Clarke v Edwards - [2007] SADC 49

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
CLARKE v EDWARDS
[2007] SADC 49
Judgment of His Honour Judge Millsteed
1 May 2007
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES
Defendant alleged to have entered into oral contract with plaintiff’s agent to borrow from the plaintiff money in the sum of $100,825 – loan to be repaid by November 2002 – Alternative position put before Judgment delivered that defendant’s nephew and/or two offshore companies borrowed the money and defendant agreed to indemnify plaintiff if funds not repaid by due date – loan not repaid – whether defendant liable – defendant denied borrowed money or agreed to provide indemnity - judgment for defendant.
Whether recording made by plaintiff's agent of conversation between agent and defendant admissible in civil case - discussion as to Listening and Surveillance Devices Act 1972 (SA).
Letters from investors of investment schemes to be sent to ASIC - whether letters constitute business records for the purpose of s45A of the Evidence Act 1929 (SA).
Corporations Act 2001 (Cth) Chapter 5c; Evidence Act 1929 (SA) s45A; Listening and Surveillance Devices Act 1972 (SA) s3, s4, s7, referred to.
Karl Suleman Enterprizes Pty Ltd (in liq) v Babanour [2004] NSWCA 214; Australian Securities Investment Commission v Atlantic 3 Financial (Aust) Pty Ltd [2006] QSC 132; Australian Securities and Investments Commission v McDougall [2006] FCA 427; Ryan v ETSA (No 2) (1987) 47 SASR 239; R v Calabria (1982) 31 SASR 423; Technilock (Australia) Pty Ltd v Mondami Pty Ltd [1999] SASC 320; Southern Equities Corporation Ltd (in liq) v Arthur Andersen & Co (No 10) (2002) 82 SASR 53; Commissioner for Railways (NSW) v Young (1962) 106 CLR 535; R v Masters (1992) 26 NSWLR 450; Southern Equities Corporation Ltd (in liq) and Others v Bond and Others (No 2) (2001) 78 SASR 554; Mazinski v Bakka (1979) 20 SASR 360; Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245; Lakeman v Mountstephen (1874) 7 CL HC 17, considered.

CLARKE v EDWARDS
[2007] SADC 49
Introduction

It is the case for the plaintiff Mr Peter Clarke that in February 2002 the defendant, Mr Phillip Edwards, orally agreed with the plaintiff’s agent and accountant, Mr David Abram of David Abram and Associates Pty Ltd (DAAPL), to borrow from the plaintiff the sum of $100,825.00 upon the condition that the loan would be repaid by November 2002. In the alternative, the plaintiff contends that the funds were paid to the benefit of the defendant’s nephew Peter Edwards and/or two offshore investment companies called Coppertone Investments Limited (CIL) and Smart Goal Investments Limited (SGIL) and that the defendant agreed to indemnify the plaintiff if the funds were not repaid by the due date. Because the funds were never repaid, the plaintiff now seeks an order that the defendant pay the plaintiff the sum of $100,825.00 plus interest and costs.
At the time of these alleged events two persons named Robert Foster and Chris Collins held shares in CIL and SGIL. It is the plaintiff’s case, that CIL, SGIL and certain other investment vehicles were managed by a team of people that included the defendant and his nephew Peter Edwards. The plaintiff contends that the funds borrowed from him were used to pay out Foster and Collins because they had threatened to complain to the media and the Australian Securities and Investment Commission (ASIC) that the schemes in which they had invested were scams.
The defendant denies that he borrowed any money from the plaintiff or that he agreed to indemnify the plaintiff against a failure by Peter Edwards and/or CIL and SGIL to repay the plaintiff’s funds. The defendant further denies that he was a member of the team that managed those companies. The defendant contends that David Abram arranged for the plaintiff to purchase the shares of Messrs Foster and Collins, who were clients of David Abram, on the basis of a representation by Peter Edwards (communicated to David Abram by the defendant) that the plaintiff’s funds would be repaid by November 2002. The defendant further contends that the share transactions were instigated by David Abram because he had introduced Messrs Foster and Collins to the CIL and SGIL investment schemes and feared that his reputation and accountancy practice would be damaged if they took their complaints to the media and ASIC.
The disposition of this case turns upon an assessment of the credibility and reliability of the various witnesses who were called to give evidence.
At trial, both the plaintiff and the defendant gave evidence in support of their respective cases. The plaintiff also called David Abram. The defendant called his wife Wendy Edwards and David Abram’s parents, John Abram and Maureen Abram.
The plaintiff was represented by Mr Keen of counsel. The defendant conducted his own case.
The pleadings
Before I turn to the evidence presented by the parties, it is appropriate to mention that the alternative basis of liability advanced by the plaintiff was not originally pleaded by the plaintiff. In the final preparation of the judgment, I considered that it was appropriate to hear submissions from the parties regarding a possible finding that if the defendant had not borrowed the plaintiff’s funds that there may have been an alternative incurring of liability by the defendant voluntarily agreeing to indemnify the plaintiff.
On 31^stJanuary 2007 I heard further submissions from the parties in relation to this issue on which occasion Mr Keen applied to amend the plaintiff’s statement of claim and to plead the further cause of action. The application was opposed by the defendant.
Pursuant to DCR 53.01, amendments to pleadings can be made at any time up to the time of judgment by leave of the Court if the interests of justice so allow. Mr Keen submitted that the defendant would not be prejudiced by the amendment because there was no further evidence that the defendant would have adduced in relation to the relevant events. I accepted that submission. I was satisfied that the defendant would not be prejudiced in any relevant way and granted the plaintiff leave to plead the further cause of action.
Background
The plaintiff is a retired businessman. David Abram has been his accountant for about 10 years. The defendant and his wife resided in Queensland until late 2002 when they moved to South Australia. The relevant events took place whilst they were living in Queensland. David Abram’s parents, John and Maureen Abram, have been close friends of Mr and Mrs Edwards for about 30 years. John Abram is the Pastor of the Golden Grove Community Church. The defendant and his wife are also of the Christian faith. The defendant visited Mr and Mrs Abram and attended the church at Golden Grove when he travelled to Adelaide.
The investment schemes
The defendant and his wife were directors of a company called Abba Shaddai Ministries (“Abba Shaddai”). The company which was registered in Vanuatu in about 2000 had ceased operating by early to mid 2002. The defendant also operated International Seminars Ltd (“ISL”) which conducted investment seminars overseas. ISL arranged for speakers to attend seminars and promote investment schemes. John and Maureen Abram, and others, received a commission for recruiting people to attend the seminars.
CIL and SGIL were two of the investment vehicles promoted at ISL seminars. CIL was incorporated in Mauritius in about 2000 and SGIL was incorporated in Samoa in about 2001. Both companies guaranteed investment capital and promised monthly returns on investments of about 10-20% per month. Funds invested in CIL and SGIL were transferred to an offshore account called Edwardian Associates purportedly for further investment. Both CIL and SGIL eventually failed and ceased operating by early 2002.
The matters summarised above were not in dispute at trial. However, there is a conflict in the evidence as to Abba Shaddai’s function and as to the nature of the defendant’s connection with CIL and SGIL and other investment schemes.
The plaintiff’s case
David Abram testified that Abba Shaddai was an investment company which promised investors monthly returns in the order of 10-20%. Investor funds were placed in offshore accounts. Due to the initial success of Abba Shaddai, the defendant encouraged Peter Edwards to set up several small foreign investment companies including CIL and SGIL, to ensure that there were “no more than 20 people in a company” thereby avoiding the need to “comply with all the reporting requirements and prospectus problems.” I have inferred that Mr Abram was referring to the provisions of the Corporations Act2001 (Cth) which govern the management of investment schemes involving twenty or more investors.[1]
[1] Chapter 5C of the Corporations Act 2001 (Cth)
David Abram further testified that the funds invested in the various investment companies were managed by a team of about nine people. The “management team” included the defendant, his nephew Peter Edwards and Mr Tony Hancock. According to David Abram, the defendant first disclosed that he was a member of the management team during a meeting at his parent’s home in 2000 when he was “going around and promoting the investments”. David Abram also understood the mechanics of the investment schemes through working as an “administrative consultant” with SGIL. He was appointed to the position a short time after SGIL was set up. In that capacity he was required to attend to the “paperwork” of the defendant and Peter Edwards and to distribute any investment dividends in exchange for a commission. However, he never received any commission due to the failure of SGIL.
The defendant’s case
The defendant and Mrs Edwards denied that Abba Shaddai was a commercial venture from which they profited or intended to profit. They testified that Abba Shaddai’s sole function was to raise money for Christian Missions through the pooling and investment of “donations” which were placed in offshore accounts. Donors were issued with gift certificates. Returns from investments were also to be used to repay donors who eventually wanted their “gifts” returned. The defendant said that the scheme was established with the assistance of Peter Edwards.
According to the defendant, nearly $1,000,000, had been “donated” to Abba Shaddai before the scheme folded. The scheme initially produced high monthly returns of between 10-20% but eventually collapsed when the investments failed and donations dried up. Mrs Edwards said that as far as she was aware, no “gifts” had been returned by then. The defendant was cross-examined about the reasons for the failure of Abba Shaddai’s investments. In effect, he suggested that the funds had been invested unwittingly in fraudulent schemes.[2] I found the evidence of the defendant as to the fate of the investments to be vague for someone who was a founder and director of the company. I was left with the impression that the defendant was unwilling to disclose the extent of his knowledge of these matters.
[2] Trial transcript 104, 107
Mr and Mrs Edwards were also cross-examined about their assertion that the funds invested by Abba Shaddai were derived from donations. When pressed on the topic the defendant said:[3]
[The] fund manager gave money back to Abba Shaddai Ministries and out of those returns we used some of those to give to missions and Ministries and we gave some of the money back because the idea was we would give all the gift back to the people over a period of time, plus some. But unfortunately it all stopped and all fell over. (My emphasis).
[3] Trial transcript 104
Mrs Edwards said that it was a matter for donors as to whether or not they declared the returns they received as taxable income.[4]
[4] Trial transcript 176
In my view, the fact that so-called donors could profit from the venture suggests that the funds received by Abba Shaddai were investments rather than gifts or donations. I reject the evidence of Mr and Mrs Edwards on this topic. I accept David Abram’s evidence that Abba Shaddai was promoted to members of the public as an investment scheme which promised substantial dividends.
In relation to CIL and SGIL, the defendant and Mrs Edwards denied that they were involved in the management of either company or of any associated investment scheme. They maintained that CIL and SGIL were managed principally by Peter Edwards. The defendant conceded that he had handed out CIL and SGIL “Expression of Interest Forms” to prospective investors but said that he had done that merely as a favour for his nephew. He insisted that he had never received any financial reward for promoting CIL and SGIL.
The defendant’s case received support from Maureen Abram. Mrs Abram testified that she and her husband were recruited by Peter Edwards to work as “consultants” for SGIL. They were promised a commission for distributing “expression of interest forms” to prospective SGIL investors and for completing investment contracts but never received any commission because of the ultimate failure of SGIL. Mrs Abram said that she and her husband also handed out CIL “expression of interest forms” at ISL seminars on behalf of Peter Edwards. Although Mrs Abram she did not say so I presume that she and her husband were also promised a commission for promoting CIL. Mrs Abram insisted that as far as she was aware the defendant was not involved in the management of SGIL or CIL. John Abram gave general evidence to the same effect.
In my determination of whether the defendant was a member of the management team, I have been hampered by the failure on the part of both parties to present evidence that may have assisted me on this issue. For example, no records, accounts, memoranda, minutes of meetings or correspondence of the relevant companies were tendered. Furthermore, neither party called any of the members of the management team to either confirm or deny the defendant’s alleged role.
Despite the paucity of the evidence on this topic it is likely, in my view, that the defendant was a member of the management team behind CIL and SGIL as David Abram asserted. David Abram’s evidence is supported by the striking similarity between the investment schemes offered by Abba Shaddai, on the one hand, and by CIL and SGIL on the other, and further (as discussed later) by the degree to which the defendant involved himself in the Foster and Collins issue. But for reasons to be discussed later, it is probably not necessary to make a definitive finding on this issue.
Ponzi Schemes
In the course of Mr Keen’s closing address and cross-examination of the defendant, he suggested that Abba Shaddai, CIL and SGIL were “Ponzi” schemes.
ASIC’s consumer protection website offers the following definition of Ponzi schemes:
In these schemes the promoter promises investors a very high return on the investment and says it is secure. Part of the money deposited by the early investors is then used to pay their first dividend cheques or interest. So long as the money keeps flowing into the scheme, payments can still come out. However, the burden of future payments also keeps growing. The scheme inevitably collapses once people stop joining.
In short a Ponzi scheme operates on the “rob Peter to pay Paul principle”. Funds received from new investors are used to pay out existing investors or to pay interest on money advanced by existing investors until the scheme collapses.[5]
[5] Karl Suleman Enterprizes Pty Ltd (in liq) v Babanour [2004] NSWCA 214 at [8] See also Australian Securities Investment Commission v Atlantic 3 Financial (Aust) Pty Ltd [2006] QSC 132 at [30]; Australian Securities and Investments Commission v McDougall [2006] FCA 427 at [15]
Little effort was made to adduce evidence to support the contention that Abba Shaddai, CIL and SGIL were Ponzi schemes. The plaintiff gave no evidence on the topic and while David Abram made a passing reference, in examination in chief, to some of the funds of SGIL or CIL having been invested in what had “now become another Ponzi scheme,”[6] he was not asked to elaborate on this aspect of his evidence. Furthermore, as earlier observed, company books and financial records, which may have thrown some light on the issue, were not put before me. Neither Foster nor Collins or any other former shareholders were called by the plaintiff.
[6] Trial transcript 37
Nonetheless, in my view, it is improbable, that CIL, SGIL and Abba Shaddai were anything other than Ponzi schemes. The fact of the matter is that each company promised extraordinarily high returns of approximately 120-240% per year. It is implausible that any legitimate investment could have yielded such fabulous returns. I infer from the commercially unsustainable returns they offered and the relatively sudden demise of the companies that they were in truth Ponzi schemes. But once again it is probably not necessary to make a conclusive finding on this point.
David Abram’s clients invest in CIL and SGIL
The plaintiff gave evidence that in about June or July of 2001 David Abram informed him of various offshore investment schemes, including SGIL, and referred the plaintiff to his father. The plaintiff then invested $100,000 in SGIL.[7] The plaintiff testified that he had been told by John Abram that the capital of his investment was bank guaranteed and that he would receive a monthly return on his investment of approximately 10%. No evidence was elicited from the plaintiff to suggest that the defendant had played a role in those events.
[7] No evidence was given as to the date of the investment.
The plaintiff did say that in about July 2001 he attended an ISL seminar in Thailand where he was introduced to the defendant. The plaintiff attended various meetings at which the defendant discussed “investments that were available”. I pause here to mention that it was not suggested by the plaintiff that the discussions were connected to his decision to invest in SGIL or that the defendant held himself out as a member of the “management team”. Indeed, no evidence was elicited from the plaintiff as to what the defendant said at the meetings.
On 16^th November 2001, the plaintiff paid into the Trust Account of DAAPL an additional $150,000 for investment purposes. A short time later some of the funds, just under $50,000, were invested in a fitness centre.
As earlier mentioned, Robert Foster and Peter Collins were also clients of David Abram. David Abram gave evidence that as a result of both men expressing interest in offshore investments he introduced them to his father in about mid 2002. They also attended an ISL seminar at about the same time. There was no evidence given by David Abram as to the nature of the discussions that took place between Foster and Collins and his father. Furthermore, no evidence was elicited from John Abram either in examination in chief or cross-examination, as to the nature of his dealings with them.
Subsequently, on 23^rd October 2000, Mr Collins purchased 19,965 redeemable preference shares in SGIL in the name of Phermond Pty Ltd.[8] Later, on 27^th November 2000 he purchased a further 19,965 redeemable preference shares in SGIL in the name of Phermond Pty Ltd.[9] On 20^th June 2001, Mr Foster purchased 12,531 shares in SGIL in the name of Elandar Retirement Fund.[10] No evidence was adduced from David Abram to suggest that Foster or Collins had any discussions with the defendant which involved promoting the schemes in which they invested. For his part, the defendant denied that he was a party to any such discussions.
[8] See Exhibit P7 - copy CIL share certificate in the name of Phermond Pty Ltd
[9] See Exhibit P7 - copy CIL share certificate in the name of Phermond Pty Ltd
[10] See Exhibit P6 - SGIL share certificate in the name of Elandar Retirement Fund
Foster and Collins complain about their investments

It is common ground that by February 2002 Foster and Collins intended to complain to ASIC about the integrity of schemes in which they had invested, including CIL and SGIL.
On 14^th February 2002, the defendant received a facsimile (Exhibit D1) from his accountant Jeff Bracegirdle of Williams and Partners Pty Ltd. The circumstances in which the defendant is said to have received Exhibit D1 are discussed later.
The facsimile consisted of a handwritten covering note from “Jeff” marked “Phil Edwards Confidential” and two letters with attachments.
The handwritten note states:
Phil
As discussed. Heaps of other stuff but too much to fax including an ASIC complaints form etc.
From what I can gather Foster has still to send something to his lawyer re the car club so I assume these letters haven’t gone yet. I see Collins letter is dated today and Foster’s the 11^th for what that’s worth.
Jeff
The “Foster letter” reads:
11^th February 2002
Complaints Unit
ASIC
GPO Box 9827
BRISBANE QLD 4001
Dear Sir Madam
RE: OVERSEAS INVESTMENT COMPLAINT
I am very concerned about the security of funds that I have placed in two overseas investments, as I have been unable, despite repeated attempts, to effect the return of those funds. Consequently, I request that ASIC investigate these concerns and, if possible, not only recover my funds but also, take the strongest possible action if any law has been broken by the promoters of those schemes.
In late 2000 I was introduced to John and Maureen Abram of Adelaide who provided information about two overseas investment programs that provided very good returns, one of which involved a separate investment that returned sufficient funds to meet finance repayments on a vehicle loan. The investments were in the name of Smart Goal Investments Limited (SGIL) and Carsport International Limited (Vehicle Replacement Program – VRP).
Although the VRP (see attached documentation) investment was made in December 2000 after checking the credentials of Mr and Mrs Abram and subsequently Mr Ian Lloyd and Mr Ian McDowell (the direct promoters of the VRP), further investigations were made to establish the credibility of the other investment scheme (SGIL).
(Arrangements for the purchase of the vehicle and the subsequent investment were with Mr Ian Lloyd and Mr Ian McDowell of Fast Track Buyers Group Pty. Ltd. detail attached)
After extensive checking and discussions with Mr John and Mrs Maureen Abram, Mr Philip and Mrs Wendy Edwards, Mr Peter Edwards and several investors, funds were lodged in June 2001. A share certificate was subsequently issued (see attached certificate and full documentation concerning the investment including telegraphic transfer document).
Although the VRP paid the promised return for the firs (sic) two months, the next three payments amounted to 50% of the proposed returns and, since then, payments have ceased. I have repeatedly contacted Mr and Mrs Abram, Mr Lloyd and Mr McDowell about my concerns with the VRP but have failed to obtain any satisfactory information from them. I have even written to the VRP manager overseas, demanding return of my funds, and finally received a reply that was also non-committal (see attached letter and response).
The investment scheme (SGIL) has not provided any return and, consequently, breaches the terms of the agreement. Again, I have repeatedly spoken to Mr and Mrs Abram about my concerns with this investment but have also failed to obtain any satisfactory information. I also wrote to the investment manager overseas demanding return of my funds and although receiving a reply, no satisfactory information has been provided (see attached letter and response).
I have since spoken to Mr Tony Hancock in Queensland who, I believe, works for the organisation that collects and invests both funds.
I am extremely angry about the repeated failure to provide satisfactory answers to my questions raising concerns about these investments and now want to take the strongest possible action to recover my funds. For this purpose I have listed on the attachment full details of all the people, including contact details, who have been involved in my dealings with these issues.
Would you please investigate this complaint immediately and take the strongest possible action against these parties to recover my funds. Would you also instigate legal action if there have been any breaches of the law.
Please contact me as I have further information and the names of the other people involved in this scheme but I would rather provide these details over the telephone in the first instance.
Yours faithfully,
(signed)
R.J. Foster
A document with the heading “Overseas Investment Complaint-Contact Details” was attached to the Foster letter. The document listed the names of John and Maureen Abram, Phillip and Wendy Edwards, Peter Edwards, Tony Hancock and indicated that all of them could be contacted at “One Accord Trading, Suite 223, 171 Morayfield Road, Morayfield, QLD 4056, Telephone (w) (07) 5477-1115.” The document also provided the names and contact details of David Abram and two persons named Ian Lloyd and Ian Mc Dowell.
In summary, the key assertions contained in the Foster letter are that Foster:
·had invested in SGIL after he had been introduced to the scheme by John and Maureen Abram;
·had received no returns from his SGIL investment;
·had raised his concerns about SGIL with John and Maureen Abram and Tony Hancock but had received no satisfactory explanation;
·had invested in Carsport International Limited (Carsport) after discussions with the defendant and his wife and John and Maureen Abram;
·had failed to receive returns on his investment in Carsport; and.
·had raised his concerns about Carsport with Mr and Mrs Abram and others but had not received a satisfactory explanation.
The “Collins letter” states in part:
14 February 2002-02-13
ASIC Complaints
Australian Securities and Investments Commission
PO Box 9149
Ztraralgon VIC 3844
Dear Officer,
Re: Possible Scam
I am writing as a result of undertaking research on your website regarding a possible scam occurring throughout Australia at the moment. The scam is frighteningly similar to what you describe on your website pages:
1) ‘investing on the Advice of friends: warning”
2) ‘10% per month (120% per year) – where do you get it?; and
3) ‘international investment schemes promoted in community and religious groups.
I was introduced to this ‘possible scam’ by my accountant, whose father is one of the operators of the scheme. The promise was made of 10% per month or better, and involved investments offshore with major banks tied up with fractional reserve lending.
Since being involved in the scheme for more than 15 months, I have received 7.25% return on one part of my investment. Attachment D shows that in November 2001, I requested my funds returned by January 31^st 2002 (in error it says January 2001 but clearly it was written in November 2001 for January 2002). This has not occurred, despite being advised throughout the whole period that I could always get my funds returned if required. I know other people have requested their funds, but I am not sure of the situation for all involved. My understanding is some have had their funds returned, and some haven’t.
…
The following is a brief scenario of events. A list of contacts is provided in Attachment E. attached.
On 30 September 2000 I purchased my first 20,000 shares ($20,000(US) in Coppertone Investments Limited (CIL). Money was sent by TT on 12 October 2000 ($AUD 37,710.39 or $20,000 USD).
On 25 October, I purchased a further 20,000 shares in Coppertone Investments Limited (CIL) for ($AUD 38,287.84 or $20,000USD).
Both of these dealings were done with Peter Edwards via post and telephone. Since then, Tony Hancock has been providing updates on the investment on a weekly basis or as required. No more was ever heard of Peter Edwards.
On 16 February I purchased $28,510 shares in Smart Goal Investments Limited (SGIL) for ($AUD 55,045.24) Note the share certificate says 20 June 2001, so God only knows what happened to the funds in between this time. The contact person here was John Abram who incidently (sic) advised me not to build the house on our farm in September of 2000 because financially I would be better off putting funds into this investment. At the time him being a minister and my accountant’s father, I trusted him. I have since found out he receives a bonus for all funds collected.
In addition, in October 2000 (don’t have documentation here available) I purchased a Black VX Commodore SS under the Car scheme which I was required to pay the first five lease payments and then the investment would pay the remaining 54 payments plus balloon payment. The car was approx AUD$50,750 PLUS AUD$9,250. The contact person here was Ian Lloyd.
As such they have approximately $140,293.47 AUD of my funds for which I am not receiving any returns.
In all the contracts (available upon request) you will see they have a clause which states that within ninety days (90) of the date of the agreements, that funds will be returned to the client’s nominated bank account within a reasonable period (<30 days) if it is unable to place the funds.
I have only received one payment which was in March 2001 for 7.25% of return. It was a one-off payment from Coppertone Investments Limited (CIL). I have received no returns from Smart Goal Investments Limited (SGIL).
I hope this provides sufficient info to base at least some investigation to find out what is happening. My investigations to date personally have revealed that no one that I have dealt with actually seems to know what is going on. As such, I hired the services of an investigator to find out what is going on. When I started to do my own research on your web page, is (sic) seems to be clearer and clearer to me that something is VERY wrong.
…
Yours concerned.
(unsigned)
Chris Collins
PO Box 224
Littlehampton SA 5250
The following documents were attached to the Collins letter:
·downloads from ASIC website pages warning the public about “Ponzi schemes” (Attachments A, B and C).
·a print out of several email messages purportedly sent between Mr Collins and Tony Hancock in relation to Mr Collins investments which did not refer to the defendant or his wife (Attachment D).
·a document with the heading “List of Contacts – Attachment E.” The document listed the names and contact details of John Abram, Ian Lloyd, Peter Edwards and Phil Edwards. The defendant’s home telephone number was listed as the means by which he could be contacted.
In summary, the key assertions contained in the Collins letter are that Collins:
·had invested in CIL after dealing with Mr Peter Edwards and Mr Tony Hancock;
·had invested in SGIL after discussions with John Abram; and
·had not received investment returns from CIL and SGIL as he had been promised;
The Collins letter also asserts that Collins had invested in a car scheme through a Mr Lloyd and that all three schemes were possible Ponzi scams. Although the Collins letter does not make any allegation against the defendant or Mrs Edwards, the defendant is listed in Attachment E as a “contact”.
For reasons that will become apparent, it is relevant to make the following observations about the letters that comprise Exhibit D1. Each letter is in the nature of a complaint to ASIC. Neither letter contains a threat that the author intended to complain to ASIC or the media unless his investment funds were returned. Indeed, the letters contain no reference to the media at all.
The relevance of Exhibit D1
Before I continue with the chronology of events it is appropriate to identify the permissible use that can be made of Exhibit D1.
The letters and attachments were tendered by the defendant for the purpose of showing when he had found out that Foster and Collins were intending to complain about their investments and what he knew of the proposed complaints. The documents were not tendered by the defendant for hearsay purposes. In other words they were not tendered to prove the truth of the facts asserted in the letters. Indeed, the defendant and his wife testified that the allegations made against them in the letters were untrue.
Mr Keen, however, submitted that the letters and attachments qualified as “business records” for the purposes of s45A of the Evidence Act 1929 (SA) on the basis that they had been received by Williams and Partners Pty Ltd in the course of their accountancy business. Accordingly, they could be used as evidence of “any fact stated in them” pursuant to s45A(1)(b).[11] Used in that manner, the letters provide some evidence of the manner in which CIL, SGIL and other named schemes operated and of the defendant’s association with those schemes.
[11] Hearsay evidence may be admitted under s45A: Ryan v ETSA (No 2) (1987) 47 SASR 239; R v Calabria (1982) 31 SASR 423; Technilock (Australia) Pty Ltd v Mondami Pty Ltd [1999] SASC 320.
This argument must be rejected.
Section 45A states:
(1)     An apparently genuine document purporting to be a business record –
(a)     shall be admissible in evidence without further proof; and
(b)     shall be evidence of any fact stated in the record, or any fact that may be inferred from the record (whether the inference arises wholly from the matter contained in the record, or from that matter in conjunction with other evidence).
(2)A document shall not be admitted in evidence under this section if the court is of the opinion –
(a)     that the person by whom, or at whose direction, the document was prepared can and should be called by the party tendering the document to give evidence of the matters contained in the document; or
(b)     that the evidentiary weight of the document is slight and is outweighed by the prejudice that might result to any of the parties from the admission of the document in evidence; or
(c)     that it would be otherwise contrary to the interests of justice to admit the document in evidence.
(3)For the purpose of determining the evidentiary weight, if any, of a document admitted in evidence under this section, consideration shall be given to the source from which the document is produced, the safeguards (if any) that have been taken to ensure its accuracy, and any other relevant matters.
(4)     In this section –
business means business, occupation, trade or calling and includes the business of any governmental or local governmental body or instrumentality:
business record means –
(a)     any book of account or other document prepared or used in the ordinary course of a business for the purpose of recording any matter relating to the business; or
(b)     any reproduction of any such record by photographic, photostatic, lithographic or other like process.
It is clear, as Mr Keen submitted, that a document received by a business from another source may qualify as a business record for the purposes of s45A. As Bleby J observed in Southern Equities v Arthur Andersen (No 10)[12] in order to satisfy the definition a document:[13]
… need only be a document prepared or used in the ordinary course of a business. That need not necessarily be the same business as the business the proprietor of which held the document. In most cases it will be. However, the document might also be a business record of another business. Indeed, this is most likely in the case of third party documents held by an auditor. Thus, many of the documents in question, while they may undoubtedly be business records of the defendant, will also be business records of the plaintiff.
[12] (2002) 82 SASR 53
[13] (2002) 82 SASR 53 at [31]
His Honour went on to say:[14]
Whether the document is a document “prepared or used in the ordinary course of a business for the purpose of recording any matter relating to the business” will depend on the nature of the record, its apparent author (if known), to whom it was sent, its content and other matters to be inferred from the document itself. Sometimes, it may depend on where the document was located. Because it is located (in this case) in the files of the defendant may well mean that it becomes a business record of the defendant. It does not mean that it ceases to be a business record of the plaintiff or a copy thereof (admissible also under s 45A). As I have said, s 45A does not require that a business record be limited to a record of the business from whose custody it is produced, nor is it limited to proof of the fact pertaining to that business.
[14] (2002) 82 SASR 53 at [34]
In the present case, I am not satisfied that the Foster and Collins letters satisfy the definition of a business record. The defendant gave evidence that he understood from discussions that he had with Jeff Bracegirdle that the letters (Exhibit D1) had been supplied to Bracegirdle by Foster and Collins. He initially said that he did not know why the letters were sent to Bracegirdle[15] but later said that he understood that Bracegirdle had been asked by Foster and Collins to “draft a document and prepare a document to send to ASIC.”[16] In effect the defendant asserted that he was unaware of the nature of Bracegirdle’s association with Foster and Collins. He gave no evidence as to the nature and intended purpose of the document that Bracegirdle had been asked to prepare.
[15] Trial transcript 112
[16] Trial transcript 119-120
In my view there is insufficient evidence that Bracegirdle received the letters from Foster and Clarke in his capacity as an accountant with Williams and Partners Pty Ltd. But more than that there is no evidence that after the letters are said to have been received by Bracegirdle that they were used in the ordinary course of the accountancy business and for the purpose of recording a matter relating to the business. Furthermore, the defendant’s “understanding” that Bracegirdle was to prepare a document for ASIC was based on pure hearsay.
In my opinion, there is no evidence upon which I could be satisfied that the Foster and Collins letters were “prepared or used in the ordinary course” of the business of Williams and Partners Pty Ltd and “for the purpose of recording any matter relating to the business” as required by s45A.
Even if the letters qualified as business records I would attach no weight to the allegations contained in them. Section 45A(3) requires that in assessing the weight to be attached to a document admitted under the section consideration is to be given to the source from which the document is produced, the safeguards, if any, that have been taken to ensure its accuracy and other relevant matters. In the present case, there is no evidence of any safeguards having been taken to ensure the accuracy of the allegations contained in the letters. Indeed, there is no evidence of a non-hearsay nature which establishes that Foster and Collins prepared or authorised the preparation of the letters. The Collins letter does not even bear a signature. If the plaintiff wanted to rely on the truth of the allegations contained in the letters the appropriate course was to call Foster and Collins.
Mr Keen put forward a further argument. He submitted that even if the Foster and Collins letters were not admissible as business records the plaintiff was nevertheless entitled to use them for hearsay purposes because they had been tendered by the defendant.
I reject this argument. A document may be admissible for some purposes and not for others. This principle is illustrated by the decision in Commissioner for Railways (NSW) v Young.[17] In that case the plaintiff’s husband was killed while attempting to board a train. The defendant contended that the deceased was intoxicated at the time of the accident. At trial the defendant sought to prove that a sample of blood had been taken from the deceased following the accident which showed a substantial concentration of alcohol. To identify the jar containing the sample of blood the defendant adduced oral evidence of what was written on the jar. Neither the label nor the jar was produced. The trial judge excluded the proposed evidence.
[17] (1962) 106 CLR 535

The members of the High Court (Kitto J expressing no opinion) held that the evidence could be used for non-hearsay purposes only. Dixon CJ said:[18]
In the present case the purpose of offering the evidence was simply to prove that the sealed jar leaving the hands of Dr. Stratford Sheldon was the same sealed jar that came to the hands of Mr McDonald. The proof depended upon the identity of the character and condition of the jar in all respects and most particularly its label. The statement upon the label that it contained the blood of the deceased, if that was what it stated, could not be used as evidence of that fact. But the identity of the writing on the jar in Dr. Stratford Sheldon’s hand with what Dr. Stratford Sheldon stated that he wrote was an admissible evidentiary fact forming part of the description.
[18] (1962) 106 CLR 535 at 546
The decision in Young illustrates that a document may not be used for hearsay purposes where it is admitted for non-hearsay purposes. In my view, that principle applies with equal force to circumstances where the party seeking to rely upon the document for hearsay purposes is the party against whom the document is tendered. Mr Keen was unable to point to, and I am not aware of, any authority inconsistent with that proposition.
Accordingly, I have used Exhibit D1 for the limited purpose for which it was admitted.
Foster and Collins are paid out
I return to the chronology of the relevant events.
In early February 2002, the defendant and his wife visited Adelaide and stayed for about two weeks. During their visit Mrs Edwards stayed at the home of John and Maureen Abram for a couple of nights while her husband was performing voluntary work at a Christian youth camp at Wellington. John Abram was in the Northern Territory at the time. The defendant and his wife eventually left Adelaide on Sunday 17 February 2002. It is not in dispute that during the defendant’s stay discussions took place between the parties in relation to Foster and Collins. The contentious issues relate to the nature of the discussions and the circumstances in which they took place.
The plaintiff’s case
David Abram’s evidence
David Abram testified that in February 2002 he received a telephone call from his mother in relation to Collins and Foster. He said that he most probably received the call on Friday 15^th February 2002. He believes that Mrs Edwards was staying with his mother at the time. His mother told him over the telephone that Foster had written a letter in which he had threatened to go to the media if his investment funds were not returned to him by the following Monday. She told him that Collins had made a similar demand. He could not remember whether his mother told him that the demands made by Foster and Collins were contained in the same letter or different letters. David Abram said that his mother asked if he knew anyone who could provide $100,000 to “help out the situation”.
After speaking to his mother, David Abram rang the plaintiff and discussed the matter with him. The plaintiff expressed interest in making available the funds that were being held on his behalf in the Trust Account of DAAPL. He stipulated, however, that the funds had to be repaid by the end of the year when they would be required for certain investment projects.
Later that day, Mrs Edwards rang David Abram. She arranged to meet him at his home the following day to discuss the Foster and Collins issue.
On the morning of Saturday 16^th February 2002, Mrs Edwards attended David Abram’s home and read to him the letter or letters that he had discussed with his mother on the telephone. He could not remember reading them himself. In cross-examination the Foster and Collins letters (Exhibit D1) were shown to David Abram. He said that he did not believe that he had discussed those letters with either his mother or Mrs Edwards. He understood from what had been explained to him by his mother and Mrs Edwards that that letter or letters contained threats by Foster and Collins that they would go to the media if they were not repaid their investments. By contrast the Foster and Collins letters (Exhibit D1), as earlier observed, were addressed to ASIC only. Neither letter contained a threat that the author would complain to ASIC or the media if his investment funds were not returned.
In my view, it is likely that David Abram is mistaken on this point. I am of the opinion for reasons which I will elaborate on later that the discussions David Abram had with his mother and Mrs Edwards related to the Foster and Collins letters and that in the course of those discussions he was also informed by either his mother or Mrs Edwards or both that Foster and Collins had threatened to take their complaints to the media if their funds were not returned.
David Abram testified that he had the following conversation with Mrs Edwards:[19]
Well, she actually bought the letter along. I think she just read it to me, I can’t remember seeing it myself, but it was basically along the lines, like I explained, that the – there was going to be a media issue and the impression I got from her was that if this particular spot fire wasn’t put out that it could jeopardise everyone’s investments that had invested in all these companies because the media could just put a clamp down on when they’re in the process of being very close to finalising the whole lot and people would also get the principals and all the returns and so forth. And there was that concern that to protect the capital from these investments that it would be a wise decision if we knew of someone that could at least loan some money through for the short term to alleviate this issue and then – and because the funds – we were – I was assured by Wendy and also Phil that it was still guaranteed, that there was no risk involved in the principal, that – and then I’d rung Peter Clarke back again, the plaintiff.
[19] Trial transcript 18
It is to be observed that towards the end of this passage David Abram referred to having discussed the matter with the defendant. Later, in examination in chief, he explained that while speaking to Mrs Edwards they rang the defendant on Mrs Edwards’ mobile phone. The three of them then participated in a conversation over the phone. According to David Abram, the defendant told him that the plaintiff’s money would be “safe” and that it was “capital guaranteed.”[20] The defendant then said that he would ring his nephew Peter Edwards, who was in the United Kingdom at the time, to confirm that the money would be repaid by the time stipulated by the plaintiff.
[20] Trial transcript 21
David Abram testified that the defendant rang back later that day and confirmed that the plaintiff’s funds would be repaid by the end of the year. When asked in examination in chief if the defendant said that he would personally repay the money David Abram replied:[21]
He didn’t specifically state that he would repay the funds, he just promised to me that the funds would be repaid and I guess we weren’t too fussed on where the funds came from as long as they got repaid.
[21] Trial transcript 21
David Abram went on to say:[22]
The promise was made by Phil that the funds would be back. Because there was no documentation, there was no I guess signed borrower on the particular document. Because of the relationship I guess that existed with ourselves and the friendship that’s there, if Phil said that is capital guaranteed and that the funds would be repaid by the end of the year, but more likely by August/September, I had no reason to doubt that he wasn’t telling me the truth.
[22] Trial transcript 21
There was then the following exchange:[23]
Q. Who did you have instructions from, from Peter Clarke, to lend the money to.
A.Peter Clarke – I guess there was no direct instruction, just that ‘Okay if Phil says that he will pay the money back’ or the funds will be paid back, now whether that comes out of his pocket – we knew that he didn’t have a hundred thousand in his pocket, or we didn’t know that but – sorry, we couldn’t be sure of what he is saying but we knew that if he said that the money will be paid back that the money will be paid back. We knew that the funds would more than likely be coming from the investments, not from his bank account because the companies themselves stood to make a lot of money out of the particular investments and out of the money that the companies make, the funds we paid back.
[23] Trial transcript 22
In cross-examination he explained that as far as he was aware the money would be repaid from the profits of one or more of the companies which had invested in a deal in Malaysia. The companies included CIL, SGIL and Abba Shaddai.[24] David Abram said that he understood the “Malaysian deal” involved the following:[25]
It was apparently a deal where it was fractional lending where the million dollars was grouped with quite a few more million dollars from an Asian investor and then that money was used as a deposit to borrow a large loan which the large loan was then invested and the returns on that large loan were then to be paid back on a month-by-month basis to the investors.
[24] Trial transcript 60-63
[25] Trial transcript 37
David Abram said that after speaking to the defendant he rang the plaintiff and informed him of the discussions that he had had with the defendant. He told the plaintiff that he trusted the defendant. He also suggested to the plaintiff that if Foster and Collins were paid out then the integrity of the investment schemes, and the plaintiff’s opportunity to profit from his original investment in SGIL, would be protected. The plaintiff informed him that he would provide the money needed to pay out Foster and Collins provided his funds were repaid by the end of the year. David Abram then rang the defendant and confirmed the details of the agreement.
In examination in chief David Abram said that he did not attempt an audit of the investments from which the loan was to be repaid for the following reason:[26]
I only had the weekend to – there was an urgency that the funds had to be there by the weekend. There wasn’t room there to make a full audit investigation at that point in time, into the status of the investment. Peter and I, we would not have proceeded had we known that the value of those shares was a lot lower than what we were led to believe, that they weren’t guaranteed. The funds wouldn’t have been lent through had the true value of those shares been known to us.
[26] Trial transcript 23
David Abram gave evidence that during the discussions that took place on 16^th February 2002, the defendant suggested that he should acquire from Foster and Collins their “share certificates” to prevent them taking action against the defendant and other persons who were behind the investment schemes. According to David Abram, the defendant further suggested that he should hold the shares in trust for the plaintiff as security for the plaintiff’s funds. He was also told that the shares were worth money and that any share dividends would be used to “look after Peter Clarke” for having helped them out.
David Abram testified that on Monday 18^th February 2002 he rang Foster and Collins and asked them to deliver the share certificates to his office.
It is not in dispute that on 19^th February 2002 Mr Collins signed a “Standard Share Transfer Form”[27] on behalf of Phermond Pty Ltd, transferring that company’s shares in CIL to the Trust Account of DAAPL. On the same day, Mr Foster signed a “Standard Share Transfer Form”[28] on behalf of Elandar Retirement Fund transferring its shares in SGIL to the Trust Account of DAAPL. Each share transfer form was signed by David Abram and stipulated that the Trust Account had agreed to purchase the shares for the consideration of US $1.00 per share. In relation to each transaction, David Abram received a share certificate which stipulated that the Trust Account was the new shareholder.[29]
[27]    Exhibit P11
[28]    Exhibit P10
[29]    Exhibit P12
It is common ground that the SGIL share transfer form and the new SGIL share certificate were prepared by Mrs Abram. The latter was signed by Mr John Abram. No evidence was put before me by the parties as to the identity of the person who prepared the CIL share transfer form or the new CIL share certificate. In cross-examination, Mr Keen put to Mrs Abram that she had prepared the CIL as well as the SGIL documents. This was denied by Mrs Abram.
On 20^th February 2002, David Abram paid Mr Collins $76,000 with a cheque drawn on the Trust Account of DAAPL. The cheque was made payable to Phermond Pty Ltd.[30] On the same day, David Abram gave Mr Foster a cheque in the sum of $24,825 made payable to Elandar Retirement Fund.[31]
[30] Exhibit P2
[31] Exhibit P3
The defendant put to David Abram in cross-examination that he had arranged for the plaintiff to purchase Foster and Collins shares because he was concerned that there might be adverse consequences for both himself and his business if Foster and Collins took their grievances to ASIC or the media. David Abram denied that that was the case and claimed that both Foster and Collins had told him prior to these events that they did not hold him responsible for the fate of their investments.
I have reservations about David Abram’s assertion that he was not concerned about the prospect of Collins or Foster complaining about their investments. He introduced Foster and Collins to two of the schemes in which they had invested, namely CIL and SGIL. His parents were also connected to those schemes. Even if his involvement, and that of his parents, was entirely innocent, there was the obvious risk that adverse publicity might damage their social and business reputations.
In my view it is likely that David Abram was keen to arrange for the plaintiff’s funds to be used to pay out Foster and Collins because he perceived that such a transaction would be in his and his parents’ best interests. Such an attitude is, of course, consistent with David Abram having instigated a transaction in which the plaintiff purchased Foster and Collins’ shares, as the defendant contends. However, it is also consistent, in my view, with the witness having assisted to put in place an arrangement that enabled Foster and Collins to be paid out with funds borrowed from his client, as the plaintiff contends.
Indeed, I accept David Abram’s evidence that he did not put in place an arrangement that involved the plaintiff purchasing the shares of Foster and Collins. The share transfer forms and the share certificates, which stipulate that the shares were transferred to the Trust Account of DAAPL, support his account. However, the question of whether the defendant had borrowed the plaintiff’s funds or had entered into a contract of indemnity is another issue to which I will return.
The plaintiff’s evidence
Consistent with David Abram’s evidence, the plaintiff denied that he purchased the shares of Foster and Collins.
The plaintiff testified that in February 2002 David Abram telephoned him and said that the defendant required funds in the sum of $100,000 because investors were threatening to expose the defendant on a television program. The plaintiff informed David Abram that he was prepared to give the defendant an interest free “loan” on the condition that it was repaid by November 2002. He instructed David Abram to “take the funds that were currently sitting in his trust account and [to] use those funds for the benefit of Phillip Edwards.”[32] The plaintiff said that after the share transactions were conducted, David Abram informed him that he was holding the shares purchased from Collins and Foster as security for the funds that had been provided by the plaintiff.
[32] Trial transcript 75
The plaintiff said that he was prepared to provide the defendant with an interest free loan because he felt sorry for him. He said that he did not insist upon a written loan agreement because he trusted the defendant and knew that he was held in high regard by David Abram. The plaintiff agreed that he was told by David Abram that the plaintiff’s investments with SGIL were about to mature and that it was desirable not to “rock the boat”. However, he maintained that his willingness to provide the loan was not motivated by a desire to protect his original investment.
In the main, I accept the plaintiff as a truthful witness. However, I was not impressed by his claim that he had assisted the defendant because he felt sorry for him. The plaintiff was not a close friend or associate of the defendant. They first met the previous year at an ISL seminar. Their association at the seminar was brief. They had no further contact before the relevant events. In my view, it is unlikely, that the plaintiff, who described himself as a “very hard businessman”, would have provided such a large amount of money to a person he barely knew for philanthropic reasons. I find that it is more likely that the funds were provided for commercial reasons. In my view, consistent with David Abram’s evidence, the plaintiff was probably keen to ensure that his original investment in SGIL was not threatened by adverse media publicity or by an ASIC investigation.
The defendant’s case
On Tuesday 5^th February 2002, Mrs Edwards went to stay with Maureen Abram for a couple of nights while Mr Edwards remained at the youth camp at Wellington.
Mrs Edwards testified that Mrs Abram informed her that Foster and Collins intended to speak to the media and ASIC on Monday 11^th February 2002 about their investments. Mrs Abram expressed concern that the controversy might affect both her and her husband because they were consultants for SGIL. She was also concerned for her son David Abram because Foster and Collins were his clients. Mrs Edwards suggested to Mrs Abram that she ring Peter Edwards’ office in Queensland and obtain advice in relation to the matter. Mrs Edwards then rang the defendant to determine his attitude. He agreed with the advice that she had given Mrs Abram.
After speaking to the defendant Mrs Edwards rang Peter Edwards’ office in Queensland. She made the call because Mrs Abram had indicated that she was not sufficiently confident to handle the matter. The call was received by Mr Tony Hancock. He told her that Peter Edwards was in the United Kingdom and that he was managing the office in Mr Edwards’ absence. Mr Hancock suggested that the issue concerning Foster and Collins could be resolved if David Abram could find someone to purchase their shares. He said it would be possible to issue new share certificates if a purchaser was found. Mrs Edwards subsequently rang David Abram and passed on the information that she had received. She said that she might have also met David Abram to discuss the matter. Mrs Abram gave evidence substantially consistent with Mrs Edwards’ account of the events that I have just described. She added that her son had previously informed her that Mr Foster and Mr Collins had threatened to complain to ASIC and possibly the television program “A Current Affair” about their investments.
Mrs Edwards deposed that on Thursday 7^th February 2002 she left Mrs Abram’s home and went to stay with another friend in Adelaide. That night she had dinner with friends including a Mr Chris Thompson and informed them that there was an opportunity to purchase Foster and Collins shares. Mr Thompson stated that he was prepared to buy one half of the shares.
According to Mrs Edwards, she rang David Abram on Friday 8^th February 2002 and informed him of Mr Thompson’s offer. She said that he told her that he had found someone who was prepared to buy all of the shares. David Abram did not dispute that Mrs Edwards may have informed him that Mr Thompson was interested in purchasing some of Foster and Collins’ shares but denied telling Mrs Edwards that he had found a buyer. Mrs Edwards said that David Abram rang her back later that day and told her that he “needed to have confirmation of when the money would come back.”[33] Mrs Edwards said that she then rang Tony Hancock and asked him to ring David Abram to discuss the matter.
[33] Trial transcript 161

The defendant and his wife gave evidence that the defendant left the youth camp at Wellington on 8^th February 2002 and joined her in Adelaide.
The defendant testified that on the morning of the following day, Saturday 9^th February 2002, he received a call on his mobile phone from Peter Edwards while he was having coffee with Mrs Edwards and a friend at North Adelaide. Peter Edwards told him that he had spoken to Tony Hancock in relation to the Foster and Collins issue and that if David Abram paid Foster and Collins the $100,000 held in trust for the plaintiff, that the money would be repaid by about August 2002 when CIL was expected to receive a “dividend”. He said that he rang David Abram that same weekend and passed on the information that he had received from Peter Edwards.
On the defendant’s case he returned to the youth camp at Wellington on Monday 11^th February 2002.
On Thursday 14^th February 2002, Jeff Bracegirdle rang Mrs Edwards and informed her of the Foster and Collins letters. She suggested that he speak to the defendant and gave Mr Bracegirdle the defendant’s mobile number. The defendant said that Bracegirdle then rang him and faxed Exhibit D1 to him. The defendant said that he was unaware of the complaints of Foster and Collins until he received Exhibit D1.
In cross-examination the defendant said that he was not concerned about the impact that any complaint by Foster or Collins to ASIC would have on him personally.[34] However, he was concerned about the possible consequences for Abba Shaddai:[35]
I was concerned not so much that they were going to complain about me. I was very mindful of the whole investments that were involved, whether it was Coppertone, whether it be Smart Goal or Abba Shaddai Ministries. As far as Abba Shaddai Ministries, it was a different arrangement because it was a gift situation. Obviously I was concerned. I didn’t want any negative exposure to something that we put together …Originally Abba Shaddai Ministries was going to help and support missions and ministries, not to cause people heartache. So yes, of course, I was concerned.
[34] Mrs Edwards gave similar evidence.
[35] Trial transcript 110
On either Friday 15^th or Saturday 16^th February 2002, the defendant left the youth camp and returned to Adelaide where he joined his wife and showed her Exhibit D1. Mrs Edwards said that she was not alarmed by the allegations contained in the letters about herself and her husband because they were not true. Mrs Edwards accepted that she may have spoken to David Abram at his home on the 16^th February and further accepted that she may have had the Foster and Collins letters (Exhibit D1) in her possession at the time. However, she did not think that she discussed the letters with him. For his part the defendant agreed in cross-examination that he may have had discussions with David Abram over the telephone on Saturday 16^th February 2002. However, he was not asked to elaborate on the nature of those possible discussions.
It is not in dispute that Mr and Mrs Edwards left Adelaide on Sunday 17^th February 2002 to return home.
In summary, it is the case for the defendant that the critical conversations with David Abram happened on the weekend of 9^th-10^th February 2002 and not on the following weekend as asserted by him. More significantly, it was their understanding based on their discussions with David Abram that the plaintiff’s funds were to be used to purchase Foster and Collins shares. They denied that they had instructed David Abram to hold the shares as security for a loan from the plaintiff to the defendant or that the defendant was liable in any way for repaying the plaintiff. In relation to the question of whether the plaintiff had purchased the relevant shares, the evidence of Mr and Mrs Edwards received some support from Mrs Abram. As earlier stated Mrs Abram prepared the new share certificate and the form authorising the transfer of Collins’ SGIL shares to the Trust Account of DAAPL. Mrs Abram said that at about the time of those events her son told her that the shares were to be purchased by the plaintiff.
At this point it is convenient to identify several aspects of the evidence given by the defendant and his wife that did not impress me.
First, there is the defendant’s evidence as to when he first became aware of the complaints of Foster and Collins and what he knew of their complaints. In his evidence in chief, the defendant said that he received Exhibit D1 on the 14^th February 2002.
In cross-examination, the following exchange occurred:[36]
Q.... This threat, you agree that Foster and Collins had said that they were going to report it to the media and they were going to report, you say, these investments or these matters to the media that happened before you spoke to David Abram in February 2002.
A. I may have had a phone call from Collins prior to that because I was involved with a doctor over here that he was with and I am not sure of the timing of any communications I had with Collins, but I’m not denying the fact that he did talk to me and I know he was very concerned about not getting his moneys back and was getting very anxious.
Q. And he said ‘If you don’t pay me very soon, I’m to go to the media.
A. He definitely did say that, but the only way I found out that he was going to go to ASIC, the media, was from that fax that Jeff Bracegirdle notified me.
[36] Trial transcript 111-112
The defendant’s claim that he only found out that Collins was going to the media as a result of receiving the fax from Bracegirdle cannot be right. As I have pointed out, the Foster and Collins letters make no reference to the media. Nor do the letters contain any demands for money. If the defendant was aware that Collins was demanding money and that he was threatening to go to the media, then the defendant must have found out about those matters from another source. Furthermore, he must have acquired that information before he received the fax on 14^th February 2002 because it is common ground that after the fax was received arrangements were put in place which resulted in the purchase of Foster and Collins shares. The problem relating to Foster and Collins then disappeared.
I am of the view that the defendant was aware of the Foster and Collins issue before he received the fax. I am satisfied that he spoke at least to Collins before 14^th February 2002 and that Collins had demanded money from him. I do not believe that the defendant has told me the truth about when he first became aware of the demands made by Collins and Foster.
Second, there is the evidence of Mr and Mrs Edwards that they were not worried about Foster and Collins threatening to go to the media or ASIC. According to the defendant, he was only concerned about the impact that any such complaints would have on Abba Shaddai. However, there was on the face of the letters (Exhibit D1) no reason for the defendant to be concerned about Abba Shaddai at all. There is simply no reference to that company in either the Foster or Collins letter. If the defendant had concerns about Abba Shaddai it was for reasons unrelated to the Foster and Collins letters.
I reject Mr and Mrs Edwards’ assertion that they were not worried from a personal viewpoint about the prospect of Foster and Collins going to the media or ASIC. The allegations in the Foster and Collins letters had the potential, whether true or false, to cause serious embarrassment to the defendant and his wife. Even if they were not guilty of any wrongdoing they could not have failed to appreciate that adverse publicity could damage their personal and business reputations. It is for this reason that I earlier expressed the view that it is probably not necessary to express a conclusive view about whether the defendant was in fact a member of the management team of CIL and SGIL and as to whether those companies were in fact Ponzi schemes. In any event, even on the defendant’s account he was concerned about the negative exposure that Abba Shaddai might receive. The fact that Mr and Mrs Edwards were concerned about the possibility of negative publicity is reflected in the extent to which they involved themselves in the events which resulted in Collins and Foster being paid out. Even on their own accounts they went to some lengths in that regard.
Third, there is the defendant’s assertion, and that of Mrs Edwards and Mrs Abram, that David Abram arranged for the plaintiff to purchase the shares of Foster and Collins. As I have already stated, I find that that did not happen. The share certificates and transfer forms do not support the defendant’s contention. Furthermore, Mrs Abram who completed the share certificate and share transfer form in relation to Mr Collins’ shares was unable to provide any explanation for having specified in the relevant documents that the new owner of the shares was the Trust Account of DAAPL rather than the plaintiff. In cross-examination, when pressed on this topic, Mrs Abram virtually conceded that her son might have told her that he was holding the shares as security for the plaintiff’s loan.[37]
[37] Trial transcript 187-188
The defendant’s case that the shares had been purchased with the plaintiff’s funds is also difficult to reconcile with his evidence that he told David Abram, after making enquiries with Peter Edwards, that CIL was expecting a dividend in about August or September 2002 from which the plaintiff’s funds would be repaid. It is difficult to understand why there would have been discussions about repaying the plaintiff if he had purchased the shares. Discussions about repaying the plaintiff are more likely to have taken place in the context of the plaintiff’s funds having been loaned to someone.
The critical question to be determined, however, is whether it was the defendant who borrowed the plaintiff’s funds and if not whether the defendant agreed to indemnify the plaintiff if the funds were not repaid by the borrower.
Before I turn to analyse those issues it is convenient to summarise the evidence relating to certain events that occurred after Foster and Collins had been paid out.
Subsequent events
David Abram testified that when the plaintiff’s funds were not repaid by about August or September 2002 he regularly telephoned the defendant to ascertain when they would be repaid. He said that the defendant informed him the Malaysian deal had not matured and offered various excuses for that not having happened. Mr Abram kept the plaintiff informed of the information he was receiving from the defendant.
First meeting at the home of Mr and Mrs Abram
David Abram said that at some stage during the latter part of 2002, or early 2003, the defendant held a meeting at his parents’ home which was attended by “quite a few people from Adelaide”. I have inferred that David Abram was referring to investors. At the meeting, the defendant discussed the various schemes in which CIL and SGIL and other companies had invested, including the Malaysian deal from which the plaintiff’s funds were to be repaid.
David Abram said that prior to the commencement of the meeting he spoke to the defendant specifically about the plaintiff’s funds. In examination in chief he gave the following account of the conversation:[38]
Q. What did he say about repayment of the $100,000 loan.
A.He explained that he’s doing the best he can but it’s out of his hands. It’s – the money’s just invested and he can’t do anything until the investments come to maturity. He felt quite frustrated at the time that he couldn’t – he couldn’t provide the funds and solve the problem but he continually said that he doesn’t have the funds himself, that – you know, if he had the money that, yes, he’d be able to provide it but he said that he’s financially broke and all he can do is hope and pray that the investments mature like they were meant to.
[38] Trial transcript 35-36
The defendant did not cross-examine David Abram or give evidence about this alleged meeting. However, allowances have to be made for the fact that the defendant is an unrepresented litigant. I have not treated his failure to canvass this meeting as any form of concession on his part.
The plaintiff rings the defendant
It is common ground that in January 2003 the plaintiff rang the defendant after obtaining his mobile telephone number from David Abram.
The plaintiff testified that he asked the defendant if he intended to repay the loan. The defendant told him that he was unable to repay it and said that if the matter went to court that he would offer to pay the plaintiff $10.00 per week. The plaintiff became angry and terminated the call. Mr Keen submitted that the plaintiff’s evidence on this topic is significant because the defendant’s remarks on the phone were tantamount to an admission of liability.
The defendant, however, gave a somewhat different account of the conversation. He said that when the plaintiff alleged that he had given the defendant a loan, the defendant told him that he did not know what he was referring to. The defendant gave no evidence as to whether he offered to pay the plaintiff $10.00 per week if the matter went to court.
I consider that it is possible that the plaintiff is mistaken about the details of the conversation that he had with the defendant. Indeed, in cross-examination Mr Clarke conceded that it is possible that the defendant did indicate that he did not know what he was referring to when he raised the topic of the loan. Furthermore, if the defendant did indicate that he would offer to pay the plaintiff $10 per week (in the event of the matter going to court) such remarks are consistent with the defendant merely emphasising that due to his poor financial circumstances there was no point in pursuing him for money that he did not owe the plaintiff.
Plaintiff institutes legal proceedings
By letter dated 27^th February 2003, the plaintiff’s solicitors Kelly & Co demanded that the defendant pay the plaintiff the sum of $104,825 by 29^th May 2003. The defendant failed to comply with that demand in consequence of which the plaintiff instituted the present action against the defendant on 30^th July 2003.
The meeting in September 2003
David Abram gave evidence in chief of a second meeting that he had with the defendant at his parents’ new home in about September 2003. He said that he spoke to the defendant in the presence of his father. When asked by Mr Keen whether the defendant said “anything about his promise to repay [the] loan” David Abram replied: “Yes, and again the statement was I don’t have the money, you know, why don’t you just ring Peter because he would have a better idea than me where the investments are at.”[39]
[39] Trial transcript 40
The defendant did not give evidence in chief about this alleged meeting and he was not, initially at least, cross-examined about it. Following the defendant’s cross-examination and before the defendant called his first witness, Mr Keen applied to have Mr Edwards recalled for further cross-examination.
At that point I was informed by Mr Keen that the conversation said to have taken place in September 2003 had been secretly recorded by David Abram on his dictaphone. Mr Keen told me that he wanted to put to the defendant portions of the recorded conversation which he contended were inconsistent with the defendant’s claim that the plaintiff had purchased the shares of Foster and Collins at the instigation of David Abram. Mr Keen explained that he did not appreciate the significance of the recorded conversation until he examined the transcript of the recording following the completion of his cross‑examination. I exercised my discretion to allow the defendant to be recalled for further cross-examination on a point of potential substance that counsel had overlooked or failed to appreciate.[40]
[40] See R v Masters (1992) 26 NSWLR 450 at 479-480
During further cross-examination the defendant admitted making some of the statements that were put to him but did not distinctly admit others. Accordingly, I permitted the plaintiff to call David Abram in rebuttal and to tender through him the recording of the conversation (Exhibit P14) pursuant to s28 of the Evidence Act. Apart from the operation of s28 I would have permitted the recording of the conversation to be led in rebuttal in the exercise of my discretion though it was not led as part of the plaintiff’s case. I was of the view that counsel’s failure to appreciate the significance of the recorded conversation should not be allowed to redound to the detriment of the client.[41]
[41] See Cross on Evidence 6^th Aust Ed [17725] and the authorities discussed therein.
My decision to allow the evidence in rebuttal was subject to consideration of the question of whether the recording of the conversation should be excluded on the ground that it was in breach of the Listening and Surveillance Devices Act 1972 (SA) (“LDA”). I indicated to the parties that I would receive the evidence and rule on this issue later.
I now turn to deal with that issue.
Section 4 of the LDA states:
Except as provided by this Act, a person must not intentionally use any listening device to overhear, record, monitor or listen to any private conversation, whether or not the person is a party to the conversation, without the consent, express or implied, of the parties to that conversation.
Maximum penalty: $10,000 or imprisonment for 2 years
Private conversation is defined in s3 to mean:
any conversation carried on in circumstances that may reasonably be taken to indicate that any party to the conversation desires it be confined to the parties to the conversation.
Section 7 stipulates in effect that the prohibition contained in s4 does not apply where the listening device is used by a party to the conversation and “in the course of duty of that person, in the public interest or for the protection of the lawful interests of that person”.
Bearing in mind the nature of the topics which were discussed, I am satisfied that the conversation was one which the defendant wanted to be confined to the parties to the conversation and therefore was a private conversation for the purposes of s4. Accordingly, the covert recording of the conversation by David Abram was unlawful unless it was for a purpose falling within the parameters of s7.
David Abram testified that he secretly recorded the conversation with the defendant because he had been asked by a group of investors, including the plaintiff, to investigate the fate of their investments in various companies including Abba Shaddai, CIL and SGIL. He said, and I accept, that he believed that his conduct was lawful.
In my view it is fair to say that the recording of the conversation for the purposes identified by David Abram would have been in the interest of the investors who were searching for their funds, but I doubt whether it can be said that the recording was in the “public interest”. Furthermore, I do not believe that the recording can be characterised as one conducted “for the protection of the lawful interests” of David Abram. Accordingly, I am of the view that the recording was in breach of the legislation.
The LDA is silent on the question of whether evidence obtained in breach of s4 is admissible. Though the point is not free of doubt, there is authority for the view that in civil cases there is a residual discretion in the Court to refuse the tender of otherwise admissible evidence where that evidence has been obtained unlawfully and in circumstances that an amount to an abuse of the Court’s processes.
This view was expressed by Lander J in Southern Equities Corporation Ltd (in liq) and Others v Bond and Others (No 2).[42]
[42] (2001) 78 SASR 554
His Honour said:[43]
I am inclined to the view that the Bunning v Cross discretion is available to the Court in civil proceedings for the very reason it exists in criminal proceedings and that is to protect the administration of justice.
In my opinion a court would not sit idly by and allow its processes to be abused and then allow the person guilty of that abuse to tender the fruits of the abuse in those or other proceedings. The Court has a duty to protect itself against such abuses. It will stay proceedings where otherwise a party will not receive a fair trial until a fair trial can occur. It will stay proceedings for all time where a party has brought proceedings for an improper or collateral purpose: Williams v Spautz. If the Court will exercise those powers in civil proceedings it must have the power to refuse or accept the tender of evidence obtained by reason of an abuse of process.
In my opinion, there is a residual discretion in the Court to refuse to allow the tender of otherwise admissible evidence where that admissible evidence has been obtained by abuse of the Court’s processes: Mazinski v Bakka.
[43] (2001) 78 SASR 554 at [109]-[111]

In the present case, if the conversation had been recorded unlawfully I would not have excluded the recording of the conversation in the exercise of my discretion. There must be strong grounds to exclude evidence in civil cases on grounds such as where a party has obtained evidence by a serious and deliberate infringement of the legal rights of another.[44] That is not the case here. As earlier indicated, I accept David Abram’s evidence that any breach of the provisions of the LDA was unintended.
[44] See Mazinski v Bakka (1979) 20 SASR 360 King CJ at 361, Wells J at 381
Accordingly, I rule that the recording is admissible and decline to exercise my discretion to exclude.
The conversation
The recorded conversation commences with the defendant discussing the fact that the plaintiff had instituted proceedings against him. The conversation proceeds as follows:
Phillip Edwards (PE): Yes. And I just thought well maybe he’s decided there wasn’t enough evidence to go any further because I have never ever received the money. That’s what he’s claiming on the previous correspondence that he’d given me this amount of money and he wanted me to pay it back to him, $100,000 plus interest. Now all I can say to, at the hearing is the fact that I’ve never ever received this money. The only thing I’ve ever done is invited John [referring to John Abram] to seminars and my understanding is that then that you [referring to John Abram] invited David and then you [referring to David Abram] must have invited Peter Clarke.
David Abram (DA): This had nothing to do with CIL or anything. This is.
PE:    But that’s how I came in the picture, into the picture.
DA:   Yeah.
PE:    What relationship have I got with Peter Clarke? None whatsoever.
DA:   Well what, I can understand but, I see this was the situation, just going back, that arose because of some threats, was it Collins and Foster, made.
PE:    yeah, yeah, they wanted their money back out of …whatever was going on.
DA:    I think Wendy rang me, might have even been at work or home, and said, explained the situation, and said was there anyway you can get hold of, I think it was close to, it wasn’t exactly $100,000, it was a bit more, it was about 120. I said I don’t know how much I can get, but I know some people, I made it quite clear I haven’t got the money, that I, ‘cause, I guess the urgency was that it was the following Monday or Tuesday they needed to know whether they were getting the money or they were going to go to TV, current affairs or something, or one of those shows, and, and so I rang around and, Peter Clarke said he would on the proviso that it was secure and that he, he’d have his money back by the end of the year and at the time, I think you were in Wellington was it?
PE:     I was there in Wellington at the time, doing some work …. at the same time that Peter was in England.
DA:    Peter Edwards?
PE:     Mmm.
DA:    Because I know Peter Clarke wasn’t ‘cause he was here, in Adelaide.
PE    And so these guys were putting the pressure on to get the money by a set date otherwise they were going to do this that and the other. So I rang Peter and talked to him and said you know what’s the situation with these guys. And then you made a comment about having someone that you had some funds but they would need it back by the October or November of that year.
DA:   Yeah.
PE:     I spoke to Peter about it, and said that that’s an option but you need it back, [?] provided could guy [?] get it from, needs it back by the October November period, whatever that date was, he said that would be fine. The other option was Chris Thomson who John knows.
DA:    Wendy did mention that name when, when she was sitting down there but I didn’t know what relevance.
PE:    All he was going to do was to buy the shares.
JA:     He was very keen to.
PE:    Sorry?
JA:     He was very keen to.
PE:    Yeah, he was going to buy the shares out of CIL but through the fact that you had the funds available it was going to be a lot quicker than the Chris Thompson one. He was going to buy the shares, take over the share portfolio.
DA:   I wasn’t aware of that. I heard her mention the name, but I thought it, it didn’t really click, she wasn’t talking to me about Thomson, but anyway.
PE:    …beside the point, the fact was that, it was really Peter’s call in terms of who would take over the ownership of the shares …
DA:   … that’s right, you, I think you did when Wendy was sitting down, you, she was corresponding to you, on the mobile, you on the mobile, and, and cause when I said I needed it guaranteed, not me, but, you know, Clarke needed it guaranteed, I think you said I need to make a call and I’ll get back to you, but, or you might have said that to Wendy ‘cause I think I only spoke to you after Wendy had spoke to you.
PE:    … I was waiting for it to come through and I was actually with, in, Melbourne, North Adelaide, O’Connell St, with, what’s the name of the guy, Ray, what’s his face, [?] mortgage manager, Hanson.
JA:     … having coffee with him
PE:    … I was talking with Ray, and then the phone called and Wendy said it’s Peter on the line.
DA:   I thought you were in Wellington?
PE:    I was, but I had to come back to Adelaide for something at the weekend. But I was talking to Ray Hampson (sic) and I said excuse me I just need to take this call. So Wendy stayed talking to Ray and I went off down the street to talk to Peter about it. I said to him well David’s got someone … in business that could take it, who could be used, providing he’s got it back by, whatever date you gave me. And he said, oh yeah that will be fine, wouldn’t be a problem and then I relayed that message back.
DA:   That it wouldn’t be a problem
PE     … back to Wendy or whatever, said it wouldn’t be a problem … I was the message boy. I have never received any money – it never came to me. What I see happening here was that Peter Clarke shooting me because I was the message boy.
DA:   Well yeah, but
PE:    … understanding, according to the phone conversation I had with him, he rang me very very aggressively about the fact that he wanted his money back that I had. And I said well I’ve never ever received your money, it never ever came to me. Why does he think I’ve got it?
DA:   I guess because he knew that, you, at that time, when Wendy rang me and said you need the money for such and such, he didn’t know that you were then getting any okays from, your Unc, (sic) Peter’s your uncle ? nephew? But that wasn’t his concern I guess, where you got that okay from. He just needed to hear from me, right, and I said look Phil told me that it will be back, I think you even mentioned, that you expect it back by the middle of the year, maybe even by September. I said well that’s okay but we don’t need it until November December. I said well that’s fine if it’s earlier, Peter would be happy with that, you know, at least it solves the problem that Wendy rang about to start with, and it did solve that problem.
PE:    But then, I mean, the share certificates that those guys had, they would have had to make a change at CIL’s end, so is the share certificate now in your name or whose name is the share certificate …
DA:   I can’t, I haven’t seen the share certificate. I did see them originally but the idea was that these people as part of giving them the money, had to sign, resign their ownership of the IL shares and so I think, that when they did that that Peter must have, I don’t know whether he put it in my name or, I know, I know it wouldn’t have been Peter Clarke’s name ‘cause Peter Edwards didn’t even know Peter Clarke was involved in it which he never did. And Peter Clarke didn’t know.
PE:    ... never met Peter Clarke myself …
DE:    So he may have put it in my name because I said well what’s, I think the agreement was to get some, some shares for security that, that
PE:    … some documentation that covers it … $100,000 …
DA:   Well that’s right, I trust you, and that’s why I wasn’t bothered about going mad about drawing up loan agreements and, and, and, you know, black and white legal documents, its just, you know, you tell me something, I take it on word and I pass it onto Clarke, and well he took my word for it ‘cause he’s a client of mine and he said well I trust your professional judgement, you know, if you’re saying this guy’s going to pay it back by then, then, you know, I’ll take that as being.
Later in the conversation, the following exchange occurred:
PE:    … again I’ve got a copy of the Affidavit I sent through to say I’ve never ever seen his money. …say to the Judge, in relation to the facts come up, I was a message boy, I had conversations with yourself about these moneys, but, and I just, I didn’t really go from there.
DA:   Well, I, I, because I haven’t had any actual involvement, I really don’t know, Peter Clarke is not like me, I mean, I wouldn’t go through the process Peter’s gone through because of my background, you know me, but Peter Clarke he’s not a Christian. He’s, how do I say, occasionally he’s mentioned to me a couple of comments that he’s never lost a fight in his life, and he’s not going to start now, so he is an aggressive sort of …
PE:    I mean well he’s got, I mean, I’ve got nothing that I can give him, I have a house, I’ve been living off my reserves for 9 months …taking too long …It’s just going to take a lot longer than we originally thought it would. And I just decided that because I’ve been offered a senior position back in national sales area of the company in Melbourne that I’m going back to take up that position which will help me …reserves for nine months without paying a hefty price for it …
The conversation then continued primarily about other matters.
Findings in relation to conversation
In relation to the portion of conversation underlined above Mr Keen submitted that it is significant that the plaintiff did not correct David Abram when he asserted that Wendy Edwards had telephoned him and had asked whether he could “get hold of” $100,000. Mr Keen submitted that the defendant’s failure to correct David Abram amounted to an implied admission that what David Abram had said on that topic was true.
In my view, there is force in that argument. The defendant’s case is that David Abram was the driving force behind the arrangements that resulted in the plaintiff’s funds being used to pay out Foster and Collins. Mrs Abram and Mrs Edwards denied that they initiated contact with David Abram to ascertain if he knew anyone who could supply the funds that were required. Furthermore the defendant gave an account of events that dovetailed with his wife’s account of what had occurred. David Abram’s assertion in the tape recorded conversation that Mrs Edwards rang him and asked if he could get hold of $100,000 was never challenged by the defendant at any stage in the course of the conversation though it was clearly inconsistent with what the defendant contends happened. Furthermore, there is no reference at any stage of the conversation to David Abram having put in place an arrangement that involved the plaintiff purchasing Foster and Collins’ shares. This feature of the recorded conversation reinforces my view that there was no such transaction.
On the other hand, the recorded conversation has caused me to have some concern about the reliability of David Abram’s evidence in relation to this meeting. In evidence in chief David Abram gave an affirmative answer when asked if the defendant had discussed “his promise to repay the loan”. But the recorded conversation does not bear that out. The recording contains no admissions by the defendant that he borrowed any of the plaintiff’s funds. On the contrary the defendant complained that he was being shot for being the “message boy”. I do not believe that David Abram has been deliberately untruthful on this point but rather that he has unintentionally put an inaccurate gloss on the conversation.
Conclusions
On balance I am satisfied that David Abram and the plaintiff gave a substantially truthful account of the relevant events.
I am satisfied that as at 15^th February 2002, the defendant and Mrs Edwards were aware as a result of his communications with Bracegirdle that Foster and Collins were threatening to complain to ASIC about their investments in CIL, SGIL and other investment schemes. They were also aware as a consequence of his discussions with Collins, and possibly Foster and Bracegirdle as well, that Foster and Collins complaints would be the subject of media publicity unless their investment funds were returned. Concerned by the adverse impact that such publicity might have on them Mrs Edwards discussed her concerns with Mrs Abram.
As a result of those discussions, and perhaps also out of concern that such publicity might have on both her and her husband, Mrs Abram rang David Abram on or about the 15^th February 2002 and enquired if he knew anyone who could provide the funds necessary to pay out Foster and Collins. As a result of the further conversations that David Abram said he had with Mr and Mrs Edwards on 16^thFebruary, the plaintiff agreed to provide the sum of just over $108,000. Those monies were then used to purchase Foster and Collins’ shares which were held by David Abram on behalf of the plaintiff as security for the plaintiff’s funds.
However, as I have already observed the critical question is whether the funds provided by the plaintiff were borrowed by the plaintiff and if not whether the defendant agreed to indemnify the plaintiff in the event that the funds were not repaid by the borrower regardless of whether the borrower was Peter Edwards, and/or CIL and SGIL.
An indemnity was described by Mason CJ in Sunbird Plaza Pty Ltd v Maloney[45] as “a promise by the promisor that he will keep the promisee harmless against loss as a result of entering into the transaction with a third party.”
[45] (1988) 166 CLR 245 at 254. See also Lakeman v Mountstephen (1874) 7 CL HC 17
The statements ascribed to the defendant during the conversations on 16^th February 2002 and at the subsequent meetings, are at best equivocal. While it is possible that the words could be construed as an indemnity (i.e. to the effect – “whatever happens with Peter Edwards, CIL or SGIL – I will see you paid”) they equally could mean no more than a statement that he expected that Peter Edwards, CIL or SGIL would be able to repay the plaintiff by the stipulated time. I suspect that the parties did not turn their mind to the question of an indemnity until the completion of the evidence.
I am not satisfied that the words referred to by Mr Abram can be construed as an indemnity or for that matter an agreement to possibly borrow money from the plaintiff.
I accept the plaintiff’s evidence that he understood from his discussions with David Abram that the funds were being borrowed by the defendant. But it is not what David Abram told him or what he understood David Abram to have told him that is critical. What is critical are the statements attributed to the defendant by David Abram which, as I say, are equivocal. I also consider that there is a risk that David Abram, in his discussions with the plaintiff, may have put an inaccurate gloss on the conversations that he had with the defendant in the same way that he did in relation to the conversation that he had with the defendant in September 2003.
Order
Judgment for the defendant.
I will hear the parties as to costs.