale sought by Mr Paterson could be made by the tribunal under that part of the Property Law Act. Section 234C, being located in Part IV of the Property Law Act, provides that, subject to its terms, the Supreme Court and this Court “do not have jurisdiction to hear an application under this Part”. (Subsection (1)) Subsection (4), however, grants this Court jurisdiction to hear an application under Part IV if, in any proceeding which has commenced in the Court, “the issue of co‑ownership of land ... arises in the course of that proceeding”, which appears to be the situation here. Section 234D of the Property Law Act empowers this Court to make any order “which VCAT could make under this Part [IV]”.
Disposition
Standard of proof
209All findings as to matters of alleged fraud and dishonesty have been made cognisant of and in accordance with the principles stated in s140 of the Evidence Act 2008 and Briginshaw v Briginshaw (1938) 60 CLR 326, referred to above.
210Whilst little has been said as to the situation of the first defendant, Eumeralla, it was, for reasons explained, trustee of the monies deposited with it by the plaintiffs. The disbursement of those monies effected by its director Jeff constituted a breach of trust. Eumeralla, therefore, is liable for that breach of trust and subject to any appropriate remedies. Presumably, this is a matter of academic interest only, because there is nothing to suggest that Eumeralla itself has any assets.
211As to the situation of Bo, paradoxically, as the person who seems to have been the “driver” of all these matters, it has not been demonstrated that she received any trust property, whether knowingly or otherwise, and, as explained, I do not believe it has been proven to the necessary standard that she was a knowing participant in Eumeralla’s trust breaches.
212Jeff was a knowing participant. His was the hand and the mind that misappropriated the plaintiffs’ money. For reasons explained, he did this knowing that he was involved in misappropriation. He is therefore liable as a knowing assistor under the second limb of Barnes v Addy. He is also liable as having knowingly received $173,999 and the $100,000 cash withdrawal.
213As to the Kooyong property, the plaintiffs are entitled to trace $173,999 of their funds into that property. The effect, as noted above, of such a finding is that they should be declared to have a corresponding beneficial interest in the Kooyong property. As explained earlier, the court has power to order a sale and division of proceeds of that property in accordance with s228 of the Property Law Act 1958.
214I will direct the parties within 14 days to bring in short minutes to give effect to these reasons.
Costs
215I have heard no submissions on the question of costs and so I will reserve them.
Annexure A: ‘Minutes of a Meeting Eumeralla Estate Pty Ltd’
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