Furlong v Wise & Young Pty Ltd

[2016] NSWSC 1839

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Kathleen Jeanne Furlong & Mark Andrew Leishman (a bankrupt) v Wise & Young Pty Ltd, Defined Properties Investment Pty Ltd & Wyse and Young International Pty Ltd; Wise & Young Pty Ltd, Defined Properties Investment Pty Ltd & Wyse and Young International Pty Ltd v Kathleen Jeanne Furlong, Gilbert Innes Leishman, Design by Kaka Pty Ltd as trustee for Kathleen Leishman Investment Trust, GIM Investments (ncle) Pty Ltd as trustee for Kathleen Leishman Investment Trust & Kim Magella Leishman; Gilbert Innes Leishman v Defined Properties Investment Pty Ltd, Wise & Young Pty Ltd, Wise & Young International Pty Ltd, George Dimitriou and Bramco Group International Pty Ltd [2016] NSWSC 1839

Hearing dates:

1, 2, 4, 15, 16, 17, 18, 19, 22, 23, 24, 25, 29 August and 13 October, 5 November (Plaintiffs’ final written submissions, 6 November (Plaintiffs’ further, final written submissions), 15 November (Plaintiffs’ final oral submissions), 24 November (Defendants’ final submissions), 3 December (Defendants’ written submissions), 7 December 2016 (Further final submissions)

Decision date:

16 December 2016

Jurisdiction:

Equity - Expedition List

Before:

Sackar J

Decision:

See paragraphs [5], [199], [204], [209], [214], [243], [256], [261], [286]-[287], [299]-[300], [303]

Catchwords:

EQUITY – interests created by the deposit of money – equitable mortgages – subrogation of a mortgagee’s rights – the award of interest in equity – caveatable interests – trusts – creation of a trust – nature and purpose of a trust – mingling of trust funds – misappropriation of trust funds – accessorial liability – quantum meruit

 

REAL PROPERTY – equitable interests in land – caveats – caveatable interests – removal of caveats

  PRACTICE AND PROCEDURE – judicial assessment of witnesses’ evidence – failure to cross examine a witness

Legislation Cited:

Competition and Consumer Act 2010 (Cth)
Evidence Act 1995 (NSW)
Real Property Act 1900 (NSW)
Real Property Regulation 2014 (NSW)
Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Aetna Life Insurance Co v Middleport 124 US 534 (1887)
Ali v Nationwide News Pty Ltd [2008] NSWCA 183
Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation (Cth) [1983] 1 NSWLR 1
Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175
Australasian Annuities Pty Ltd (in liq) v Rowley Super Fund Pty Ltd (2015) 318 ALR 302
Australian Corporation and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51
Avco Financial Services Ltd v White [1977] VR 561
Bale v Mills (2011) 81 NSWLR 498
Banque Financiere de la Cite v Purc (Battersea) Ltd [1999] 1 AC 221
Barnes v Addy (1874) LR 9 Ch App 244
Bayblu Holdings Pty Ltd v Capital Finance Australia Limited (2011) 279 ALR 166
Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) 21 NSWLR 459
Bellissimo v JCL Investments Pty Ltd [2009] NSWSC 1260
Black and Black v S Freedman and Company (1910) 12 CLR 105
Black Uhlans Inc v NSW Crime Commission (2002) 12 BPR 22,421
Blomley v Ryan (1956) 99 CLR 362
Bofinger v Kingsway Group Limited (2009) 239 CLR 269
Brady v Stapleton (1952) 88 CLR 322
Briginshaw v Briginshaw (1938) 60 CLR 336
Browne v Dunn (1893) 6 R 67 HL
Butler v Rice [1910] 2 CH 277
Byrnes v Kendle (2011) 243 CLR 253
Cochrane v Cochrane (1985) 3 NSWLR 403
Commercial Bank of Australia v Amadio (1983) 151 CLR 447
Commissioner of Stamp Duties (Qld) v Jolliffe (1920) 28 CLR 178
Commonwealth Bank of Australia v Christine Maree Delacy [2010] NSWSC 1449
Cook v Addison (1869) LR 7 Eq 466
Cooney v Burns (1922) 30 CLR 216
Cooper v R (2012) 293 ALR 17
Croton v R (1967) 117 CLR 326
Cubillo v Commonwealth (2000) 103 FCR 1
Davies v Uratoriu (1995) 6 BPR 13,917
Dow Securities Pty Ltd v Manufacturing Investments Ltd (1981) 5 ACLR 501
Ellis v Marshall [2006] NSWSC 448
Ex parte Coombe (1810) 34 ER 142
FAI Insurance Ltd v Pioneer Concrete Services (1987) 15 NSWLR 552
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89
Farnell v Cox (1898) 19 LR (NSW) Eq 142
Federal Commissioner of Taxation v Clarke (1927) 40 CLR 246
Foley v Hill (1848) 2 HL Cas 28
Foskett v McKeown [2001] 1 AC 102
Fox v Percy (2003) 214 CLR 118
Frith v Cartland (1865) 2 Hem & M 417
Furlong v Wise & Young Pty Ltd [2016] NSWSC 647
Ghana Commercial Bank v Chandriam [1960] AC 732
Grant v R (1981) 147 CLR 503
Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296
Hagan v Waterhouse (No 2) (1991) 34 NSWLR 308
Hanson Construction Materials Pty Ltd v Roberts [2016] NSWCA 240
Harrison v Schipp [2001] NSWCA 13
Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609
Heperu Pty Limited v Belle (2009) 76 NSWLR 230
Herdergen v Federal Commissioner of Taxation (1988) 84 ALR 271
Hermann v Charny [1976] 1 NSWLR 261
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
Hungerfords v Walker (1990) 171 CLR 125
Iaconis v Lazar [2007] NSWSC 1103
Illich v R (1987) 162 CLR 110
In re Tilley's Will Trusts [1967] Ch 1179
In the matter of Dalma No 1 Pty Limited (in liquidation) (ACN 111 772 260) (2013) 31 ACLC 13-048
Johns v Peters (1948) VLR 331
Kakavas v Crown Melbourne Limited (2013) 250 CLR 392
Kation Pty Ltd v Lamru Pty Ltd (2009) 257 ALR 336
Kauter v Hilton (1953) 90 CLR 86
Kerabee Park Pty Ltd v Daley (1978) 2 NSWLR 222
Kettles and Gas Appliances Ltd v Anthony Hordern and Sons Ltd (1934) 35 SR (NSW) 108
Kinsela v Caldwell (1975) 132 CLR 458
Knight v Knight (1840) 3 Beav 148
Knightsbridge Estates Trust Ltd v Byrne [1939] CH 441
Korda v Australian Executor Trustees (SA) Limited (2015) 255 CLR 62
Louth v Disprose (1992) 175 CLR 621
Maddison v Alderson (1883) 8 AC 467
Markem Corp v Zipher Ltd [2005] RPC 31
Martyn v Glennan [1979] 2 NSWLR 234
McPhail v Doulton [1972] 1 All ER 41
Millett v Regent (1975) 1 NSWLR 62
Multiservice Bookbinding Ltd v Marden [1979] Ch 84
Murphy v Lush (1986) 65 ALR 651
MWF v R (2005) 222 ALR 436
National Australia Bank Ltd v Clowes (2013) 8 BFRA 600
National Provincial and Union Bank of England v Charnley [1924] 1 KB 431
Parsons v R (1999) 195 CLR 619
Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 195 CLR 1
Pejovic v Malinic (1960) SR (NSW) 184
Peter Johan Devries & Anor v Australian National Railways Commission & Anor (1993) 177 CLR 472
Poricanin v Australian Consolidated Industries Ltd [1979] 2 NSWLR 419
Precision Plastics Pty Ltd v Demir (1975) 132 CLR 361
R v Davenport [1954] 1 WLR 569
Raulfs v Fishy Bite Pty Ltd; Fishy Bite Pty Ltd v Raulfs [2012] NSWCA 135
Re Australian Elizabethan Theatre Trust (1991) 30 FCR 491
Re Dawson; Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211
Re Diplock [1948] Ch 465
Re Drax; Savile v Drax [1903] 1 Ch 781
Re Hallett’s Estate (1880) 13 Ch D 696
Re Paul (1902) 19 WN (NSW) 114
Re Sports Alive Pty Ltd (in liquidation) [2013] VSC 69
Re Tilleys Will Trusts [1967] Ch 1179
Re Wadham (1879) 13 SALR 70
Re White Rose Cottage [1965] Ch 940
Registrar, Accident Compensation Tribunal v FCT (1993) 178 CLR 145
Robb Evans of Robb Evans & Associates v European Bank Limited (2004) 61 NSWLR 75
Sanna v Wyse and Young International Pty Limited & Others (No.2) (2015) 18 BPR 35-699
Scott v Scott (1963) 109 CLR 649
Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd (in administrative receivership) and others [2012] Ch 453
State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In Liq) And Others (1999) 160 ALR 588
Steadman v Steadman (1974) 2 All ER 977
Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584
Talacko v Talacko [2009] VSC 579
Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315
Thames Guaranty Ltd v Campbell [1984] 2 All ER 585
The State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146
Thornton v Court (1854) 43 ER 115
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1998) 165 CLR 107
UTC Ltd (In liq) v NZI Securities Australia Ltd (1991) 4 WAR 349
Varma v Varma [2010] NSWSC 786
Walker v Corboy (1990) 19 NSWLR 382
Wallersteiner v Moir (No 2) [1975] 1 QB 373
Walsh v Lonsdale (1882) 21 Ch D 9
Westfield Holdings Ltd v Australian Capital Television Pty Ltd (1992) 32 NSWLR 194
Windella (NSW) P/L v Ronald James Hughes & 2 Ors (1999) 49 NSWLR 158
Ying v Song [2010] NSWSC 1500

Texts Cited:

A Tyler, P Young and C Croft, Fisher and Lightwood’s Law of Mortgage (3rd Australian ed, 2014, Lexis Nexis Butterworths)
S Lindsay, Caveats Against Dealings in Australia and New Zealand (The Federation Press, 1995)

Category:

Principal judgment

Parties:

Kathleen Jeanne Furlong (First Plaintiff and First Cross Defendant)
Mark Andrew Leishman (a bankrupt) (Second Plaintiff)
Wise & Young Pty Ltd (First Defendant, First Cross Claimant and Second Cross Defendant in the Second Cross Claim)
Defined Properties Investment Pty Limited (Second Defendant, Second Cross Claimant and First Cross Defendant in the Second Cross Claim)
Wyse & Young International Pty Limited (Third Defendant, Third Cross Claimant and Third Cross Defendant in the Second Cross Claim)
Gilbert Innes Leishman (Second Cross Defendant and First Cross Claimant in the Second Cross Claim)
Design by Kaka Pty Ltd as trustee for Kathleen Leishman Investment Trust (Third Cross Defendant)
Investments (ncle) Pty Ltd as trustee for Kathleen Leishman Investment Trust (Fourth Cross Defendant)
Kim Magella Leishman (Fifth Cross Defendant)
George Dimitriou (Fourth Cross Defendant in the Second Cross Claim)
Bramco Group International Pty Ltd (Fifth Cross Defendant in the Second Cross Claim)

Representation:

Counsel:
F Corsaro SC and M Auld (Plaintiffs, First Cross Defendants and Second Cross Claimants)
M Foley solicitor on 2 and 4 August (Defendants, First Cross Claimants and Second Cross Defendants)
T Hall solicitor from 15 August to 3 September (Defendants, First Cross Claimants and Second Cross Defendants)
G Dimitriou in person on 1 August and 7 December (Defendants, First Cross Claimants and Second Cross Defendants)

  Solicitors:
Gardner Ekes (Plaintiff)
Hall Partners (Defendants)

File Number(s):

2015/326698

Publication restriction:

N/A

Judgment

Nature of the proceedings

1. The plaintiffs are Ms Kathleen Furlong (nee Leishman) and Mr Mark Leishman. The defendants are Wise & Young Pty Ltd (‘Wise and Young’), Defined Properties Investment Pty Ltd (‘DPI’) and Wyse & Young International Pty Ltd (‘WYI’).

2. The plaintiffs seek declaratory relief in relation to security arrangements between the plaintiffs and defendants. They also seek removal of three caveats over property at 24 Memorial Drive, The Hill, NSW, 2300 (‘property’): the first numbered AJ876905K lodged by DPI, the second numbered AJ876904M lodged by Wise and Young and the third numbered AJ876906H lodged by WYI. The plaintiffs also seek declarations that the defendants engaged in misleading and deceptive conduct under Schedule 2 of the Competition and Consumer Act 2010 (Cth).

3. In the first cross-claim, the defendants seek declaratory relief relating to the caveats over the property and the security arrangements in contention. The defendants also seek, by way of this cross-claim, the payment of $1,866,253.26 of outstanding fees which are owed to them by the plaintiff parties (CC [37]).

4. In the second cross-claim, Mr Gilbert Leishman seeks declarations to set aside the various costs agreements and reimburse $1,959,150.70 of allegedly misappropriated Bramco Group International Pty Ltd (‘BGI’) funds, which were allegedly held on trust for Mr Gilbert Leishman by the defendants. Mr Gilbert Leishman also seeks declarations that the defendants engaged in conduct which breached Schedule 2 of the Competition and Consumer Act 2010 (Cth).

Caveat AJ876905K

5. It became apparent in the course of the trial, by way of Amended Cross Claim dated 17 August 2016, that the defendants’ attempt to support caveat AJ876905K (CB 171-172, 217-218) was an exercise in futility. This caveat was dated 9 August 2015 and lodged by DPI over the property on 7 October 2015 pursuant to the “deed of loan, guarantee and indemnity” document dated 3 September 2014 (Affidavit of Furlong 4 November 2015 [24]; CB 217; Affidavit of Dimitriou 26 November 2015 [18]). Putting aside the defendants’ effective abandonment of this caveat, the plaintiffs submitted that the caveat must be removed because it was lodged pursuant to a forged document (P submissions [4(b)]) and because the evidence shows the loan was provided to Ms Furlong with Bramco funds and not the funds of DPI (P submissions [4(c)]). Further, the plaintiffs submitted that this caveat is therefore invalid and that they are immediately entitled to orders 4, 7 and 10 of the Amended Statement of Claim (P submissions [1]-[6]). Except for the submission as to any alleged fraud, I agree with the plaintiffs’ submissions and propose to make orders to that effect.

6. This left for determination the validity of two caveats: one numbered AJ8769904M (CB 169-170, 215-216) lodged pursuant to an unregistered mortgage dated 30 October 2014 and another numbered AJ876906H (CB 173, 219-220) lodged pursuant to the “appointment letter and cost agreement” of 1 January 2014. I will consider both below.

Procedural history

7. This matter has had some considerable history to which it is necessary to refer. This history is especially important in providing the context to view the defendants’ application to rely on certain materials provided to the plaintiffs prior to and during the trial. While the plaintiffs have provided a comprehensive procedural chronology which I attach as Annexure A to this judgment, I will briefly explain some important parts of this procedural history below.

8. The history of the matter began with a summons issued on 6 November 2015, supported by the affidavits of Kathleen Furlong and Mark Leishman, both filed on 4 November 2015. This summons sought removal of the caveats over the property and was heard by Darke J, who did not make any of the proposed orders, but set the matter for hearing on 25 November 2015. The hearing of the summons did not take place on this date, but was stood over to be heard before the duty judge, Rein J, on 26 November 2015. His Honour referred the matter to the Expedition List on 4 December 2015 before me. On this date, I set the defendants’ unopposed expedition application for hearing on 12 February 2016 before the Expedition List Judge.

9. As early as 4 December 2015, the defendants foreshadowed that they proposed to bring a cross-claim. Two iterations of a cross-claim were handed up in Court before Stevenson J. On 6 and 13 May 2016, Stevenson J heard both parties’ submissions on this cross-claim. On 19 May 2016, Stevenson J delivered judgment in Furlong v Wise & Young Pty Ltd [2016] NSWSC 647. His Honour found that the defendants made allegations of dishonesty and serious misconduct in the cross-claim without there being a proper basis and therefore refused leave to the defendants to had to proceed with it, and ordered the defendants pay costs.

10. On 13 May 2016, Stevenson J fixed the matter for a five day hearing, commencing before me on 1 August 2016.

11. From 20 May to 17 June 2016, Stevenson J made various orders relating to the filing of evidence by the plaintiffs and defendants, in anticipation of the 1 August 2016 hearing. Both the plaintiffs and defendants failed to comply with many of these ordered dates.

12. On 1 August 2016, for various reasons I made orders that the hearing be adjourned until 15 August 2016 to provide the defendants with time to obtain legal representation.

13. Also on 1 August 2016, the plaintiffs filed an amended statement of claim and the second cross-claimant filed an amended statement of second cross-claim.

14. On 15 August 2016 (T 203), the defendants indicated they were going to withdraw a series of allegations and claims made against the plaintiffs.

15. On 17 August 2016, the defendants filed an amended statement of cross-claim. Most notably, these new pleadings withdrew allegations that the Binding Financial Agreement between Kathleen Furlong and Mark Leishman and vehicle security documentation were sham documents.

16. Both parties were directed to give final submissions on 25 November 2016. Only the plaintiffs made final submissions on this date, as the defendants’ legal representation ceased and Mr Dimitriou requested additional time to prepare final submissions. His request was accommodated and the defendants’ final submissions were then heard on 24 November 2016. Further time was granted to the defendants’ legal representative, Mr Hall, to submit further written submissions on 4 December 2016.

17. Both parties then gave further, final submissions on 7 December 2016. On this date, the plaintiffs sought to also produce an amendment to the evidence of Mr Mark Leishman, along with some new evidence. I denied their request and reserved judgment.

The key parties in the case

18. The first and second plaintiffs are married but separated on 9 July 2014 (Affidavit of Furlong 4 November 2015 [2]; Affidavit of Mark Leishman 4 November 2015 [3]). The property is their former matrimonial home (Affidavit of Furlong 4 November 2015 [4]). They are both affiliated with the ‘Bramco’ group of companies, which conduct business in the electronics industry.

19. The first defendant, Wise & Young provides business finance (Affidavit of Dimitriou 13 November 2015 [5]).

20. The second defendant, DPI is primarily engaged in short term lending to distressed businesses (Affidavit of Dimitriou 13 November 2015 [5]). Two bank accounts in the name of Defined Properties Investment Pty Ltd were used to receive monies on behalf of the Bramco group of companies and to pay expenses on behalf of the Bramco group of companies.

21. The third defendant, WYI is a firm offering accounting, general business, tax, business restructuring and litigation support services (Affidavit of Dimitriou 13 November 2015 [5]; Exhibit P2). It purports to offer “Corporate advisory, Enterprise advisory, Financial planning & wealth creation Litigation Support, Management consulting, Sucession [sic] planning, Superannuation, Tax consulting, Tax planning, Accounting compliance and BAS/GST” services (Exhibit P2). The person who dropped this document clearly sat down with a thesaurus and dictionary in hand with the result that the most exhaustive and extravagant claims are made as to the firm’s expertise and services provided.

22. The accounting division purports to employ two CPA accountants, a senior book keeper, a chartered accountant (tax agent), a middle tier accountant and three junior accountants (Affidavit of Dimitriou 31 July 2016 [51]). It purports to have performed various works for the Bramco group of companies including the creation of “purchasers’ journal and supplier invoices, sales journal and sales invoices, remittance advices, pro-forma invoices, purchase orders, employee pay slips, employee contracts, PAYG payment summaries, employee leave entitlement calculations, inter-company invoices, receipts, employee reimbursements, consultant invoices, bank statements, payroll reports, employment separation certificates, ATO portal print outs, motor vehicle higher [sic] purchase schedules, super guarantees, withholding declaration forms, employee tax file number declarations, employee time sheets, supplier statement reconciliations, asset listing for insurance, budgets, distributor billings, financial records, debtors ledgers, creditors ledgers, companies insurance policies and depreciation schedules” (Affidavit of Dimitriou 31 July 2016 [52]).

23. The business reconstruction division consists of the director (Mr Dimitriou), a chartered accountant, a law student and various ‘consultants’ (Affidavit of Dimitriou 31 July 2016 [53]). It purports to have performed various works for the Bramco group of companies including the recording of “ASIC company details, minutes and resolutions of meetings, sale agreements, manufacturing agreements, confidentiality agreements, distribution agreements, product catalogues, inventory stock take, Fair Work correspondence, employee contracts, insurance proposals, distributor reconciliations, inventory lists, depreciations schedules, leases, heads of agreement, company structure diagrams, intellectual property agreements, FEG discussions, consultancy agreement drafts, forecasts, creditors’ actions and letters of appointment” (Affidavit of Dimitriou 31 July 2016 [54]).

18. The defendants’ offices are located at Lexington Drive, Bella Vista (Affidavit of Dimitriou 13 November 2015 [5]; Exhibit P2). It is alleged that the defendants work closely with each other in providing insolvency and restructuring services to businesses and companies in difficult financial circumstances (Affidavit of Dimitriou 13 November 2015 [5]).

19. Mr George Dimitriou is the director of all three defendant corporations (Affidavit of Dimitriou 26 November 2015 [1]). He is also the company secretary and sole shareholder of each of the three defendant corporations (CB 207-09, 212-214, 1175-1180). Mr Dimitriou is neither a qualified lawyer or an accountant, nor has he any tertiary qualifications.

Background facts

26. The history of the ‘Bramco’ group of companies (‘Bramco entities’) began on 29 November 1979, when Gilbert Leishman, the second plaintiff’s father, registered Rynand Pty Ltd (Affidavit of Gilbert Leishman 21 July 2016 [6]). On 22 March 2004, Rynand changed its name to Bramco Electronics Pty Ltd (Affidavit of Gilbert Leishman 21 July 2016 [6]; CB 1166). Between 1979 and 2007, Gilbert Leishman was a director and shareholder of Bramco Electronics Pty Ltd (Affidavit of Gilbert Leishman 21 July 2016 [7]; CB 1166).

27. On 26 November 2007, Gilbert Leishman resigned as director of Bramco Electronics Pty Ltd and his son Mark Leishman was appointed in his place (Affidavit of Gilbert Leishman 21 July 2016 [12]; CB 1165). At this time, Gilbert Leishman continued to hold 10% of the shares in Bramco Electronics Pty Ltd (Affidavit of Gilbert Leishman 21 July 2016 [13]).

28. Prior to December 2013, Mark Leishman and Furlong were joint tenants and registered proprietors of the property (CB 187).

29. In late 2013, Bramco Electronics Pty Ltd began experiencing financial difficulties (Affidavit of Gilbert Leishman 21 July 2016 [15]).

30. On 17 December 2013, David Mansfield was appointed liquidator of Bramco Electronics Pty Ltd and the related Leishman entity, Tablam Pty Ltd (CB 536).

31. On 30 December 2013, receivers were appointed over Bramco Electronics Pty Ltd and its assets (Affidavit of Gilbert Leishman 21 July 2016 [16]).

32. Upon the advice of their solicitor, Anthony Foate, in December 2013 and January 2014, Gilbert and Mark Leishman made contact with Mr Dimitriou and the defendants to help rectify the financial situation of Bramco Electronics Pty Ltd (Affidavit of Gilbert Leishman 21 July 2016 [17]-[19]). On 30 December 2013, the first oral communication between Gilbert Leishman, Mark Leishman and George Dimitriou occurred via telephone (Affidavit of Gilbert Leishman 21 July 2016 [19]; Affidavit of Dimitriou 31 July 2016 [7]). On 1 January 2014, the first written communication occurred, as Mark Leishman sent an email to Mr Dimitriou (CB 1172).

33. In January 2014, Ms Ashley Sheaves commenced employment with WYI as a receptionist (Sheaves affidavit [4]).

34. In or about early 2014, the mortgages on the property and another property at 37/215 Darby Street, Cooks Hill (‘Cooks Hill property’) fell into default (Affidavit of Gilbert Leishman 21 July 2016 [39]).

35. On 13 January 2014, Gilbert Leishman and Mark Leishman met Mr Dimitriou for the first time at the Crowne Plaza in the Hunter Valley to discuss corporate advisory and restructuring services the defendant companies may provide to the Bramco entities (Affidavit of Gilbert Leishman 21 July 2016 [21]; Affidavit of Mark Leishman 4 November 2015 [15]). Dimitriou disputes that this meeting occurred on 9 January and not 13 January 2014, however he does not deny this conversation did not take place at all (Affidavit of Dimitriou 31 July 2016 [8]). No documents were signed at this meeting (Affidavit of Gilbert Leishman 21 July 2016 [22]). Mr Gilbert Leishman deposes that a conversation occurred at this meeting, the terms of which he recalls as follows (Affidavit of Gilbert Leishman 21 July 2016 [21]):

1. “DIMITRIOU: We need to start a new company, with a new structure, and with a good name. I can do all this for you including finding a professional director with a good credit record who can get finance for the companies. He will be a name director only and Gil will control the company from behind the scenes. The shares in the company will be held on trust for Gil. I know what I am doing. I have been doing this for years.

2. MARK LEISHMAN: Ok. How much will this cost us?

3. DIMITRIOU: The director will charge a small fee of say $10,000, then after a year, so when the dust settles, Gil, or someone else of Gil’s choosing can come on as a director and shareholder and take over. It will be in name only. Gil will still have control. Gil owns the IP. I will manage the cash flow and hold monies on trust for you. Gil will just tell me who you want to pay and where to pay and I’ll do it.

4. MARK LEISHMAN: This all sounds very confusing. Who will be the director?

5. DIMITRIOU: A gentleman by the name of Nick Urbano. I use him all the time. Don’t worry he has a great credit record and it’s only a temporary arrangement. We can’t make you or Gil a director or shareholders right now. Not until the dust settles. We don’t know who or which creditors will chase you both personally and whether they will come after the new entities. That’s why we need to keep all the money in my trust account. We need to keep you both away from the new companies and protect your assets. We will put Gil back in as director and shareholder, just give it a few months.”

36. Following this meeting and other communications between the parties, in mid-January 2014, Kathleen Furlong, Mark Leishman, Gilbert Leishman and Kim Leishman attended the defendants’ offices to execute various documents (CB 437-476; Affidavit of Kathleen Furlong 29 July 2016 [17]).

37. On 3 March 2014, the defendants began to restructure the Bramco entities as BGI was incorporated by Dimitriou (Affidavit of Gilbert Leishman 21 July 2016 [26]). Mr Nicola Urbano was appointed as the sole director and shareholder of BGI (Gil Leishman affidavit of 21 July 2016 [49]). A significant amount of business of the Bramco entities began to be conducted from the defendants’ offices in Bella Vista, with Mr Mark Leishman regularly working from these offices (Affidavit of Gilbert Leishman 21 July 2016 [31]-[32]; T 300, 387, 529, 539).

38. On or about 4 March 2014, Kathleen Furlong signed a further costs agreement dated 4 March 2014 for the purposes of establishing Design By Kaka Pty Ltd (Affidavit of Furlong 4 November 2015 [52]-[55]; Affidavit of Kathleen Furlong sworn 29 July 2016 [22]; CB 481-498).

39. On 31 March 2014, Mr Gil Leishman discharged debts owed by Bramco Electronics Pty Ltd to Scottish Pacific Business Finance Pty Ltd, which had provided a finance facility to Bramco (Affidavit of Gilbert Leishman 21 July 2016 [33]). This debt was guaranteed against the property and the Cooks Hill property (Affidavit of Gilbert Leishman 21 July 2016 [35]). Gilbert Leishman allegedly paid $284,456.82 to Scottish Pacific pursuant to a Deed of Subrogation of Debt (Gil Leishman affidavit of 10 November 2015 [4]; CB 224), as Scottish Pacific had lodged a caveat over the property. Mr Dimitriou disputes that this amount was in fact $168,300.00 and not $284,456.82 (Affidavit of Dimitriou 13 November 2015 [11]). In addition to this amount, Mr Gil Leishman alleges that he advanced the sum of $2,000,000.00 between 2008 and 2015, for and on behalf of Ms Furlong and Mr Mark Leishman (Gil Leishman affidavit of 10 November 2015 [6]).

40. On 3 April 2014, the second defendant alleges it requested its bank managers to draw two separate bank cheques from its National Australia Bank accounts, valued at $142,228.41 and $125,881.06 respectively and a third bank cheque valued at $16,347.35 from its ANZ account (Affidavit of Dimitriou 13 November 2015 [12]). The second defendant alleges these monies were provided to Mr Gil Leishman and Ms Furlong to subrogate the Scottish Pacific Business Finance Pty Ltd debt (Affidavit of Dimitriou 13 November 2015 [13]).

41. On 9 April 2014, a ‘Domestic Factoring Agreement’ was entered by the DPI and BGI (Affidavit of Dimitriou 26 November 2015 [7]; CB 1048). It is uncontroversial this was never invoked by Mr Dimitriou, DPI and/or BGI.

42. On 25 June 2014, Mark Leishman and Kathleen Furlong gave written authorities to Dimitriou to organise the discharge of the Commonwealth Bank mortgage (‘CBA mortgage’) over the property (CB 364-368).

43. In July 2014, Dimitriou refused to provide reconciliations of the Bramco entities’ business to Gilbert Leishman (Affidavit of Gilbert Leishman 21 July 2016 [41]).

44. In July 2014, Mark Leishman and Kathleen Furlong separated (Affidavit of Mark Leishman 4 November 2015 [3]).

45. On 9 July 2014, Ms Furlong and Mark Leishman entered into a Binding Financial Agreement (‘BFA’) by which Mark Leishman transferred his rights, title and interest in the property to Ms Furlong (Furlong 4 November 2015 [2]; Affidavit of Mark Leishman 4 November 2015 [4]-[5]).

46. On 9 July 2014, $2,570,000 was deposited from an account of Union Steel Investments Pty Ltd (‘Union Steel’), via an internet banking transfer, to Wyse Accounting Pty Ltd account number 13-512-4991 (CB Bank Statements NAB-171). Prior to this deposit, there was a credit balance of $45.60 in Wyse Accounting Pty Ltd account number 13-512-4991 (CB Bank Statements NAB-171). There is no evidence of the terms of any arrangement between Union Steel Investments Pty Ltd and Wyse Accounting Pty Ltd for the transfer of the $2,570,000.

47. On 3 September 2014, Ms Furlong allegedly signed a ‘Deed of Loan, Guarantee and Indemnity’ (CB 1004-1014) and a ‘Mortgage’ over the property to secure repayment of $77,500 loaned by DPI to Design by Kaka Pty Ltd (CB 1019-1026).

48. On 4 September 2014, McCarroll’s Volvo Cars issued an invoice in the sum of $77,500 for the purchase of a Volvo XC90 vehicle (CB 1243). On 5 September 2014, $77,500 was transferred from the DPI ‘savings’ account 13-515-6176 into the DPI ‘cheque’ account 13-515-6117 (CB 1250, 1257). $77,500 was then withdrawn from the DPI cheque account (CB 1257).

49. As at 10 September 2014, there was a credit balance of $2,129,911.01 in Wyse Accounting Pty Ltd account 13-512-4991. A number of cheques were written from this account in September and October.

50. On 30 October 2014, $1,070,334.82 was transferred via an internet transfer from Wyse Accounting Pty Ltd account 13-512-4991 under the description “loan to kl” to Wise and Young Pty Ltd account number 74-280-9712 (CB Bank Statements NAB-172; CB 289-290). Mr Dimitriou alleges this money was withdrawn to discharge the CBA mortgage (CB 281 [5]). In passing, it must be noted that there was a delay from 9 July 2014 until the 30 October 2014 for the Union Steel monies to be used to discharge the CBA mortgage. The evidence implies that Mr Dimitriou was attempting to procure alternative finance to discharge the mortgage (CB 858-860). Whatever the arrangement was between Union Steel and the defendants, it does not appear that it was agreed between them that the money was to be used to discharge the CBA mortgage.

51. On 30 October 2014, the defendants allege various mortgages and loan deeds were executed to secure a loan of $1,231,752 given by Wise and Young to Mark Leishman and Kathleen Furlong to discharge the CBA mortgage (CB 796-808, 1099-1102, 1120-1134). On the same day, the $1,068,000 CBA mortgage was discharged (CB 292, 372). The plaintiffs assert these documents were fraudulently created. I will consider the facts surrounding the discharge of this mortgage in greater detail below.

52. On 30 October 2014, Mr Dimitriou, on behalf of Wise and Young, emailed “Natalie”, asking that she collect three bank cheques, one of which was for $1,068,050.72, to be addressed to the CBA and handed to Fiona Reynolds of Turks Legal (CB 856; CB 911).

53. On 1 November 2014, Kathleen Leishman sent a text message to Mr Dimitriou stating “…Thankyou. I can’t believe the house is safe. Let me know what the details are for refinancing (emphasis added)” (CB 294). This perception of Mr Dimitriou refinancing the CBA mortgage is reinforced by another text message sent by Ms Leishman to Mr Dimitriou on 6 September 2014, stating “…I am overwhelmed by your generosity and goodwill…You have helped us out of such a difficult situation…Thank you. Speak Monday to organise the refinance (emphasis added)”.

54. On 21 November 2014, Mr Dimitriou was advised by a settlement agent that the property’s CT was ready for collection (CB 910).

55. On 9 June 2015, Dimitriou replaced Nicola Urbano as the director of BGI and transferred the entire shareholding to DPI (Affidavit of Gilbert Leishman 21 July 2016 [50]).

56. On 10 June 2015, Mr Mark Leishman sent an email to Mr Dimitriou and stated at paragraph 5, “Memorial. Is there any scope for refinance? Kath/I want to get debt repaid back to you urgently” (Exhibit D3).

57. In early August 2015, Mark Leishman became aware of the NSW Police Fraud Squad investigations into Mr Dimitriou and was asked to “cooperate with the investigations” (Affidavit of Mark Leishman 24 November 2015 [19]; T 503).

58. On 12 August 2015, the relationship between Mark Leishman and Mr Dimitriou deteriorated and Mark Leishman ceased working from the defendants’ Bella Vista offices (CB 830; T 453; Affidavit of Dimitriou 26 November 2015 [20]-[22]). The defendants allege that during August, all monies payable to the Bramco entities were redirected to entities not controlled by Mr Dimitriou (Affidavit of Dimitriou 26 November 2015 [8]).

59. On 8 September 2015 Mr Mark Leishman sent an email to Ms Ashley Sheaves explaining, “We are working to return all funds to George” (Exhibit D3).

60. On 13 September 2015, Gilbert Leishman and Ms Furlong lodged a caveat (AJ817227) over the property to secure the assignment of the Scottish Pacific debt (Gil Leishman affidavit of 10 November 2015 [4]; CB 4064, 813).

61. On 14 September 2015, Bramco Property Holdings Pty Ltd was incorporated to purchase the property (CB 144, 146).

62. On 18 September 2015, Furlong and Mark Leishman made statutory declarations in support of an application for the replacement of the property’s certificate of title (CB 815, 817-818, 823). A sentence in Mr Mark Leishman’s statutory declaration stated that “in or about 26 October 2014 my former wife and I refinanced the property (emphasis added)” (CB 4052 [4]).

63. On 21 September 2015, the document discharging the CBA mortgage was lodged (CB 376, 813), the Scottish Pacific withdrawal of caveat document was lodged (CB 813) and an application for replacement of the property’s certificate of title was made (CB 813).

64. On 2 October 2015, Furlong acquired finance for the property and Mark Leishman executed a transfer instrument which transferred his right, title and interest in the property to Furlong (Affidavit of Mark Leishman 4 November 2015 [8]).

65. On 7 October 2015, Wise & Young lodged a caveat (AJ8769904M) over the property pursuant to an unregistered ‘mortgage’ dated 30 October 2014 (Affidavit of Furlong 4 November 2015 [9]; CB 215, 813; Affidavit of Dimitriou 26 November 2015 [18]), DPI lodged caveat (AJ876905K) over the property pursuant to the ‘deed of loan, guarantee and indemnity’ document dated 3 September 2014 (Affidavit of Furlong 4 November 2015 [24]; CB 217; Affidavit of Dimitriou 26 November 2015 [18]) and WYI lodged a caveat (AJ876906H) over the property pursuant to the ‘appointment letter and cost agreement’ document dated 1 January 2014 (Affidavit of Furlong 4 November 2015 [24]; CB 219; Affidavit of Dimitriou 26 November 2015 [18]).

66. On 8 October 2015, WYI lodged an Application for Preparation of Lapsing Notice with LPI in relation to the caveat (AJ817227) Gil Leishman and Ms Furlong lodged over the property and WYI sent a letter to Gil Leishman and Ms Furlong informing them of this (CB 284-286).

67. On 6 November 2015, as explained in the procedural history above, the current proceedings began by way of Summons filed by the plaintiffs.

68. On 25 November 2015, Mr Urbano ceased his role as sole director and shareholder of BGI, and Dimitriou became its sole shareholder and DPI its sole shareholder (CB 1175). However, the changes were only reflected in the ASIC register when the required 484 form was lodged on 9 June 2016 (CB 1178).

69. On 2 December 2015, Mark Leishman was made bankrupt (CB 2508-2509).

70. In or about December 2015, Ms Ashley Sheaves ceased employment with WYI (Sheaves affidavit [4]).

71. On 28 June 2016, forensic document examiner Mr Stephen Dubedat completed a handwriting report for the purpose of these proceedings (CB 1193-1233).

Relevant legal principles

The legal ownership of money

72. Where money is transferred, even fraudulently, the legal ownership of this money is conferred on the transferee: Black and Black v S Freedman and Company (1910) 12 CLR 105; Robb Evans of Robb Evans & Associates v European Bank Limited (2004) 61 NSWLR 75 at [109]-[118].

73. As Wilson and Dawson JJ explained in Illich v R (1987) 162 CLR 110 at [24]:

“Money is, of course, capable of being stolen and if it is stolen, property in the notes or coins does not pass to the thief. But if the thief passes the money into currency, which he may do by making payment with it, ownership will pass with possession notwithstanding the thief's lack of title providing the transaction was bona fide and for valuable consideration: Moss v. Hancock (1899) 2 QB 111; Banque Belge v. Hambrouck (1921) 1 KB 321; Clarke v. Shee and Johnson (1774) 1 Cowp 197 (98 ER 1041).”

74. However, it must be noted that in such cases, a trust will be imposed on the stolen money to ensure the thief (as legal owner) holds the money on trust for the victim: Black and Black v S Freedman and Company (1910) 12 CLR 105; Robb Evans of Robb Evans & Associates v European Bank Limited (2004) 61 NSWLR 75 at [109]-[118].

Equitable interest created by a deposit of money

75. It is well established that when an individual deposits money with a financial institution, it no longer owns that money, but becomes a creditor who has a chose in action to recover their debt: Croton v R (1967) 117 CLR 326 at 330-331; Parsons v R (1999) 195 CLR 619 at 626-627; Grant v R (1981) 147 CLR 503 at 509; Re Diplock [1948] Ch 465 at 521-522; Foley v Hill (1848) 2 HL Cas 28 [36]-[37]; R v Davenport [1954] 1 WLR 569 at 571.

76. Barwick CJ, in Croton v R (1967) 117 CLR 326, stated at 330:

“…[T]hough in a popular sense it may be said that a depositor with a bank has "money in the bank ", in law he has but a chose in action, a right to recover from the bank the balance standing to his credit in account with the bank at the date of his demand, or the commencement of action. That recovery will be effected by an action for debt. But the money deposited becomes an asset of the bank which may use it as it pleases.”

77. Similarly, Viscount Simon LC explained in Perrin v Morgan [1943] AC 399 at 407:

“…it is a matter of common speech to refer to one's "money at the bank," although in a stricter sense the bank is not holding one's own money and what one possesses is a chose in action which represents the right to require the bank to pay out sums held at the call of its customer.”

78. Also, in R v Davenport [1954] 1 WLR 569 at 571, Lord Goddard CJ explained:

“If I pay money into my bank either by paying cash or a cheque, that money at once becomes the money of the banker. The relationship between banker and customer is that of debtor and creditor. He does not hold my money as an agent or trustee; the leading case of Foley v. Hill exploded that idea. Directly the money is paid into the bank it becomes the banker's money, and the contract between the banker and the customer is that the banker receives a loan of money from the customer against his promise to honour the customer's cheques on demand. When the banker is paying out, whether he pays in cash over the counter or whether he is crediting the bank account of somebody else, he is paying out his own money, not the customer's money; but he is debiting the customer's account. The customer has a chose in action, that is to say, a right to expect that the banker will honour his cheque.”

Transfer by payment and the creation of an equitable mortgage

79. There are two means by which an equitable mortgage may be created in the present case. First, an equitable mortgage may exist according to an express or implied agreement between the parties. The deposit of security documentation may be evidence of intention to make such an agreement. Alternatively, an equitable mortgage can exist pursuant to the doctrine of subrogation.

By agreement

80. It is well accepted that an equitable mortgage can exist according to an express or implied agreement evincing the parties’ intention to create a mortgage security: National Provincial and Union Bank of England v Charnley [1924] 1 KB 431 at 440; Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584 at 595; Westfield Holdings Ltd v Australian Capital Television Pty Ltd (1992) 32 NSWLR 194 at 200. This is grounded in the equitable maxim expressed in Walsh v Lonsdale (1882) 21 Ch D 9, that “Equity looks on that as done which ought to be done”. As Atkin LJ explained in National Provincial and Union Bank of England v Charnley [1924] 1 KB 431 at 449-450:

“It is not necessary to give a formal definition of a charge, but I think there can be no doubt that where in a transaction for value both parties evince an intention that property, existing or future, shall be made available as security for the payment of a debt, and that the creditor shall have a present right to have it made available, there is a charge, even though the present legal right which is contemplated can only be enforced at some future date, and thought the creditor gets no legal right of property, but only gets a right to have the security made available by an order of the Court. If those conditions exist I think there is a charge. If, on the other hand, the parties do not intend that there should be a present right to have the security made available, but only that there should be a right in the future by agreement, such as a licence, to seize the goods, there will be no charge.”

81. As Leeming JA recently explained, with the agreement of McColl and Macfarlan JJA, in National Australia Bank Ltd v Clowes (2013) 8 BFRA 600 at [21]-[25]:

“[21] An equitable mortgage arises when the mortgagee does not receive legal title to the mortgaged property. In the case of a mortgage of shares, and particularly in the case of shares in a private company such as Jefferson whose directors were empowered to impose levies upon members to meet outgoings (see Article 22), a legal mortgage is obviously undesirable. Hence the Mortgage and Charge was drafted on the basis that the Bank would not become registered owner of the shares until and unless there was a default.

[22] An equitable mortgage may be created in a number of ways. In Theodore v Mistford Pty Ltd [2005] HCA 45; (2005) 221 CLR 612 at 621 [22] the High Court referred with apparent approval to Frederic Maitland's statement:

“An equitable mortgage (enforceable by an order for foreclosure or for sale) can be made by a deposit of title deeds if they were deposited with intent that the land which they concern shall be security for the payment of a debt."

[23] The deposit may occur with or without a signed transfer in blank. It is said in Sykes and Walker, The Law of Securities, 5th ed (1993) at 790 that:

"It was, for a long time, usual, though the practice seems less frequent in modern times, for the deposit to be accompanied by a blank transfer signed by the mortgagor so that the mortgagee could, if the mortgagee wished, procure the passing of the legal title by filling in her or his name and registering the transfer."

[24] No writing is required in this country to create an equitable mortgage by deposit of a certificate of title. The position is different in the United Kingdom, as was noted by Lord Walker in Ross v Bank of Commerce (Saint Kitts Nevis) Trust and Savings Association Ltd [2012] UKPC 3 at [20].

[25] An equitable mortgage will also arise where there is a specifically enforceable agreement between mortgagor and mortgagee to create a mortgage. In light of the foregoing, it is sufficient for there to be a specifically enforceable agreement to deposit a certificate of title, with or without a signed transfer, with the lender by way of security. "A binding promise for the delivery of a certificate of title by way of security is a contract to create an equitable mortgage and, if specifically enforceable, creates an interest in the relevant land": Pico Holdings Inc v Wave Vistas Pty Ltd [2005] HCA 13; (2005) 79 ALJR 825 at 837 [68].”

82. Leeming JA also authorised at [45], the comments of Campbell J (as his Honour then was) in Ellis v Marshall [2006] NSWSC 448 at [47]-[48]:

“[47] The deposit of title documents, without more, gives rise to an inference that the deposit was intended by the parties to operate as creating an equitable charge or mortgage over the property whose title document is deposited: Bank of New South Wales v O'Connor (1889) 14 App Cas 273 at 282; Shaw v Foster (1872) 5 Eng & Ir App 321 at 339-340, per Lord Cairns; Westpac Banking Corporation v Cronin (1990) 6 BPR [13,105]; Re Wallis & Simmonds (Builders) Limited [1974] 1 All ER 561.

[48] That inference is, as I have said, one which arises when there is a mere deposit of title deeds without more. If the Court is satisfied that there has been an actual agreement about the basis on which those title documents are deposited, the inference ceases to operate: Westpac Banking Corporation v Cronin (1990) 6 BPR [13,105] at 13,110. In that situation, the rights which arise from the deposit will be whatever the parties are demonstrated to have actually agreed. It is not necessary to decide whether the detailed process of reasoning in Cronin – that the presumption did not operate when it was proved that there was an agreement about the basis on which the title deeds were held, but both parties failed to discharge the onus of proving what the agreement was – is correct.”

83. As the authorities above recognise, the existence of an equitable mortgage may also be indicated by acts of part performance. As Knox CJ said in Cooney v Burns (1922) 30 CLR 216 at 224-225:

“The rules to be applied in determining whether a given act or series of acts amounts to such part performance as obviates the necessity for a memorandum in writing are reasonably clear ; the difficulty lies in applying these rules to a particular state of facts. A careful consideration of a great number of authorities, and especially of the speech of Lord Selborne L.C. in Maddison v. Alderson, leads me to the conclusion that these rules may be summarized thus:—(1) The acts relied on must be unequivocally and in their own nature referable to some such agreement as that alleged (Maddison v. Alderson). I think the meaning of this statement is most clearly expressed by Wigram V.C. in Dale v. Hamilton, where he says: “It is, in general, of the essence of such an act that the Court shall, by reason of the act itself, without knowing whether there was an agreement or not, find the parties unequivocally in a position different from that which, according to their legal rights, they would be in if there were no contract.” By the words “some such agree­ment as that alleged” I understand some agreement for the dis­position of some estate or interest in the land in question. (2) The acts proved must be such as to render it a fraud in the defendant to take advantage of the contract not being in writing (Fry on Specific Performance, 6th ed., sec. 580). It is, I think, involved in propositions 1 and 2 that the circumstances in which the acts relied on were done must be proved. (3) When acts ful­filling the conditions expressed above have been proved, evidence becomes admissible to prove a parol agreement (Frame v. Dawson). “The previous question as to the sufficiency of the part performance must be settled before the construction and operation of the unwritten contract can be legitimately approached ” (Maddi­son v. Alderson, per Lord O'Hagan). (4) In order that the plaintiff may succeed he must establish by clear evidence the agreement alleged by him, and it must appear that the acts relied on as acts of part performance were done for the purpose and in the course of performing that agreement and with no other view or design than to perform it. (5) Another rule, but one not relevant to the question which arises in this case, is that the agreement sued on must be of such a nature that the Court would have jurisdiction to enforce it specifically if it had been in writing. From the application of these rules to the varied circumstances of a great number of cases certain qualifications of a negative character may be deduced. It is settled that payment of part of the purchase-money is not of itself and apart from other circumstances - e.g., delivery of possession- a sufficient act of part perform­ance to take a case out of the statute (Fry on Specific Performance, sec. 013). The best explanation of this doctrine is said by Lord Selborne in Maddison v. Alderson to be that the payment of money is an equivocal act and not in itself, until the connection is established by parol testimony, indicative of a contract concerning land. And it is said that acts subsequent to the contract and even in pursuance of it, if not strictly in performance of the contract as between the parties to it but preparatory to such performance, cannot be taken as part performances (Fry on Specific Performance, sec. 025). The cases illustrating this statement are difficult to reconcile either with one another or with the general rules propounded by Lord Selborne, but most, if not all, of them may be explained by the suggestion that “acts of this sort may be, and for the most part are the mere acts of the party doing them : the other party is not necessarily cognizant of them, and consequently he is not so bound by them as to render it fraudulent in him subsequently to refuse to carry the contract into effect.”

84. Malcolm CJ, with Ipp and Nicholson JJ substantially agreeing, further explained in UTC Ltd (In liq) v NZI Securities Australia Ltd (1991) 4 WAR 349 at 351:

“It is well-settled that a mere deposit of title deeds as security for a loan constitutes an equitable charge over the subject matter to which the title deeds relate: see Matthews v Goodday (1861) 31 LJ Ch 282. Where a share certificate is deposited as security for a loan without any signed transfer, an equitable mortgage of the shares the subject of the certificate is created: seeHarrold v Plenty [1901] 2 Ch 314. In such a case, where there is an equitable mortgage so created, the court may order a sale on the application of the mortgagee, in the event of default: see Matthews v Goodday (supra); Tennant v Trenchard (1869) 4 Ch App 537 at 542; Oldham v Stringer (1884) 51 LT 895; Re Owen [1894] 3 Ch 220; and Deverges v Sandeman Clark and Co [1902] 1 Ch 579. An equitable mortgagee by way of deposit of title deeds may obtain an order of the court for possession of the subject matter and may foreclose: see Re Postle; Ex parte Bignold (1835) 4 Deac & Ch 259; Garfitt v Allen (1887) 37 Ch D 48 at 50;Barclays Bank Ltd v Bird [1954] Ch 274 at 280 (possession); James v James [1873] LR 16 Eq 153; Backhouse v Charlton (1878) 8 Ch D 444; Jones v Davies [1940] WN 174 (foreclosure). A deposit of a share certificate as security for a loan has been held to amount to an equitable mortgage by deposit, as distinct from a mere pledge and is, therefore, properly the subject of foreclosure: see Harrold v Plenty (supra).”

85. Multiple acts of part performance may be considered together: Steadman v Steadman (1974) 2 All ER 977 at 1001; Millett v Regent (1975) 1 NSWLR 62 at 74. However, the payment of money alone is generally seen to be an insufficient act of part performance to justify an equitable mortgage: Maddison v Alderson (1883) 8 AC 467; Johns v Peters (1948) VLR 331; Pejovic v Malinic (1960) SR (NSW) 184 at 189.

86. Further, the intention to create an equitable mortgage through the act of depositing documents may be established by writing alone, writing coupled with parol evidence or by parol evidence alone: see A Tyler, P Young and C Croft, Fisher and Lightwood’s Law of Mortgage (3rd Australian ed, 2014, Lexis Nexis Butterworths) at 105 and the authorities cited there. However, an inference that the deposit of documents was made by way of equitable mortgage will not be made where it contradicts the parties’ correspondence or is otherwise inconsistent with contemporaneous statements: Thames Guaranty Ltd v Campbell [1984] 2 All ER 585; Ex parte Coombe (1810) 34 ER 142; Re White Rose Cottage [1965] Ch 940.

By subrogation

87. As I have said above, an equitable mortgage may also arise in the present case pursuant to the doctrine of subrogation. Subrogation has been described as “a legal fiction, by force of which an obligation extinguished by a payment made by a third person is treated as still subsisting for the benefit of this third person, so that by means of it, one creditor is substituted to the rights, remedies and securities of another”: In the matter of Dalma No 1 Pty Limited (in liquidation) (ACN 111 772 260) (2013) 31 ACLC 13-048 at [26]; Aetna Life Insurance Co v Middleport 124 US 534 (1887) at 548-9.

88. In the context of the doctrine of subrogation, the absence of a common intention on the part of the borrower and lender that the lender should have security is neither determinative or fatal to a lender’s claim for subrogation: Banque Financiere de la Cite v Purc (Battersea) Ltd [1999] 1 AC 221 at 232-234.

89. Where a third party discharges a debt owed by another party secured by mortgage, there is a rebuttable presumption that arises that the first party is entitled to the benefit of the mortgage security, on the same terms as the debt discharged: Butler v Rice [1910] 2 CH 277; Ghana Commercial Bank v Chandriam [1960] AC 732; Cochrane v Cochrane (1985) 3 NSWLR 403; Commonwealth Bank of Australia v Christine Maree Delacy [2010] NSWSC 1449.

90. Approved by the High Court in Bofinger v Kingsway Group Limited (2009) 239 CLR 269 at [83], Kearney J explained the doctrine further in Cochrane v Cochrane (1985) 3 NSWLR 403 at 405:

“This principle is based on equity's concern to prevent one party obtaining an advantage at the expense of another which in the circumstances of the case is unconscionable. Hence, there is a common thread running through the relevant cases to the effect that the conscience of the mortgagor should be affected so as to cause the mortgage to be kept alive. This is illustrated in the text book examples first, of a third party not being entitled to a right by way of subrogation where he simply lends the money on an unsecured basis to the mortgagor who then uses such funds to pay off the mortgage; and secondly, of a third party being so entitled where he advances the money to pay out the mortgage on the understanding that security would be provided for such advance upon the mortgage being paid out. As a corollary to this basis for the principle, there is no occasion for equity to intervene by way of subrogation where there is available to the third party a remedy at law or in equity sufficient to avoid an unconscionable result.” (Emphasis added)

The question of interest

91. Pursuant to the common law, interest is not payable on a loan unless there is a contract which stipulates as such, although interest may be awarded as damages: Hungerfords v Walker (1990) 171 CLR 125 at 137.

92. However, as Collins MR stated in Re Drax; Savile v Drax [1903] 1 Ch 781 at 793:

“…a Court of Equity has power to give interest, and in point of fact does so where a charge is created on land, although there are no words allowing interest in the instrument creating the charge.”

(see also Hermann v Charny [1976] 1 NSWLR 261 at 269 per Hutley JA, with whom Glass and Samuels JJA agreed)

93. Further, Mason CJ and Wilson J explained in Hungerfords v Walker (1990) 171 CLR 125 at 148:

“Equity has adopted a broad approach to the award of interest. It has long been accepted that the equitable right to interest exists independently of statue: Wallersteiner v Moir [No.2] [1975] QB 373. Equity courts have regularly awarded interest, including not only simple interest but also compound interest, when justice so demanded, eg money obtained and retained by fraud and money withheld or misapplied by a trustee or fiduciary: La Pintada [1985] AC at 116.”

94. However, interest awarded in Equity will not be punitive: Wallersteiner v Moir (No 2) [1975] 1 QB 373; Harrison v Schipp [2001] NSWCA 13 at [129]; Australasian Annuities Pty Ltd (in liq) v Rowley Super Fund Pty Ltd (2015) 318 ALR 302 at [320]. Further, it is accepted that a court of Equity will not reform an interest rate in a transaction that is ‘unreasonable’: Knightsbridge Estates Trust Ltd v Byrne [1939] CH 441; Multiservice Bookbinding Ltd v Marden [1979] Ch 84.

95. As Street J (as his Honour then was) explained in Re Dawson; Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211 at [218]:

“The court’s jurisdiction in selecting the appropriate rate of interest is exercisable solely for compensatory purposes. Although orders for interest may in some cases appear to have the effect of penalising defaulting trustees, the court does not, in ordering interest and in selecting a rate, attempt in any way to impose a punishment upon the defaulter (Vyse v Foster (1872) 8 Ch App 309. The practice of imposing a higher rate in the second class of case is based upon a requirement that the defaulter compensate the estate at the mercantile rate. The lesser rate of four per cent applied in the first class of case is a special rate which represents some concession in favour of the trustee: the assessment is made by reference to interest considered to be obtainable on authorized trustee investments rather than on the higher mercantile rate.”

96. Kyrou J (as his Honour then was) articulated in Talacko v Talacko [2009] VSC 579 at [10]-[14]:

“[10] The Court has inherent equitable jurisdiction to award interest when the interests of justice so demand, including in circumstances where money has been withheld or misappropriated by a fiduciary. The right to interest in equity exists independently of statute.

[11] Traditionally, in fixing the rate of interest, equity broadly distinguished between two classes of case. In cases involving a breach of trust or misconduct, the fiduciary was charged interest at the mercantile rate of five per cent per annum. In all other cases, the defaulting fiduciary was charged interest at a rate of four per cent per annum.

[12] More recently, however, the courts have departed from the fixed interest rates of four and five per cent. In Hagan v Waterhouse, McKearney J said:

“I think that the volatile range of fluctuations in interest rates in recent times ought to be taken into account in applying to these changed conditions the policy of the Court which was settled in times of greater monetary stability. Since then a fundamental change has resulted from financial deregulation and its consequential uncertainties. I consider that it is no longer appropriate to apply a policy fixing a settled mean rate of interest, but rather that the mercantile rate should reflect the reality of the market place as it exists under a regime not in contemplation at the time of the foregoing pronouncement of judicial attitudes.”

[13] An example of this more flexible approach is provided by Murdocca v Murdocca (No 2). In that case, Campbell J decided that the appropriate rate to be paid in respect of the late performance of a personal equitable obligation to transfer money was the standard rate specified in the relevant court rules for interest upon judgments.

[14] Equity does not award interest in order to punish the defaulting fiduciary. Rather, interest is awarded in order to restore to the innocent party the benefit derived by the defaulting fiduciary from his or her use of the property (citations omitted).”

97. Garde AJA also explained in Australasian Annuities Pty Ltd (in liq) v Rowley Super Fund Pty Ltd (2015) 318 ALR 302 at [321]:

“As to the rate of interest, the court does the best that it can to do justice in the circumstances of the case. A rate of 4% was adopted for many years: Re Tennant Mortlock v Hawker (1942) 65 CLR 473, 507-8. The mercantile rate of 5% was often subsequently applied: Re Dawson [1966] 2 NSWR 211, 219. In some cases the standard rates for interest upon judgments have been applied: Lewis v Nortex Pty Ltd (In Liq); Lamru Pty Ltd v Kation Pty Ltd [2006] NSWSC 480 [13]; Morgan Equipment Co v Rodgers [No 2] (1993) 32 NSWLR 467; Murdocca v Murdocca [2002] NSWSC 505.”

98. Where a debt would have been satisfied but for a mortgagee’s wrongful or inequitable act, the mortgagee will be allowed no interest during such time as the debt has thereby remained unsatisfied: Thornton v Court (1854) 43 ER 115 at 118.

Creation of an express trust in law

99. As French CJ explained in Korda v Australian Executor Trustees (SA) Limited (2015) 255 CLR 62 at 69:

“…many express trusts are not express at all. They are implied, or inferred, or perhaps imputed to people on the basis of their assumed intent.”

100. In this case, the relevant trust is to be, like French CJ explains, implied or inferred from the intent and oral discussions of the Furlong and Dimitriou parties.

101. Derived from the words of Lord Langdale in Knight v Knight (1840) 3 Beav 148 at 68, three certainties must be fulfilled for the creation of a valid, express trust: Varma v Varma [2010] NSWSC 786 at [474]; Ying v Song [2010] NSWSC 1500 at [239].

102. Firstly, there must be certainty of intention. This intention is to be determined objectively by the Court on the basis of what the parties said: Byrnes v Kendle (2011) 243 CLR 253. No formal or technical words are required; there must simply be a sufficient expression of intention: Registrar, Accident Compensation Tribunal v FCT (1993) 178 CLR 145 at 165-166. Intention may be inferred from the circumstances of the case and nature of the parties’ transaction: Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1998) 165 CLR 107 at 121, 148-9, 156; Re Australian Elizabethan Theatre Trust (1991) 30 FCR 491 at 503; Walker v Corboy (1990) 19 NSWLR 382 at 395-396. Reference may also be had to commercial necessity in determining the parties’ intention: Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1998) 165 CLR 107 at 121. Intention may be rebutted by evidence of contrary intention: Commissioner of Stamp Duties (Qld) v Jolliffe (1920) 28 CLR 178. In the present case, it is important to note the analogous authority of Kauter v Hilton (1953) 90 CLR 86 at 100 where it was held that all circumstances of the case must be examined to determine whether a depositor of money into an account intended for these monies to be held on trust.

103. Secondly, certainty of the trust’s subject matter or property must be established: Federal Commissioner of Taxation v Clarke (1927) 40 CLR 246; Herdergen v Federal Commissioner of Taxation (1988) 84 ALR 271.

104. Finally, there must be a certainty of the objects or beneficiaries of the trust: Kinsela v Caldwell (1975) 132 CLR 458 at 461. A trust will not be declared invalid by a mere difficulty in determining its objects, as long as a “loose class” of objects can be identified: McPhail v Doulton [1972] 1 All ER 41; Herdergen v Federal Commissioner of Taxation (1988) 84 ALR 271 at 277. This is often the case for an express, discretionary trust.

Ascertaining the nature and purpose of a trust arrangement

105. The High Court discussed the nature and purpose of a trust arrangement in Byrnes v Kendle (2011) 243 CLR 253. In particular, Gummow and Hayne JJ explained in that case:

“[49] In Bahr v Nicolay [No 2] Mason CJ and Dawson J approved of the expression of the "traditional attitude" by du Parcq LJ that "unless an intention to create a trust is clearly to be collected from the language used and the circumstances of the case, I think that the court ought not to be astute to discover indications of such an intention". In the present case there was no degree of informality, the trust being manifested and proved by deed using the technical term "upon trust". Accordingly, to adopt what was said in Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (In liq):

"This is not one of those cases where the language employed by the parties for the transaction is inexplicit so that the court is left to infer the relevant intention from other language used by them, from the nature of the transaction and from the circumstances attending the relationship between the parties."

…

[53] The fundamental rule of interpretation of the 1997 Deed is that the expressed intention of the parties is to be found in the answer to the question, "What is the meaning of what the parties have said?", not to the question, "What did the parties mean to say?" The point is made as follows, with reference to several decisions of Lord Wensleydale, in Norton on Deeds:

"The word 'intention' may be understood in two senses, as descriptive either (1) of that which the parties intended to do, or (2) of the meaning of the words that they have employed; here it is used in the latter sense."

Dixon J and Starke J spoke to similar effect when construing the terms of wills creating testamentary trusts.

…

[55] … The question, as Megarry J put it, "is whether in substance a sufficient intention to create a trust has been manifested". The point was made by Lord Millett in Twinsectra Ltd v Yardley:

"A settlor must, of course, possess the necessary intention to create a trust, but his subjective intentions are irrelevant. If he enters into arrangements which have the effect of creating a trust, it is not necessary that he should appreciate that they do so; it is sufficient that he intends to enter into them."

[59] Likewise, the "objective theory" of contract formation, which, as Mason ACJ, Murphy and Deane JJ put it in Taylor v Johnson, stands "in command of the field", is concerned not with "the real intentions of the parties, but with the outward manifestations of those intentions". While the origins and nature of contract and trust are quite different, there is, as Mason and Deane JJ observed in Gosper v Sawyer[88], no dichotomy between the two. For example, a common form of express trust is that created by covenant between settlor and trustee. Hence the significance of consistency between trust and contract with respect to matters of intention in contract formation and trust declaration. (citations omitted)

(Also see Korda v Australian Executor Trustees (SA) Limited (2015) 255 CLR 62 per Keane J)

106. In the same case, Heydon and Crennan JJ stated at [102]-[115]:

“[102] The rules for the construction of contracts apply also to trusts. Although the two institutions are distinct, that is not surprising.

[103] For one thing, as Mason and Deane JJ said [160] : “The contractual relationship provides one of the most common bases for the establishment or implication and for the definition of a trust.” By “establishment” their Honours referred to deciding whether a trust existed. By “definition” they referred to ascertaining its terms. The two inquiries are closely related: for the terms of a document or oral dealing determine whether it creates a trust.

…

[105] The authorities establish that in relation to trusts, as in relation to contracts, the search for “intention” is only a search for the intention as revealed in the words the parties used, amplified by facts known to both parties. Thus in 1881 Sir George Jessel MR said [163]:

“The settlement is one which I cannot help thinking was never intended by the framer of it to have the effect I am going to attribute to it; but, of course, as I very often say, one must consider the meaning of the words used, not what one may guess to be the intention of the parties.”

….

[110] In 1991, Gummow J said that the relevant intention to create a trust “is to be inferred from the language employed by the parties in question and to that end the court may look also to the nature of the transaction and the relevant circumstances attending the relationship between them” [173] .

…

[112] In 2000 Gaudron, McHugh, Gummow and Hayne JJ said that even if “the language employed by the parties … is inexplicit”, the court can infer an intention to create a trust “from other language used by them, from the nature of the transaction and from the circumstances attending the relationship between the parties” [179].

[113] Neither in England nor in Australia has the application of the principles for establishing and defining a trust been analysed with the sophistication devoted in England to their application in contract. However, in both English and Australian law the surrounding circumstances are material to the questions whether the words used created a trust and what its terms are. Accordingly, Conaglen was correct to say [180]:

“The court's focus when construing the terms of [a] bilateral arrangement [creating a trust] is on the objective meaning that those terms would convey to a reasonable person, just as it is when construing contractual arrangements.”

The question is what the settlor or settlors did, not what they intended to do.

[114] That truth tends to be obscured by constant repetition of the need to search for an “intention to create a trust”. That search can be seen as concerning the first of the three “certainties” – what Dixon CJ, Williams and Fullagar JJ called in Kauter v Hilton [181]:

“[T]he established rule that in order to constitute a trust the intention to do so must be clear and that it must also be clear what property is subject to the trust and reasonably certain who are the beneficiaries.”

But the “intention” referred to is an intention to be extracted from the words used, not a subjective intention which may have existed but which cannot be extracted from those words. This is as true of unilateral declarations of alleged trust as it is of bilateral covenants to create an alleged trust. It is as true of alleged trusts which are not wholly in writing as it is of alleged trusts which are wholly in writing. In relation to alleged trusts which are not wholly in writing, the need to draw inferences from circumstances in construing the terms of conversations may in practice widen the extent of the inquiry, but it does not alter its nature.

[115] As with contracts, subjective intention is only relevant in relation to trusts when the transaction is open to some challenge or some application for modification – an equitable challenge for mistake or misrepresentation or undue influence [182] or unconscionable dealing or other fraud in equity, a challenge based on the non est factum or duress defences, an application for modification by reason of some estoppel, an allegation of illegality [183] , an allegation of “sham” [184] , a claim that some condition has not been satisfied [185], or a claim for rectification. But subjective intention is irrelevant both to the question of whether a trust exists and to the question of what its terms are.”

Caveatable interests

107. A caveat must contain the prescribed particulars of the estate or interest claimed by the caveator: Real Property Act 1900 (NSW) s 74F(5)(b). A caveat must also be supported by a legal or equitable estate or interest in land. A contractual right to be repaid a debt pursuant to a loan agreement or deed does not create an interest in land where its terms are too uncertain: Sanna v Wyse and Young International Pty Limited & Others (No.2) (2015) 18 BPR 35-699.

108. Section 74F(1) of the Real Property Act 1900 (NSW) makes express reference to “a legal or equitable estate or interest in land.” In Re Pile’s Caveats [1981] Qd R 81 Dunn J stated that “the existence of a prima facie equity to relief involving land is not necessarily the same as the prima facie existence of an interest in land.” In S Lindsay, Caveats Against Dealings in Australia and New Zealand (The Federation Press, 1995), it was said at 153 that “an interest in the land must ultimately trace back to an interest created by or otherwise binding upon the registered proprietor.”

109. It was said in Municipal District of Concord v Coles (1905) 3 CLR 96 at 108 that “[t]he lodging of a caveat is really in the nature of the initiation of litigation, and only those persons should be entitled to initiate litigation who are entitled to litigate the matter of the dispute which is set up by the caveat.” A caveat may only be lodged by a person who claims an interest in land, such as:

• A person claiming an interest under a contract for purchase or unregistered transfer: Re Wadham (1879) 13 SALR 70;

• A person claiming an easement over the land: Re Paul (1902) 19 WN (NSW) 114;

• An equitable mortgage holder or the holder of an equitable charge: Avco Financial Services Ltd v White [1977] VR 561.

110. A person who merely has an interest in the proceeds of the sale of land does not have a sufficient interest in the land to caveat, except in circumstances where he has a right to compel sale: Davies v Uratoriu (1995) 6 BPR 13,917.

111. In Bellissimo v JCL Investments Pty Ltd [2009] NSWSC 1260 at [12] it was explained:

….[I]n some cases, an agreement that one party has authority to lodge a caveat in respect of the property of the other carries with it by implication an agreement to confer such an interest in the land as will sustain a caveat.”

112. In discussing contractual clauses allowing the lodgement of a caveat over property, in Iaconis v Lazar [2007] NSWSC 1103 Young CJ in Eq stated at [23]-[24]:

“[23] The current commercial enthusiasm for this sort of clause in a contract and for lodging a caveat was given a great boost by the decision of the Court of Appeal in Troncone v Aliperti (1994) 6 BPR 13,291. This decision has often been interpreted by persons seeking charges as meaning that every time there is an agreement that X can lodge a caveat over any property Y may own, that an equitable charge is created. It should be remembered, as McLelland CJ in Eq said in Coleman v Bone (1996) 9 BPR 16,235 at 16 and 239, that the true principle is that ‘Where the authority to lodge a caveat is given in connection with an obligation by A to pay money to B, and there is no sufficient indication to the contrary, the implication is that the estate or interest granted is an equitable charge to secure payment to B of that money.’

[24] The probabilities would be that if the facts show that there is a pro forma document and a person of limited commercial experience has signed it without evidence being proffered by the lender that the clause has been properly explained to the person who is said to have given the charge by or on behalf of the person providing the financial benefit, that the court may very well come to the conclusion that the former person never intended to give a charge notwithstanding the words used in the document.”

Removal of caveats

113. In determining whether a caveat should stand, the appropriate principle to apply is whether the defendant would, in all the circumstances, be entitled to an interlocutory injunction to protect the interest that they claim in the caveat. An interlocutory injunction is granted if the court is satisfied that there is a serious question to be tried, and that the balance of convenience favours the granting of an interlocutory injunction: Murphy v Lush (1986) 65 ALR 651 at 652; Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 195 CLR 1 at 24.

114. If the defendant is not entitled to an interlocutory injunction, the Court must order that the caveat be withdrawn: Martyn v Glennan [1979] 2 NSWLR 234 at 238-239; Hanson Construction Materials Pty Ltd v Roberts [2016] NSWCA 240 at [37]; BaybluHoldings Pty Ltd v Capital Finance Australia Limited (2011) 279 ALR 166 at [20].

Mingling of funds held on trust

115. The fiduciary obligations arising if a trustee mingles or mixes trust funds with non-trust funds were explained in Cook v Addison (1869) LR 7 Eq 466 at 470:

“It is a well-established doctrine in this court, that if a trustee or agent mixes and confuses the property which he holds in a fiduciary character with his own property, so as that they cannot be separated with perfect accuracy, he is liable for the whole.” (emphasis added)

116. This was applied by Ungoed-Thomas J in Re Tilleys Will Trusts [1967] Ch 1179 at 1183 who said:

“The words in that passage so as that they cannot be separated with perfect accuracy are an essential part of the Vice-Chancellors proposition, and indeed of the principle of Lupton v White 15 Ves Jun 432. If a trustee mixes trust assets with his own, the onus is on the trustee to distinguish the separate assets, and to the extent that he fails to do so they belong to the trust.”

117. Similarly, in Foskett v McKeown [2001] 1 AC 102, Millett LJ approved the comments of Page Wood VC in Frith v Cartland (1865) 2 Hem & M 417 at 420, explaining:

“…if a man mixes trust funds with his own, the whole will be treated as the trust property, except so far as he may be able to distinguish what is his own.”

118. Lord Neuberger of Abbotsbury MR approved the above comments and went on further to state in Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd (in administrative receivership) and others [2012] Ch 453 at [138]:

“Where he has mixed the funds held on trust with his own funds, the onus should be on the fiduciary to establish that part, and what part, of the mixed fund is his property”.

(see also In re Tilley's Will Trusts [1967] Ch 1179 at 1182-1189; Re Sports Alive Pty Ltd (in liquidation) [2013] VSC 69 at [125]-[128]; Lupton v White (1808) 15 Ves 432; Re Hallett’s Estate (1880) 13 Ch D 696; Farnell v Cox (1898) 19 LR (NSW) Eq 142)

119. Australian courts have accepted these principles: Brady v Stapleton (1952) 88 CLR 322 at 336-339; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 109-110.

120. Further, where it is proven that there has been a mixing of funds, and these mixed funds are used to acquire other property which is not "specifically severable", the trust funds may be traced into the newly acquired property and the beneficiaries may claim an interest in the new property proportionate to their trust funds used to acquire it: Scott v Scott (1963) 109 CLR 649 at [14]; Raulfs v Fishy Bite Pty Ltd; Fishy Bite Pty Ltd v Raulfs [2012] NSWCA 135 at [95]. As Ungoed-Thomas J explained in Re Tilleys Will Trusts [1967] Ch 1179 at 1193:

“…if, having regard to all the circumstances of the case objectively considered, it appears that the trustee has in fact, whatever his intention, laid out trust moneys in or towards a purchase, then the beneficiaries are entitled to the property purchased and any profits which it produces to the extent to which it has been paid for out of the trust moneys.”

(see also Hagan v Waterhouse (No 2) (1991) 34 NSWLR 308 at 357-359; Heperu Pty Limited v Belle (2009) 76 NSWLR 230 at 256-259)

121. I am acutely aware that the authorities always permit a defaulting Trustee to exonerate themself from liability by pointing to evidence which distinguishes between their personal funds and the trust funds.

Accessorial liability in Equity

122. As the High Court (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ) explained in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89:

“[111] In Barnes v Addy (1874) LR 9 Ch App 244 Lord Selborne LC said: “Those who create a trust clothe the trustee with a legal power and control over the trust property, imposing on him a corresponding responsibility. That responsibility may no doubt be extended in equity to others who are not properly trustees, if they are found either making themselves trustees de son tort, or actually participating in any fraudulent conduct of the trustee to the injury of the cestui que trust. But, on the other hand, strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions, perhaps of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees.”

258. Eventually, after the hearing had commenced, Mr Dimitriou produced documentation which he alleged explained his use of these trust funds. All of this documentation was in my view unintelligible and its authenticity was questionable. Mr Dimitriou had innumerable opportunities to produce this documentation. Yet, he failed to do so with any urgency or seriousness. It was not until the proceedings commenced that he felt the urge to produce voluminous material which he alleged aided him to discharge the onus of proving the use of the funds held on trust in the DPI bank accounts.

259. In the interests of fairness, I denied this request: The State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146; Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175. Although for reasons that are later explained I have determined to reverse my position on this aspect of the case.

The trustee and the beneficiary

261. According to the authorities above and on an objective analysis of the evidence, I am satisfied that it was intended that the Bramco entities’ trading funds were to be held by DPI as trustee for the benefit of BGI and Mr Gilbert Leishman as beneficiaries. I have already said I accept Gilbert Leishman’s recollection of the terms of the conversation at which he was present with Mr Dimitriou and Mark Leishman, as set out in Gilbert Leishman’s affidavit (Affidavit of 21 July 2016 [21]). Viewed literally, this conversation could be construed as suggesting that Mr Gilbert Leishman was to be the sole beneficiary of the alleged trust (CB 1156-1157).

262. However, it seems to me that on a proper, objective view of the evidence as a whole, both BGI and Mr Gilbert Leishman are the proper beneficiaries of the trust. I am of this view because BGI was the entity which generated all of the revenue and was the entity established for the very purpose of being the face of the Bramco business. Further, I consider Mr Gilbert Leishman to be a joint trustee because this revenue was in part or in whole, I infer, generated by the use of Mr Gilbert Leishman’s intellectual property.

263. In his Amended Second Cross Claim at [7] and in his affidavit of 21 July 2016 at [9], Mr Gilbert Leishman asserts, without the reference to any underlying evidentiary basis, that he was at all relevant times the “sole proprietor and owner” of the Bramco entities’ intellectual property. In the Second Cross Claim, he asserts that up until 17 December 2013, Bramco Electronics was the licensee of his intellectual property. Further it is asserted that Bramco Electronic was placed in liquidation and as a result ceased to be the licensee of the intellectual property (Affidavit of Gilbert Leishman 21 July 2016 [8]). No detail is thereafter pleaded as to what if any license arrangement exists and with whom.

264. In his affidavit of 21 July 2016, Mr Gilbert Leishman makes no mention likewise as to what if any license exists and with whom in relation to the intellectual property. No attempt was made at the trial to prove the detail of any license agreement nor the proprietorship of any patents or trademarks if they exist.

265. However, when he gave his evidence, Mr Gilbert Leishman was not cross examined to suggest that what he asserted in his evidence was inaccurate or untrue. Mr Dimitriou of course was arguably in no position (beyond mere denial) to prove the contrary of the assertion made by Mr Gilbert Leishman. In fact, Mr Gilbert Leishman gave evidence of a conversation on 13 January 2014, which I have accepted, in which Mr Dimitriou expressly acknowledged that “Gil owns the IP” (Affidavit of Gilbert Leishman 21 July 2016 [21]).

266. On balance, I am prepared to accept Mr Gilbert Leishman’s evidence and I am fortified in my conclusion by the defendants’ failure to test his assertions (in pleadings or affidavits) in cross-examination let alone make any attempt to call any evidence of a tangible nature to the contrary.

267. In addition, I have resolved that the proper trustee is DPI because it was the entity which all the parties knew would receive the Bramco trading funds and deal with them according to the terms of the trust. I accept Gilbert Leishman’s evidence that he and Mr Dimitriou agreed that Mr Dimitriou would conduct the everyday financial details of the Bramco entities, keep proper accounting records and hold surplus funds on trust for BGI after having paid for various debts of the business. This establishes that all funds received in the DPI bank accounts, minus proper expenses, were to be held on trust.

268. The evidence suggests that all monies coming into the DPI bank accounts were relevantly from the Bramco entities. The evidence is all one-way in suggesting that the agreement between the relevant parties was that all funds would be received by Mr Dimitriou on behalf of the Bramco entities and be held in the DPI bank accounts. Mr Dimitriou accepted that he had implemented this arrangement by attempting to (although the evidence shows this did not occur in practice) receive income into the DPI savings account numbered 13-515-6176 and pay all expenses out of the DPI cheque account numbered 13-515-6117 (T 680-681). While Mr Dimitriou alleged that some of the monies coming into the DPI accounts were loans provided by the defendants, no supporting documentation for these assertions was ever presented to the court, precluding any finding that there was any income in the DPI accounts that did not originate from the Bramco entities.

269. Subject however, to what if any monies are found to have been misappropriated or misapplied and hence owed to the beneficiaries, a question might arise in what proportions each beneficiary is entitled to share in those proceeds. I will hear further submissions in due course on this topic, subject to the referee’s report which I propose below.

The onus is on DPI

270. Where it can be established that a trustee has mingled his own funds with trust funds, the law regards all funds held and or dealt with by the trustee as trust monies. There is an onus therefore on the trustee, if they are able to, to distinguish between those (if any) of the funds that are theirs and the funds which belong to the trust.

271. In the present case, I am satisfied that there has been a mingling of funds. Mr Dimitriou admitted funds in the DPI bank accounts had been mingled (T 742). It seems to me that consequently, the onus shifts to DPI to distinguish between these funds.

Breach of trustees’ duties and failure to discharge the onus

272. In my view, DPI has thus far failed to discharge this onus and also committed serious breaches of its duty to keep proper accounts and records and arguably to act honestly in relation to the trust.

273. First, the accounting in the DPI bank accounts was shambolic. Mr Dimitriou, or DPI as the corporate trustee he directed, chose the description to be given to each item in the bank statements. The precise nature of each transaction lied peculiarly within his knowledge, yet he has failed to provide any clarity on each of the transactions in the trust accounts. The descriptions given to the transactions in the DPI bank statements are vague and largely unintelligible. Mr Dimitriou’s lack of apparent readiness to assist the court in tracing the transactions in the DPI bank accounts is telling. He was given more than every reasonable opportunity to do this, yet he failed to do so. This failure is inexcusable, given the extensive services his corporations purported to supply customers, particularly in accounting, with the services of Ms Kaur and other of his staff.

274. Most importantly in my mind, many of the entries in the bank statements are of a generic kind, for example the variously described ‘loan’ transfers or simply an amount transferred out of the account to an unspecified destination labelled “transfer”. Mr Dimitriou was the person who chose or supervised the choice of every description of every item in the DPI bank statements. But, when asked, he was simply unable coherently to intelligibly explain what it was he described in each transaction. Leaving aside any documentation he may or may not possess which is authentic and contemporaneous, he has not yet presented a plausible and credible explanation of what he was doing with these funds. Further, while Mark Leishman has purported to authorise or explain the use of some of these items in the bank statements, the vast majority of them remain unexplained.

275. My view on this is fortified by Mr Dimitriou being unable to readily supply orthodox business records and by reason of his failure to call even one of the accountants employed by him or his group of companies to explain their accounting system or the work they performed for the Bramco entities. This makes his failure to keep proper records even more serious, and adds to the weight of the onus upon him.

276. I am equally fortified by the evidence of Ms Sheaves as to the haphazard or non-existent business practise of Mr Dimitriou in his day to day so called record keeping.

277. Mr Dimitriou, when on notice and frankly obliged to produce evidence to defend the very serious allegations in these proceedings and to provide sufficient evidence for his cross-claim, failed to produce any conventional books and records to explain any of these transactions and their descriptions. All Mr Dimitriou did was produce documentation which was either inadequate and/or suggested recent invention. While he stated that he was able to give explanations for the various transactions, he simply failed to do so comprehensively, or at all, when he was given ample opportunity. This absence is again inexcusable, given that he must have appreciated that it was in his, and the defendant companies’ interests to do so, and to do so in some detail.

278. For example, in cross-examination, Mr Dimitriou was asked about the meaning of various transactions described as ‘loans’ in the DPI bank statements, such as “Bramco Loan” or “Loan Bramco Group”. He, being the person who coined the phrase, was the primary person who would have known what this meant. He responded in the following manner at T 884 to 886:

“Q. But why wouldn't you nominate it in a bank statement as fees‑‑

A. Yes.

Q. ‑‑because you'd have to bring it to account as income for Wise & Young, wouldn't you? And how would you do that if it was said to be a loan? Or was it done on the basis that it was said to be a loan in order to avoid bringing it to account as income?

A. No.

Q. Well, then what was the loan? Precisely what was the loan?

A. Okay. It's recorded here as a loan.

Q. What was the loan?

A. I'm trying to explain to your Honour.

Q. Please do.

A. The description of "loan" is any moneys that have gone out of the BGI controlled account.

Q. But was it a loan or was it just the terminology "loan"?

A. Terminology of a loan.

Q. So it could mean anything at all?

A. Yes, yes.

Q. And it would mean nothing to anyone looking at the bank statements‑‑

A. Correct.

Q. ‑‑unless you were the person?

A. No, that's not correct, your Honour.

Q. All right.

A. It would mean something to everybody‑‑

Q. But if anybody else read this bank statement, they would assume it was an accurate description, hence a loan. But you just told me now it's not a loan. Is that right?

A. It's recorded as a loan.

Q. Are you telling me it's not a loan?

A. Not a loan to Wise & Young, no, your Honour.

Q. Well then, is it rightly recorded or wrongly recorded in the Wise & Young bank statement?

A. In the Wise & Young bank statement, if it was a fee payable, it should have been described as a fee towards an invoice, if that's what it was.

Q. Mr Dimitriou‑‑

A. Yes.

Q. ‑‑you don't actually know one way or the other, do you?

A. Your Honour, it's difficult for me to answer your question. I'm trying my best.

Q. All right.

A. Okay. I'm owed a lot of money and I'm trying to get through this as best I can.

Q. Yes, maybe you are owed a lot of money, but it seems to me that you're not altogether accurate in the way that you maintain your records.

A. No, that's not correct.

Q. Now, you tell me, this was a loan or not a loan?

A. It's described as a loan.

Q. Is it right or wrong to describe it as a loan?

A. It's right to describe it as a loan on the DPI bank statement.

Q. What about this bank statement we're looking at? Is that correct or not?

A. On the Wise & Young ‑ well, it depends, your Honour because‑‑

Q. Depends on what?

A. Because ‑ if your Honour allows me to elaborate on it ‑ the other companies that Wise & Young ‑ my group of other companies gave moneys to Wyse & Young International.

Q. When you say "gave", do you mean gave or loaned?

A. Loaned, recording loan accounts in those companies. And those monies may have been ‑ this may have been money that's gone back, to then go back to those companies, your Honour. Your Honour, it is quite simple if your Honour's able to take a couple of charts over there, which your Honour will understand.

Q. Thank you.

A. I'm sorry.

Q. That's all right, but you're telling me if I carefully look at all of your bank statements here, will I ever see a reference to accounting fees, ever?

A. You may, yes.

Q. All right. Yes, Mr Corsaro.

A. Thank you.”

279. In giving further oral evidence, Mr Dimitriou again failed to give any intelligible explanation for the variously described ‘loan’ transactions in the DPI bank accounts (T 882-885, 698-704).

280. Mr Mark Leishman asserted that he had no knowledge of these loans and had never signed, executed or sighted a loan agreement between himself, Mr Dimitriou and or the defendant companies (T 408; Affidavit of Mark Leishman 4 November 2015 [23]). Ms Furlong did not give any specific evidence in relation to these ‘loan’ transactions, however she explained that she never borrowed money from Mr Dimitriou or his companies (Affidavit of Furlong 29 July 2016 [12]).

281. Further, Mr Dimitriou accepted that he did not keep or prepare documents underlying the loans (T 897-900) and was unable to point to any underlying document supporting the transfer, other than insufficiently promising that he would show that particular transfer in another schedule he had prepared (T 694-707). His answers to questions surrounding the ‘loan’ transactions were ambiguous, implausible and insufficient to explain the nature of each transaction. Mr Dimitriou’s choice of this generic term “loan” was either done because he is lazy, incompetent or more plausibly, to be deliberately ambiguous so as to cover a more cynical purpose. If one is to trace these “loan” transactions, they each have different paths through the defendant entities’ bank accounts. It is impossible to ascertain any clear purpose of the “Bramco Loans” from the evidence before the court. This difficulty is compounded by the absence of any loan documentation which could explain the use of that terminology.

282. Apart from these ‘loan’ transactions, Mr Dimitriou also failed to explain the nature of other transactions in the DPI accounts during the proceedings. For example at T 744:

“Q. What's WA DPI?

A. That's Wise Accounting, which is the same reference. This would have went back into DPI, I gather.

Q. But what we do see here, irrespective of where they went, they didn't go to Darby Street, did they, Mr Gil Leishman's--

A. No cause they weren't necessarily needed to. They were Bramco International's money. They weren't Mr Leishman's money. It had nothing to do with Darby Street. What was required, Mr Corsaro--

Q. I haven't asked you what was required.

A. I'm sorry.

Q. The answer to my question was, yes, they didn't go towards Darby Street. Correct?

A. Yes.”

283. Again at T 683 to 684:

“Q. Please take whatever time you need. I want you to indicate to his Honour which of these payments which you say are credited to the account are not Bramco Trading receipts?

A. Yes. On 22 July 2014, NAB-9. I'm just working off the cuff here.

…

Q. Can you tell us by reference to this PAR sheet or these statements which ones are not? Which is the first one?

A. Yep. 18 June 2014 page NAB-46. There's an amount there for 15,000.

Q. Sorry, just bear with me. 18 June an amount of how much, please?

A. Would you like me to highlight them and you can announce them all.

Q. No, just tell me which ones, please. I'm just trying to understand which ones. Which ones? 18 June. Which one, I'm sorry?

A. 18 June 2014.

Q. Yes. how much is it for, please?

A. $15,000.

Q. That's loan repayment Xal. Is that correct?

A. Yep.

Q. Yes, thank you?

A. Then there is 14 May 2015 on NAB-61.

Q. On, I'm sorry? The date again, please?

A. 14 May 2015. It says "Loan to Tickner". That's a loan to Kim Leishman.

Q. Loan to?

A. $10,000.

Q. Sorry, loan to?

A. That's a loan to Gil Leishman $50,000 on 14 May.

HIS HONOUR: Sorry, I don't understand that.

Q. These are moneys, your moneys?

A. Yes.

Q. Paid - what - back to you, is that the way you're suggesting, by either Mr Gil Leishman or Ms Kathleen Leishman?

A. No, your Honour. It's me contributing to them to assist the group, your Honour.

Q. But these are credits, aren't they?

A. Credit into the account. Then it's used. Then it goes over to the debits and then it's--

Q. I'm sorry. So you deposit the 10,000 into this savings account?

A. Yes.

Q. Is that right?

A. Yes.

Q. That's a loan, you say, to Kathleen and the $50,000 is a deposit by you?

A. Yes.

Q. And you identify that as a loan to Mr Gilbert Leishman?

A. That's correct, yes, to assist the group, yeah. That first one was to Ken Tickner.”

284. Despite his failure to explain these transactions, there is little doubt that Mr Dimitriou was paying some expenses from the DPI accounts from time to time for Bramco. This is reinforced by Mark Leishman’s evidence that he would direct payments to be made out of the DPI accounts for business expenses (Affidavit of Mark Leishman 24 November 2015 [11]) and his reconciliation finding that some in effect $700,000 of the transactions in the DPI accounts were authorised transactions, suggesting that they were expenses paid by Mr Dimitriou. Further, both Ms Furlong and Mark Leishman accepted that they were paid wages by Mr Dimitriou, and in fact, had to ask him numerously for such payment (T 244-245, 259, 421-422). Mark Leishman explained that funds in the accounts were “utilised for the day to day running” of Bramco “including the payment of bills, rent, materials, wages and expenses” (Affidavit of Mark Leishman 24 November 2015 [8](e)]. Further, there is no evidence before the court that any persons to which Bramco did business had outstanding debts owing to Bramco when Mr Dimitriou was in control of the corporate structure.

285. However, as above, I accept the evidence of the Ms Furlong and Mr Mark Leishman that they never received any accounting from DPI, Mr Dimitriou or the defendants. Further, I accept the evidence of Gilbert Leishman that Mr Dimitriou in fact refused to provide such accounts when he asked him, instead meeting these requests with threats and belittlement (Affidavit of Gilbert Leishman 21 July 2016 [41]-[44]). This alone is sufficient to establish a breach of the duty to keep proper accounts, however it is gravely compounded by the unsatisfactory business practises of the defendants and Mr Dimitriou.

286. For the reasons above, I am of the view that DPI, largely through the conduct of its sole director Mr Dimitriou, acted in clear breach of its duties as trustee to keep proper accounts and to act honestly in relation to the trust.

287. According to the principles above, it follows that Mr Dimitriou, as director, secretary and sole shareholder of DPI (CB 209-211), is also liable as an accessory under the second limb of Barnes v Addy (knowing assistance) to DPI’s breaches. It is clear on the evidence and according to my findings above, that Mr Dimitriou was the controlling mind of DPI, the key individual in charge of its day to day operations and the person ultimately responsible for keeping and rendering accounts. He was, according to the authorities referred to above, the alter ego or at very least an agent of DPI who knowingly assisted in the breaches of DPI’s fiduciary duties. He had exclusive control over the bank accounts of DPI, being himself responsible for any transfer of funds from these accounts or directed others to do so.

284. The current evidence does not permit any findings of knowing receipt, as apart from Mr Mark Leishman’s unsatisfactory reconciliation, there is no evidence showing precisely who received any misappropriated trust funds, if there was in fact any. Such a finding may later emerge once an expert is engaged to determine who or what entity received these funds.

285. Further, I do not believe there is sufficient evidence currently to prove any accessorial involvement in DPI’s breaches of fiduciary duty (be it receipt or assistance) on the part of the other cross-defendants.

286. I am satisfied however that there has been a breach of trust by DPI as trustee and Mr Dimitriou was an accessory to that breach. However, quantification of any losses, if any, occasioned by that breach is for the reasons which follow a moot question.

The Leishman analysis of the DPI bank accounts

291. Putting aside the onus issue and the inadequacies in the defendants’ evidence, Mr Mark Leishman’s analysis is in many respects wholly unsatisfactory. The flaws within this exercise commenced with the admission of many of the paragraphs in his affidavit of 1 August 2016 as being restricted to his opinion pursuant to section 136 of the Evidence Act 1995 (NSW). In that affidavit he purports to undertake an exercise designed to expose unauthorised payments from DPI at the direction of Mr Dimitriou, with the aim of proving Mr Dimitriou and or one of his entities misappropriated and/or misapplied the funds.

292. The exercise he performed, which involved him having had some unspecified conversations with his father, purported to single out with some apparent specificity particular payments. The exercise was a hopeless one from the start. He does not explain his methodology and what exactly permits him to label payments as ‘authorised’ or ‘unauthorised’. Further, he does not explain any particular familiarity with each transaction he analyses nor any contemporaneous recollection or documents against which he may be able to form a view about the nature of any transaction. Ultimately, his analysis is flawed because it is entirely driven by the descriptions given to each transaction by Mr Dimitriou, which, as I have already explained are themselves unexplained and ambiguous.

293. Mr Mark Leishman has at best some “expertise” in the sense that he was familiar with the day to day operations of the Bramco entities and the persons with whom it traded. His methodology as I say was however opaque. Despite unsurprisingly purporting to have an intimate knowledge of the Bramco entities’ business, his opinion alone is insufficient to categorise these payments on their force as authorised or unauthorised, given the seriousness of the allegations in question.

294. The deficiencies in the Leishman analysis were compounded by Mr Dimitriou and the defendants’ failure to give any assistance to the court in relation to these transactions and the precise amount of transactions which were legitimate or not by the timely production of any relevant documents.

295. In short, my tentative view (expressed in the hearings of 24 November and 7 December) was that it would be difficult if not impossible to use his evidence as a basis for anything let alone any allegation of misappropriation or misapplication.

296. Any disquiet on my part at the state of Mr Mark Leishman’s analysis was aggravated when Mr Dimitriou, in his final submissions, was able to point to numerous errors in Mr Leishman’s analysis which caused me to have considerable doubt about the entire exercise undertaken. These difficulties were confronted by the plaintiffs and Mr Leishman purported to readdress his evidence. An amended, more detailed spreadsheet was prepared by Mr Leishman that purported to correct errors, make concessions and do what could only amount to the provision of fresh evidence. At the late stage the exercise could clearly not be received, without causing significant prejudice and unfairness to the defendants.

297. In light of these considerations, I am in no position on the current state of the evidence to form any conclusion as to what, if any, funds were misappropriated, misapplied, unauthorised or remain otherwise unaccounted for. In the circumstances I intend as a matter of fairness to refer the matter to a referee to assess the nature of each transaction in the DPI bank accounts under challenge and to quantify what, if any, monies are unexplained or unaccounted for by Mr Dimitriou. I will make a final judgment on this aspect of the case after I assess the referee’s report. In my view that is the only way in my view to get to a position on this issue of qualification so as to conclude whether any breach or breaches of trust has led to any quantifiable losses.

298. I am entirely conscious of the fact that I have prevented Mr Dimitriou and his entities from tendering any records supporting the various payments out of the DPI account (if they exist). Mr Dimitriou will now get that chance.

299. What I envisage is first appointing a suitably qualified referee pursuant to Part 20, Division 3 of the Uniform Civil Procedure Rules 2005 (NSW). Secondly, pursuant to regulation 20.20 of the Uniform Civil Procedure Rules 2005 (NSW) I propose to give Mr Dimitriou a limited frame to produce invoices, loan agreements and any other contemporaneous supporting documents he alleges support the challenged payments out of the DPI accounts. I mean by the latter the amounts now challenged as a result of Mr Mark Leishman’s most recent amended spreadsheet. The referee will then need to analyse such documents and report on which payments are the subject of supporting documentation and which are not. The exercise is to be entirely documentary. It is not an occasion for the reception of any additional oral testimony. A report should then be prepared for the court: Uniform Civil Procedure Rules 2005 (NSW) r 20.17.

300. Given the history of the matter and the recent developments, each party should be responsible for 50% of the referee’s fees in the first instance, with an opportunity to be heard on whether one side or the other should have their costs of the reference reimbursed: Uniform Civil Procedure Rules 2005 (NSW) r 20.18.

Set off or stay

301. The plaintiffs submitted that if the court is to find that any monies are owed from the monies advanced to discharge the CBA debt, the Furlong and Leishman parties are entitled to a set off of these monies against any misappropriated BGI trust funds (P [35]; P additional [58]). I note however that such a set off is not pleaded, when in my view it should have been.

302. Subject to what, if any amount may be found to be owed to Mr Gilbert Leishman under the second cross claim, I will hear further argument as to whether there should be any stay or set off and in whose favour such a stay or set off is ordered.

Alleged breaches of the Australian Competition and Consumer Act

303. In passing, while Mr Dimitriou and the defendants’ business practices are fatally flawed for the reasons I have stated, I am not satisfied that a breach of any section of the Competition and Consumer Act 2010 (Cth) has been established by the plaintiffs. No initial or final submissions of any substance were put which would prove these pleaded breaches and therefore I propose not to grant any such relief.

Conclusion

304. At the very end of the proceedings, the plaintiffs handed some proposed Short Minutes of Order to the Court. As a result of my findings, those short minutes are in part, at least, inappropriate and I would refuse to make those orders. However, I would invite the parties to prepare short minutes to reflect my reasons. I will also hear the parties on the terms of my reference out and potentially on the questions of costs. I say potentially because it may or may not be appropriate to hear any costs argument on any issue until the contemplated reference is completed.

Annexure A (118 KB, pdf)

Amendments

12 September 2018 - para [21] 7th line - change "dropped" to "drafted"

para [262] 6th line - change "trustee" to "beneficiary"

19 December 2016 - added PDF version of Annexure A

Decision last updated: 12 September 2018