GP Building Holdings Pty Ltd v Voitin

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCI 2021 0123

GP BUILDING HOLDINGS PTY LTD (ACN 145 944 163)	First Applicant
ROUBAL BEIRUTI	Second Applicant
v
CLARE MAREE VOITIN	Respondent

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JUDGES:	Niall, Sifris and Walker JJA
WHERE HELD:	Melbourne
DATE OF HEARING:	19 July 2022
DATE OF JUDGMENT:	30 September 2022
MEDIUM NEUTRAL CITATION:	[2022] VSCA 210
JUDGMENT APPEALED FROM:	[2021] VCC [1487] (Judge MacNamara)

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TRUSTS – Knowing receipt – Solicitor misappropriated trust funds for private expenditure – Whether solicitor’s wife knowingly received misappropriated trust funds – Solicitor’s wife wilfully and recklessly failed to make reasonable inquiries about the source of trust funds – Solicitor’s wife ought to have known funds came from misuse of trust account – Leave to appeal granted – Appeal allowed.

Barnes v Addy (1874) LR 9 Ch App 244; Baden v Société Générale pour Favoriser le Développment du Commerce et de l’Industrie en France SA [1992] 4 All ER 161; Briginshaw v Briginshaw (1938) 60 CLR 336, considered.

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Counsel
Applicants:		Mr D Farrands QC with Ms L Mills
Respondent:		Mr D Connors with Mr T Gorton
Solicitors
Applicants:	SLF Lawyers
Respondent:	Rothwell Lawyers

NIALL JA
SIFRIS JA
WALKER JA:

Introduction and summary.

Before he was made bankrupt, John Voitin was a solicitor in private practice. He induced one of his clients, Mr Roubal Beiruti, to invest with him, and for that purpose a company associated with Mr Beiruti[1] (Mr Beiruti and the company together, ‘the applicants’), deposited $3,245,000 into Mr Voitin’s trust account held in his firm’s name, Stanton Grant Legal (‘Stanton Grant’). Neither the promised returns nor the capital were returned to the applicants. The money was paid away, largely it seems to meet the private expenditure of Mr Voitin and his family. The applicants sued Mr Voitin in the Supreme Court and obtained summary judgment from Riordan J for the amount of $3,245,000 plus interest, together with some ancillary orders. The order made by Riordan J records that the transfers made by Mr Voitin out of the Stanton Grant trust account were made in breach of trust and in breach of Mr Voitin’s fiduciary duty.
[1]GP Building Holdings Pty Ltd (ACN 145 944 163) (‘GP Building’).
Apart from the recovery of some money pursuant to a mortgage, Mr Voitin’s bankruptcy left the applicants empty-handed. Subsequently, the applicants commenced a proceeding in the County Court against Mr Voitin’s wife, Clare Maree Voitin (‘the respondent’) alleging that she had knowingly received trust money and was thus liable in accordance with what is commonly called the first limb of Barnes v Addy.[2] It was alleged that the respondent had received, or received the benefit of, some $1,526,088.70.
[2][1874] UKLawRp Ch 20; (1874) LR 9 Ch App 244 (‘Barnes v Addy’).
The claim in the County Court presented two critical issues: had the respondent received trust money and, if she had, did she have the requisite knowledge that the money or its traceable proceeds were trust property and transferred to her in breach of trust? Following a trial, Judge MacNamara concluded that the respondent had received some, but not all of the amount claimed.[3] In very brief compass, the judge concluded that it was not sufficient that the respondent, or the Voitin family, had benefited from the money; the applicants also had to show that the respondent had received it, in the sense that it had been paid to her, into a joint account held by her or to meet a liability on her behalf. The position was further clouded by the fact that much of the money taken by Mr Voitin was funnelled through various corporate entities controlled by him. Ultimately on the first issue, the judge concluded that the respondent had received $149,875.90. There is no challenge, from either party, to that conclusion in this Court.
[3]GP Building Holdings Pty Ltd and Anor v Voitin [2021] VCC 1487 (‘Reasons’).
On the question of the respondent’s knowledge, the judge held that it was sufficient if the applicants established knowledge of a kind coming within the first four categories of knowledge described by Peter Gibson J in Baden v Société Générale pour Favoriser le Développment du Commerce et de l’Industrie en France SA,[4] and that, in order to be satisfied as to knowledge under any of those categories, it was necessary to be satisfied to the Briginshaw standard.[5] The judge concluded that the applicants had not proven the requisite knowledge and dismissed the proceeding.
[4][1992] 4 All ER 161; [1993] 1 WLR 509 (‘Baden’).
[5]Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 (‘Briginshaw’); see also s 140 of the Evidence Act 2008.
The applicants seek leave to appeal on the following ten proposed grounds of appeal:
Ground 1: The learned Trial Judge erred when he concluded that it was not the case that the respondent ‘ought to have known’ that she had received payments (directly or indirectly) from the misappropriated trust funds within the first limb of Barnes v Addy. The learned trial judge should have concluded that the factual findings made by the learned trial judge, either alone or in combination or in some combination, were dispositive of a finding that the respondent ‘ought to have known’.
Ground 2: The learned trial judge erred when he considered that because the scams involving the respondent and her husband, and the husband’s transgressions involving trust accounts, did not involve misappropriations of money, those matters were not relevant considerations, having found that the scams involved blatantly dishonest schemes and the trust account transgressions were serious.
Ground 3: The learned trial judge erred when he failed to give any or adequate weight to his findings regarding the breaches by the respondent’s husband of the trust account rules or the respondent’s knowledge of them.
Ground 4: The learned trial judge erred when he accepted the respondent’s evidence that the receipts in question were just an extension of the pattern which had been followed through the Voitins’ married life.
Ground 5: In the alternative to ground 7 below, the learned trial judge erred when, having accepted that if requested, the respondent’s husband would ‘top up’ her accounts, he failed to take into account that there was no evidence from the respondent that the respondent had in fact requested any of the amounts totalling $149,875.90 which the respondent was found to have received from her husband or companies he controlled.
Ground 6: In the alternative to ground 7 below, the learned trial judge erred when, having accepted that if requested, the respondent’s husband would pay in the order of $80,000 into the respondent’s bank accounts, he failed to take into account that the payments actually made totalling $149,875.90 were not paid into her ‘personal bank accounts’ other than a payment of $10,000 which was for the repayment of a loan.
Ground 7: The learned trial judge erred by failing to reject the evidence that if requested, the respondent’s husband would ‘top up’ her accounts, on the basis that the respondent was not a witness who could be believed and that it was glaringly improbable that in truth in the past if requested she would receive $80,000 from her husband or companies he controlled.
Ground 8: The learned trial judge having erred by not rejecting the evidence as to the $80,000 a year payments, further erred by thereby failing to take into account that no such payments had previously been made, when assessing whether the respondent ‘ought to have known’.
Ground 9: The learned trial judge erred when he applied the Briginshaw v Briginshaw (1938) 60 CLR 336 principle to the evidence required to satisfy the Court that the respondent ‘ought to have known’ for knowing receipt.
Ground 10: The learned trial judge erred when he failed to give sufficient or adequate weight to the respondent’s failure to make any enquiry at all in relation to the payments totalling $149,875.90.
The grounds of appeal can be grouped into five issues. The first two issues are as follows:
(a)ground 1 is an overarching ground that seeks to overturn the judge’s findings within the first limb of Barnes v Addy as to the respondent’s knowledge. Ground 10 is a particular of ground 1, and relates to the failure of the respondent to make inquiries, when she received payments totalling $149,875.90; and
(b)ground 9 concerns the judge’s application of Briginshaw to the evidence required to satisfy the Court that the respondent ‘ought to have known’ the money was trust property.
The remaining three issues relate to the judge’s findings on three critical matters on which the applicants rely to establish knowledge:
(a)ground 2 concerns the judge’s findings in regards to the relevance of some financial scams involving the respondent and her husband;
(b)ground 3 relates to a Victorian Civil and Administrative Tribunal (‘VCAT’) determination against Mr Voitin in relation to contraventions of the rules concerning the maintenance of his trust account and in respect of which the judge attached little weight;[6] and
(c)grounds 4, 5, 6, 7 and 8 are concerned with past practice and what kind of payments the respondent could reasonably expect to receive each year from her husband and/or companies controlled by him. The applicants contend that there was no legitimate explanation by the respondent as to past payments from Mr Voitin and that any explanation proffered should have been rejected by the judge.
[6]See Legal Profession Act 2004, s 3.3.19.
For the reasons that follow, we would grant leave to appeal, and allow the appeal. In our opinion, the judge wrongly applied Briginshaw. Further, the evidence established that the respondent ought to have known that the money received by her was trust money and paid to her in breach of trust.

The principles

In Barnes v Addy, Lord Selborne LC described two, non-exhaustive,[7] circumstances in which a personal liability will be imposed on a third party in relation to a breach of trust. They form part of the more general principles that attach to third parties in the context of the maladministration of a trust.[8] The first is where the third party receives and becomes chargeable with some trust property. The second is where the third party knowingly assists in a dishonest and fraudulent design on the part of the trustee. This proceeding is only concerned with the former.
[7]Fistar v Riverwood Legion and Community Club Ltd (2016) 91 NSWLR 732; [2016] NSWCA 81.
[8]Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1, 585 [4627] (Owen J); [2008] WASC 239.
The first limb, which is a recipient-based liability, is not strict but turns on what the third party knew, or had reason to know, of the circumstances constituting the breach of trust.[9] It is a personal liability and is not directed to the recovery of trust property remaining in the hands of a third party to which a defence of being a bona fide purchaser for notice may arise.[10] In Farah Constructions Pty Ltd v Say-Dee Pty Ltd,[11] the High Court held that persons who receive trust property become chargeable if it is established that they received it with notice of the trust.[12] Notice in this context means knowledge that the funds that have been received are trust property and have been transferred in breach of trust.
[9]Grimaldiv Chameleon Mining NL (No 2) (2012) 200 FCR 296, 361 [259] (Finn, Stone and Perram JJ); [2012] FCAFC 6 (‘Grimaldi’).
[10]Black v S Freeman & Company (1910) 12 CLR 105; [1910] HCA 58.
[11](2007) 230 CLR 89; [2007] HCA 22 (‘Farah’).
[12]Ibid 140–1 [112] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).
In Baden, Peter Gibson J posited five categories of knowledge and notice:
(a)actual knowledge;
(b)the wilful shutting of eyes to the obvious (also known as Nelsonian knowledge);
(c)wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make;
(d)knowledge of circumstances which would indicate the facts to an honest and reasonable person; and
(e)knowledge of circumstances which would put an honest and reasonable person on inquiry (that is, constructive notice as traditionally understood).[13]
[13][1992] All ER 161, 235 [250]; [1993] 1 WLR 509.
After cautioning against the use of this taxonomy in a formulaic way, the Full Court of the Federal Court offered the following:
The first two categories of ‘knowledge’ require no comment. The third involves such a calculated abstention from inquiry as would disentitle the third party to rely upon lack of actual knowledge of the trustee’s or fiduciary’s wrongdoing. The fourth reflects what seems to have been accepted provisionally by three judges of the High Court in Consul Development Pty Ltd v DPC Estates Pty Ltd.^[[14]] It is, in essence, an understandable, objective, default rule designed to prevent a third party setting up his or her own ‘moral obtuseness’ as the reason for not recognising an impropriety that would have been apparent to an ordinary person.^[[15]] It is the surrogate of actual knowledge. The form of constructive notice used in category (v) derives from the bona fide purchaser for value without notice doctrine.[16]
[14](1975) 132 CLR 373, 398 (Gibbs J), 412–413 (Stephen J); [1975] HCA 8 (‘Consul’).
[15]Ibid 398.
[16]Grimaldi (2012) 200 FCR 296, 361–2 [261] (Finn, Stone and Perram JJ); [2012] FCAFC 6.
In Consul,[17] the High Court discussed the type of knowledge that might found a liability based on the second limb of Barnes v Addy, that is knowing assistance. Stephen J, with whom Barwick CJ agreed, noted that the plaintiff had not only failed to establish actual knowledge as against the relevant defendant, but had also failed to establish that the defendant wilfully shut his eyes to the truth for fear that he should learn of the fiduciary’s dishonesty, so that neither actual knowledge nor a ‘calculated abstention from enquiry’ were proved.[18]
[17](1975) 132 CLR 373; [1975] HCA 8. See also NCR Australia Pty Ltd v Credit Connection Pty Ltd (in liq) [2004] NSWSC 1.
[18]Ibid 407–8.
Stephen J also rejected imputing knowledge from a negligent failure to make inquiry. He said:
If a defendant knows of facts which themselves would, to a reasonable man, tell of fraud or breach of trust the case may well be different, as it clearly will be if the defendant has consciously refrained from enquiry for fear lest he learn of fraud. But to go further is, I think, to disregard equity’s concern for the state of conscience of the defendant.[19]
[19]Ibid 412.
His Honour did accept that, at the furthest limit, knowledge includes where the third party is in a situation in which a reasonable and honest person would have knowledge of circumstances telling of a breach of duty. His Honour was concerned to bring the issue back to one of conscience, thus the need to establish a ‘want of probity’.[20] Of course, a third party cannot avoid liability by his or her own ‘moral obtuseness’, and the test is infused with the viewpoint of the honest and reasonable person. Gibbs J put it this way:
It may be that it is going too far to say that a stranger will be liable if the circumstances would have put an honest and reasonable man on inquiry, when the stranger’s failure to inquire has been innocent and he has not wilfully shut his eyes to the obvious. On the other hand, it does not seem to me to be necessary to prove that a stranger who participated in a breach of trust or fiduciary duty with knowledge of all the circumstances did so actually knowing that what he was doing was improper. It would not be just that a person who had full knowledge of all the facts could escape liability because his own moral obtuseness prevented him from recognizing an impropriety that would have been apparent to an ordinary man.[21]
[20]Ibid 410 referring, with approval, to the observations of Edmund Davies LJ in Carl Zeiss Stiftung v Herbert Smith & Co (No 2) [1969] 2 Ch 276, 300–1.
[21]Ibid 398.
In Farah, the High Court authoritatively determined that, for the purposes of the second limb of Barnes v Addy, that is knowing assistance, the first four categories, but not the fifth category of knowledge are sufficient to found liability.[22] That is, the fifth category, based on constructive notice, will not be enough to establish a personal liability on the part of the accessory.
[22](2007) 230 CLR 89, 163–4 [177]–[178] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ); [2007] HCA 22.
In Grimaldi, the Full Court of the Federal Court considered whether the level of knowledge required might be different as between knowing receipt and knowing assistance cases, and concluded that it was not.[23] The Full Court in Grimaldi noted that from at least the 1990s and in the wake of the five Baden categories, judges commenced, in recipient liability cases, to generalise from what had been said by both Gibbs J (at 398) and Stephen J (at 412), with whom Barwick CJ agreed, about the insufficiency of traditional, or fifth category, constructive notice — though not of fourth category notice — as a basis for personal liability under the first limb.[24]
[23]Grimaldi (2012) 200 FCR 296, 363 [268]–[269] (Finn, Stone and Perram JJ); [2012] FCAFC 6.
[24]Ibid 363 [268] (Finn, Stone and Perram JJ).
In Kalls Enterprises Pty Ltd (in liq) v Baloglow,[25] the New South Wales Court of Appeal (Giles JA, with whom Ipp and Basten JJA agreed) held that it is sufficient, in a claim for knowing receipt, that the third party had constructive knowledge of the kind captured in the fourth category (but not the fifth category) in the classification deployed in Baden.
[25][2007] NSWCA 191.
Given that one of the arguments in the application concerns the standard of persuasion that a court must bring to bear in determining a claim of knowing receipt, and more particularly whether the approach in Briginshaw applies, it is convenient to refer briefly to the conceptual underpinning of the two limbs of Barnes v Addy.
The issue of third party liability often arises where there has been a payment or transfer in breach of trust or in breach of fiduciary duty and the third party assists in the breach or receives the proceeds. As already noted, the knowing assistance limb requires that the trustee has engaged in some fraudulent and dishonest design and that the third party has knowingly participated in the wrongdoing of the trustee.[26] The requirement that the third party know of the fraudulent and dishonest design ensures that liability attaches where there is some relevant fault on the part of the third party, albeit a form of accessorial liability that subsists together with the wrongdoing of the trustee. There is a deal of authority that supports the proposition that a finding of liability under the second limb is of a kind that requires a court to apply Briginshaw principles. In Farah, the High Court said a claim under the second limb comprises ‘an allegation the seriousness of which means that it ought to have been pleaded and particularised, and the assessment required by [Briginshaw] kept in mind’.[27]
[26]Farah (2007) 230 CLR 89, 159–160 [160]–[163] (Gleeson CJ Gummow, Callinan, Heydon and Crennan JJ); [2007] HCA 22; Harstedt Pty Ltd v Tomanek, (2018) 55 VR 158, 174 [68] (Santamaria, McLeish and Niall JJA); [2018] VSCA 84.
[27](2007) 230 CLR 89, 162 [170] (Gleeson CJ Gummow, Callinan, Heydon and Crennan JJ); [2007] HCA 22 (citations omitted).
The first limb, that of knowing receipt, requires that the third party know the receipt is of trust property transferred in breach of trust. It is not necessary to show a dishonest or fraudulent design on the part of the trustee or the third party. There is authority in the United Kingdom to the effect that the rationale for the first limb is proprietary and serves to maintain the integrity of the trust fund rather than a liability that attaches to personal wrongdoing. In Grimaldi, the Full Court of the Federal Court referred to this line of authority but concluded that the more powerful rationale for the liability was also fault based — that is, that liability arises from the fact that the recipient acts in the knowledge of, and benefits from, a breach of trust.[28] That approach serves to assimilate the two limbs of Barnes v Addy at least to the extent that both may be regarded as, to some degree, fault based. Given the requirement to prove knowledge of a breach of trust, it is certainly arguable that this reasoning might require Briginshaw principles to be kept in mind, but neither party was able to identify any authority directly on point. It will be necessary to further consider this matter later in these reasons when dealing with one of the grounds of appeal.
[28]Grimaldi (2012) 200 FCR 296, 360–1 [258], 362–3 [267] (Finn, Stone and Perram JJ); [2012] FCAFC 6.

Unexplained receipt

In the context of receipts by a spouse or partner of a wrongdoer, the issue of constructive knowledge, in the sense used to refer to the first, second, third and fourth Baden categories, often arises where there are unexplained or unusual payments that could not readily be traced to legitimate sources of income. In such cases, aberrant payments that do not reflect legitimate income might be of a scale or frequency as to put an honest and reasonable person on inquiry. That alone would not be sufficient to constitute the requisite knowledge, but a failure to make an inquiry in such cases may be a species of knowledge where it involves wilful, reckless or conscious abstention or where the person is in possession of all of the facts from which it may be inferred that there has been a breach of trust.[29] However, the mere fact that the recipient cannot readily explain a source of income will often not be enough to establish knowledge as to the illicit source of the funds.
[29]Moriah War Memorial College Association v Nosti [2020] NSWSC 942, [94] (Hammerschlag J) (‘Moriah’).
Moriah was a case where a husband had stolen a large amount of money from his employer. Some of the money was paid into a joint account held by the husband and his wife, and the family enjoyed a number of overseas trips and regularly replaced their cars with expensive models. The pattern of spending exceeded the husband’s legitimate source of income.
After reviewing a number of authorities,[30] Hammerschlag J rejected a claim of knowing receipt against the wife of the thief. His Honour said:
These authorities make it clear that knowledge, actual or constructive, of an unexplained source of income, simpliciter, is insufficient to get [the plaintiff] home. It does not meet the criteria which the authorities have laid down; that there must be knowledge both that the property was trust property and that is was being misapplied. An unexplained source of income does not bring with it a necessary inference or implication that the explanation is nefarious activity. It does not bring with it a necessary inference or implication that there is a trust or misapplication of trust money.[31]
[30]Hancock Family Memorial Foundation Ltd v Porteous (1999) 151 FLR 191, 209 [79] (Anderson J); [1999] WASC 55 (‘Hancock Memorial Foundation’); Spangaro v Corporate Investment Australia Funds Management Ltd [2003] FCA 1025, [55] (Finkelstein J).
[31]Moriah [2020] NSWSC 942, [97] (Hammerschlag J).

The evidence

Before coming to the judge’s findings, it is convenient to briefly set out the evidence.
The oral evidence adduced by the applicants comprised evidence from Mr Beiruti and a forensic accountant, Mr Michael Carrafa, who also provided an expert report dated 4 June 2021. The respondent also gave evidence.
In addition, the applicants relied on documentary evidence to establish that:
(a)the respondent and Mr Voitin had, in 2012 and 2013, been involved in legal proceedings designed to defraud creditors;
(b)Mr Voitin had in 2015 pleaded guilty in VCAT to a number of professional conduct violations that had resulted in an order prohibiting him from operating a trust account for six months; and
(c)both Mr Voitin and the respondent had returned negligible taxable income in the relevant period.

The evidence of Mr Beiruti

Mr Beiruti said that Mr Voitin had induced him to invest money with him secured on a first mortgage basis with a promised return of 10 to 12 per cent per annum. He said he transferred $3,245,000 to Mr Voitin in May 2016.
Mr Beiruti said that after several months of failing to receive any interest on his investment, he became anxious. He said that on 23 September 2016,[32] being a date that he remembered as it was the day after his daughter’s birthday, he was driving back from dinner and spotted Mr Voitin’s white Toyota LandCruiser car parked outside a café on Whitehorse Road, Deepdene. He said that he went into the café at 143 Whitehorse Road and saw Mr Voitin and the respondent sitting at a table. He said that he approached them and greeted Mr Voitin, who said to his wife, ‘This is Ruby. He’s a client of mine. His daughter goes to Camberwell Girls Grammar. He’s looking for a property in the area.’ According to Mr Beiruti, he replied, ‘John why have you been avoiding me?’ Following a pause, he said Mr Voitin replied, ‘There’s been a few minor issues but the good news is a few [scil mortgages] have settled and there’ll be a million in the trust account on Monday.’
[32]At times, this date is referred to in the Reasons as being 23 September 2015. Given Mr Beiruti did not transfer the money to Mr Voitin until May 2016, this is clearly an error.
According to Mr Beiruti, he then said goodbye to the respondent, saying to Mr Voitin, ‘John can you please make sure I’ve got my settlement’ to which Mr Voitin replied, ‘I’ll look you in the eyes, you’ll have your money on Monday, give me a call.’
Mr Beiruti said that there was a further encounter with the respondent in 2019 outside her farm at Swan Bay on the Bellarine Peninsula. He said that he intercepted her car as she drove from the farm and had a discussion with her during which he asked to know the whereabouts of Mr Voitin and told the respondent that Mr Voitin owed him money.

The evidence of Mr Carrafa

Mr Carrafa said that he had completed a forensic audit of the payments made into and out of the Stanton Grant trust account following the deposit of the $3,245,000. The following emerges from Mr Carrafa’s report:
(a)on 13 May 2016, GP Building transferred $3,245,000 into the Stanton Grant trust account held with the Bendigo Bank (‘the GP Building Funds’);
(b)on or around 8 June 2016, $3,206,500 of the GP Building Funds was transferred to Second Life Retirement Fund Pty Ltd (‘Second Life Retirement’). Mr Voitin was the sole shareholder of Second Life Retirement and, until his bankruptcy, its sole director. Second Life Retirement had very little, if any, evidence of income generating or trading activities. The bank account into which the GP Building Funds were transferred was opened on 8 June 2016; and
(c)a little over $2,600,000 was transferred from Second Life Retirement to companies or entities associated with Mr Voitin and/or the respondent.
The expert report of Mr Carrafa showed that there was around $2,585,000 of the GP Building Funds that had been expended by Mr Voitin through entities controlled by him on private or unidentifiable matters that could not be accounted for. The flow of funds can be seen in the flowchart prepared by Mr Carrafa and which is annexed to these reasons (‘Annexure A’).[33] Relevantly for present purposes and after allowing for internal transfers, the GP Building Funds were distributed, in rough terms, as follows:
(a)$250,000 to Australian Rural Properties Pty Ltd (‘Australian Rural Properties’);
(b)$980,000 to Goornong Pastoral Pty Ltd (‘Goornong’);
(c)$500,000 to Property Transfers Pty Ltd (‘Property Transfers’); and
(d)$1,000,000 to Albert Road Pty Ltd (‘Albert Road’).
[33]The document is Annexure O of Mr Carrafa’s report.
Mr Voitin was a director and/or shareholder in each of Australian Rural Properties, Goornong, Property Transfers and Albert Road. The respondent was not a shareholder or office holder in those companies. The respondent did however, operate a café business (‘The Providore’), a jewellery business (‘Scarvelli’) and owned what was described as a hobby farm at Swan Bay on the Bellarine Peninsula.
Mr Carrafa concluded that the companies had utilised the following portions of GP Building Funds received by them for expenses of a ‘private nature or for other purposes that cannot be identified’:
(a)Albert Road: $900,000;
(b)Australian Rural Properties: $198,889.90;
(c)Goornong: $946,088.70;
(d)Property Transfers: $475,000; and
(e)Second Life Retirement: $65,380.
It was the applicants’ case that these monies, or a substantial portion of them, were paid for the benefit of Mr Voitin, the respondent and their family, and were therefore received by the respondent. As foreshadowed above, the judge rejected this argument on the basis that it was necessary to show that the respondent had received the funds or their traceable proceeds, rather than had the benefit of funds received by her husband or companies associated with him. For that reason, most of the payments to companies associated with Mr Voitin did not constitute receipt by the respondent.
Mr Carrafa also identified payments that had been made to the respondent or on her behalf, including to The Providore and Scarvelli as follows:
(a)The Providore: $70,000;
(b)Scarvelli: $5,000;
(c)the respondent: $10,000;
(d)a joint account held by the respondent and Mr Voitin: $15,000; and
(e)by paying amounts, totalling $49,875.90, owing by the respondent or for her benefit, including her share of an overseas family holiday to Vanuatu that had been paid by Property Transfers. These payments included relatively modest amounts for payment in hardware or farming stores near Swan Bay.
It was these amounts, totalling around $150,000, that the judge held had been received by the respondent, and remain in issue in the present application.
The report of Mr Carrafa was qualified to a significant extent. As the judge recorded,[34] at paragraph 9.1 of the report Mr Carrafa identified the need for further investigation. Mr Carrafa said:
In order to arrive at any conclusion as to whether [Mr Voitin] and/or [the respondent] received any personal benefit from the GP Building Funds, I require the following further evidence (without limitation):
• Copies of the relevant bank/personal cheques of the relevant entities, [Mr Voitin] and [the respondent];
• Full particulars as to the nature [of] the payments made to the relevant payees;
• Name of the relevant credit/debit cardholder of Property Transfers and/or Goornong Pastoral;
• Name of the registered signatories to each of the Related Entities’ bank accounts;
• Documentation including, but not limited to, specific loan agreements with various other parties to support payments made.
[34]Reasons, [72]–[73].

Evidence as to the respondent’s knowledge of breach of trust

Apart from the evidence of Mr Beiruti about the meeting with both the respondent and Mr Voitin that he said occurred in September 2016, and during which he sought repayment of his investment, the applicants did not provide any direct evidence that would establish what the respondent knew of the GP Building Funds or their relationship to the transfers received by her. Plainly, the mere fact of receipt would not be sufficient to prove knowledge of the provenance of the funds.
The alleged meeting in September 2016 was, as the judge noted,[35] the most specific matter relied on by the applicants to fix the respondent with the relevant knowledge. In what was a significant blow to the applicants’ case on knowledge, the judge found that the meeting did not occur as alleged. Mr Beiruti’s evidence was very specific both as to the date of the meeting, being 23 September 2016, which coincided with his daughter’s birthday, and that he had seen Mr Voitin’s white Toyota LandCruiser, which had prompted him to stop. The judge noted that the Voitins did not acquire that car until no earlier than December 2016 and that the respondent’s evidence, supported by a diary entry, was that she was at a meeting in the city on the date of the alleged meeting.[36] The judge accepted the respondent’s denial that she attended any meeting at the café on or around the date alleged.
[35]Ibid [125].
[36]Ibid [129]–[130].
Once the judge rejected that the meeting between Mr Beiruti, Mr Voitin and the respondent occurred as alleged, the applicants were driven to rely solely on circumstantial evidence from which they invited the judge to draw the necessary inference as to knowledge. In this respect, the case of the applicants was based primarily on what they say the respondent ought to have known rather than her actual knowledge.
Rather than setting out the relevant evidence, it is convenient to first identify the topics relied on by the applicants to establish the respondent’s knowledge.
The first was the alleged involvement of both Mr Voitin and the respondent in a ‘scam’ to defeat creditors of clients of Mr Voitin from 2011 to 2013. Pared to its essentials, it involved two Hong Kong companies controlled by the respondent entering into fictitious agreements with the client debtor, obtaining judgment for breach of the agreements, and then using the judgment debt in a creditors’ meeting to allow the debtor to enter into a personal insolvency agreement with a derisory return and thereby avoid bankruptcy but clear the debts (including those of genuine creditors).
The second topic involved admissions by Mr Voitin in VCAT to 57 allegations of professional misconduct arising from Mr Voitin mixing private funds with his trust account funds. These transgressions resulted in Mr Voitin being prohibited from operating a trust account for six months.
The third was that both Mr Voitin and the respondent had only nominal taxable incomes in the three years leading up to the impugned transfers, which supported an inference that the funds had no legitimate source.
The fourth and fifth were the commercial acumen of the respondent and the strong marriage of the respondent and Mr Voitin which supported an inference that she would have been familiar with Mr Voitin’s dealings and financial position.
The applicants relied on these matters again in this Court. They submit that in some respects the judge made errors in relation to some of the matters. These are addressed in grounds 2 to 8, but the applicant submits more generally under cover of ground 1 that, when regard is had to the material as a whole, the judge was wrong to find that the respondent did not have the necessary knowledge. It is convenient to address each topic separately, by reference to the evidence at trial, the judge’s findings and the arguments in this Court. It will then be necessary to return to an assessment of the applicants’ case as a whole.
Before dealing with the these matters, it is first necessary to refer to the judge’s overarching observations about the credit of the respondent as a witness. The judge accepted that the respondent was a person of commercial acumen but he found ‘much of what she said difficult to credit.’[37] By way of example, the judge was critical of the respondent’s professed ignorance about the meaning of the criminal charges that had been brought against her.[38] The judge noted the respondent’s repeated use of the formulation that she was a ‘shelf director’,[39] which was plainly an attempt to underplay her knowledge of the activities of those entities.
[37]Ibid [134].
[38]Ibid [135], [137].
[39]Ibid [136].
The judge was plainly sceptical about the respondent’s professed ignorance about a number of matters put to her. The judge said that it was ‘difficult or impossible to credit that in such a strong marriage Mrs Voitin would be as ignorant as she professes to be as to major events and business transactions in her husband’s life.’[40] He went on to make the strong finding that if the respondent was as ignorant of these matters as she claimed, ‘it could only be by dint of “Nelsonian” blindness’.[41] The judge said that he would not critically accept the respondent’s evidence on any major point without corroboration or some documentary support.[42] There is no challenge to those aspects of the judge’s reasons in the appeal.
[40]Ibid [142].
[41]Ibid.
[42]Ibid.
With that context in mind, we turn to a consideration of the individual topics or matters relied on by the applicants to establish knowledge.

The individual matters

Financial scams

In what she said was a favour to her husband, the respondent incorporated two companies in Hong Kong, Athena Commodities and Trading Limited (‘Athena’) and Mandamus Commodities Limited (‘Mandamus’).
On 11 October 2012, Athena issued a writ out of the Supreme Court of Victoria against Mr Joseph Anthony Rullo alleging a breach of an agreement to procure investment capital and claiming the sum of $1,250,000. At the time the proceeding was commenced, an overarching obligations certificate required by the Civil Procedure Act2010 was filed. It was signed by Clare Sowersby as director of Athena. Sowersby was the respondent’s surname before she married Mr Voitin. In her evidence, the respondent accepted that it appeared to be her signature on the certificate but said she could not recall whether she signed it or not.
Judgment in favour of Athena was entered in default of appearance. The applicants allege that the debt was bogus and that the judgment was used to allow Athena to vote as a creditor of Mr Rullo in favour of a personal insolvency agreement so as to avoid bankruptcy at the hands of other creditors. To make out that allegation, the applicants relied on a newspaper article and the fact that a creditor of Mr Rullo had applied by summons in the Supreme Court to have the respondent pay his legal costs on an indemnity basis. An affidavit of service attesting to service of the summons on the respondent was tendered in evidence. The evidence also showed that a position paper in response to the summons had been filed on behalf of the respondent, a solicitor had appeared on her behalf before Lansdowne AsJ, and before the summons could be heard the creditor’s claimed costs were paid.
The newspaper article published in the Sydney Morning Herald on 28 September 2013 was headed ‘Tangled web of deceit, debt and lawsuits’. The article referred to a ‘sham loan’ made by a company controlled by the respondent and described a ‘scam’ that involved six steps. Those steps entailed a debtor hiring Mr Voitin, a fake agreement with a Hong Kong based company owned by the respondent, a ‘fraudulent lawsuit’ to enforce a debt under the sham agreement, a proposal for a personal insolvency agreement based on the judgment debt, approval of the personal insolvency agreement, and a derisory payout to the creditors under the personal insolvency agreement.
Allegedly as part of the same scheme, in 2011, Mandamus brought a proceeding against Mr Keith Ondarchie and Mr Anthony Dage. In that proceeding, Mr Voitin’s firm entered an appearance for Mr Dage. The judge accepted that this proceeding was one of the transactions referred to in the newspaper article.[43]
[43]Ibid [46].
Arising out of these matters, on 12 October 2020, the Commonwealth Director of Public Prosecutions laid 13 charges for dishonesty offences against the respondent. Some of the charges named her husband as a co-offender. In her evidence, the respondent said she had read the charges but did not understand them, saying that she believed it related to her being a ‘shelf director of a company or two companies’. These charges remain unresolved.[44]
[44]As at the time of the hearing, the respondent had not been committed to stand trial in relation to these charges. See Respondent, ‘Written Case for the Respondent’, 20 December 2021, 3 [12].
In relation to the loan transactions referred to in the newspaper article, the judge said:
[Senior Counsel for the applicants] took [the respondent], document by document, through court filings which establish the truth of what was said in the article. Therefore, I cannot accept that [the respondent] accepted her husband’s denials when the article appeared in the Sydney Morning Herald. Indeed, it will necessarily be the case advanced by the Commonwealth Director in the criminal prosecution that she knew all about what had or had not happened because she was in the middle of it herself.
…
I accept that the article in the Sydney Morning Herald and associated events would have been known to [the respondent] and would establish that her husband was willing to engage in blatantly dishonest schemes of some complexity.[45]
[45]Reasons, [141]–[143].

The applicants submit that the relevance of this evidence is twofold. First, the respondent’s own participation in, and knowledge of her husband’s willingness to engage in dishonest schemes, was relevant to her credit. Second, it was relevant to establish knowledge about her husband’s activities.
The applicants submit that the judge found that the respondent and her husband were both involved in the scam to defeat creditors between 2011 and 2013.
The respondent does not dispute the judge’s findings set out in paragraph 58 above.[46] Rather, she submits that the alleged scam did not involve the mishandling of client monies nor the respondent’s receipt of trust property. She says that the scam was for the benefit of Mr Voitin’s clients at the expense of their creditors. She submits that, given the different nature of the conduct, evidence of the scheme could not support a finding that the respondent ought to have known that her receipts were trust property. She further submits that the alleged scam took place between 2011 and 2013 whereas the impugned transfers occurred in 2016, some years later. The respondent was not charged until 2020 and the fact of the charges, or the attitude of prosecuting authorities, must be irrelevant to her knowledge in 2016. She says that, if anything, the judge gave undue weight to these matters.
[46]Transcript of Proceedings (19 July 2022) 61.10–61.16.
On a fair reading of the judge’s reasons, we take the judge to have accepted that Mr Voitin was involved in a scheme to defraud creditors and that this was done to benefit the debtors who engaged him, and that the respondent was involved in that scheme.
It does not appear clearly from the judge’s reasons that he found that the respondent’s involvement in the scheme was known by her to be wrong at the time. However, the judge accepted that the respondent had discussed the matters with her husband, at least at the time the newspaper article was published, and that she did not believe his denials that anything improper had occurred. It must follow that the judge found that at least by 28 September 2013, the respondent knew about her husband’s involvement in the wrongful scheme.
We proceed on the basis that, at least by 2013, that is before the receipts of the GP Building Funds, the respondent believed that her husband was willing to engage in blatantly dishonest schemes of some complexity. We do not accept that the judge found that the respondent participated in the schemes in the knowledge that they were fraudulent. We do not understand the applicants as having invited this Court to go further than the judge did in this respect and find for ourselves that the respondent was a knowing participant in the fraud. Further, we are not in a position to do so, given that the applicants chose not to put all of the trial evidence before this Court and presented only a small sample of the evidence of the respondent (which apparently extended over a number of hearing days). There is no basis for this Court to go further.

Mr Voitin admits to professional misconduct

On 22 October 2015, Mr Voitin was disciplined in VCAT having pleaded guilty to 57 charges of professional misconduct. The judge described the matter in the following way:
The gravamen of the charges entailed admitted allegations that Mr Voitin had run monies relating to his own personal transactions relative to sheep sales, the rearing and training of horses for export, a racehorse syndicate, and a calf raising joint venture, and the lease of a residence for Mr Voitin’s mother through his firm’s trust account. This was found by the Tribunal to be prohibited mixing of trust funds. The Tribunal appears to have accepted that Mr Voitin’s breaches were inadvertent and without the purpose or effect of defrauding any of his clients.
In accordance with the plea agreement, Mr Voitin was reprimanded and was made subject to a condition in his practicing certificate that he be not authorised to receive trust monies for a period of six months. He was also required to undertake study as to his obligations relative to trust accounts, obtaining three continuing professional development points in the ensuing 12 months.[47]
[47]Reasons, [50]–[51] (citations omitted).
The judge concluded:
I do not attach much, if any, significance to the VCAT determination against Mr Voitin. It would be wrong to regard any trust account breach by a solicitor as ‘a mere technicality’, but there was nothing in the Tribunal’s determination to indicate that any client money had been misappropriated.[48]
[48]Ibid [143].
The applicants submit that the judge was wrong to downplay this matter, and that the matter should have been ‘upgraded’ by the judge. The applicants note that Mr Voitin pleaded guilty to 57 charges of professional misconduct for intermixing trust monies and non-trust monies. He was suspended from being able to hold a trust account for six months and was required to undertake a trust accounting course.
In contrast, the respondent submitted that these proceedings, and her knowledge of them, could not support a finding that she ought to have known that her receipts were trust property, because they were inadvertent and did not involve the misappropriation of client money.

Taxable income and claimed source of the receipts

The judge then addressed the submission that, in light of his taxable income, the amount of expenditure by Mr Voitin and his related entities could not be explained by any legitimate source. The judge noted that the evidence showed that Mr Voitin had a taxable income of zero in the 2014 and 2015 financial years and $10,766 in the 2016 financial year. The judge said that the respondent had ‘in effect, a “nil return”’ of income in those years.[49]
[49]Ibid [148].
The applicants had submitted before the judge that the total expenditure by Mr Voitin was 300 times his taxable income. That submission was based on the total amount defrauded. The judge said that the force of the submission was ‘somewhat blunted’ by the fact that he had found the respondent had only received around $150,000 from the GP Building Funds.[50]
[50]Ibid [150].
In order to meet the contention that the source of the deposits was unexplained and that the respondent had turned a blind eye to where the deposits had come from, the respondent gave evidence that she regularly received payments from her husband into her account for personal or family expenditure. In answer to the rhetorical question posed by the judge: ‘where is the money coming from?’ the judge referred to the respondent’s evidence of a pattern that subsisted throughout her married life that entailed her husband ‘topping up’ her personal bank account as needed for the purpose of meeting personal and household expenses.[51] According to that evidence, a deposit would be made, in ‘a rounded off dollar amount’ approximately five to 10 times per year and result in an annual deposit in the order of $80,000. Turning to the specific deposits that the judge found had come from the GP Building Funds, the judge referred to the respondent’s explanation that these receipts were an extension of the pattern that had been followed during her marriage. The judge regarded this explanation as ‘less than compelling’, but after referring to Briginshaw and ‘the presumption of innocence’,[52] the judge said that he was not satisfied he should reject the respondent’s explanations as to her state of mind.
[51]Ibid [145].
[52]Ibid [158].
Given their importance to the applicants’ argument, it is desirable to set out the following paragraphs of the judge’s reasons:
It is difficult to credit that a couple like Mr and Mrs Voitin, who seem to have stuck together through thick and thin, would not generally be aware of the level of taxable income which the other was deriving or, in the relevant period, not deriving. The explanation proffered by Mrs Voitin that the receipts in question were just an extension of the pattern which had been followed through the Voitins’ married life is less than compelling. Nevertheless, given the gravity of the matters which are being alleged here, and the need for clear proofs and the necessity referred to by Sir Owen Dixon in Briginshaw of giving appropriate weight to the presumption of innocence, I am not satisfied that I should reject Mrs Voitin’s explanations as to her state of mind at the time. The plaintiffs’ case is deficient in positive evidence, both as to receipt by Mrs Voitin and her knowledge of the circumstances. The further investigations advocated by Mr Carrafa might have supplied the deficiency; but they were not undertaken. My own reservations as to Mrs Voitin’s credibility, and any adverse inferences which might be drawn from her failure to call Mr Voitin as a witness or produce certain documents, cannot individually or in combination supply that deficiency.
The conclusion that Mrs Voitin was not a knowing receiver is not changed by a consideration of background issues, such as the 2014 scam and the adverse finding by VCAT. As previously observed, neither of those transgressions by Mr Voitin entailed the misappropriation of any trust money.[53]
[53]Ibid [158]–[159].
The applicants make a number of criticisms of these findings, spread over various grounds of appeal. They submit that the impugned receipts were quite different from the payments the respondent said she had previously received from Mr Voitin, in that:
(a)they were not in regular amounts;
(b)other than $10,000, they were not paid to the respondent’s personal account (some were paid to The Providore and Scarvelli or on account of Swan Bay farm expenditure); and
(c)they constituted a substantially higher sum ($150,000), over a mere two month period, than the sums the respondent said she had previously received over the course of a year ($80,000).
Further, the respondent’s evidence concerning Mr Voitin’s earlier pattern of payments to her was not supported by any documentary evidence. In respect of this final matter, the applicants note that the reasoning was inconsistent with the judge’s stated approach that he would not accept the evidence of the respondent unless it was supported by other evidence.
The applicants made two further submissions. First, they contend that it was wrong to apply the Briginshaw standard (ground 9). Second, even if the findings stood, they went no further than the respondent’s ‘state of mind’ and were therefore confined to actual knowledge but not the forms of knowledge described in the second, third and fourth Baden categories, including wilful blindness, on which the applicants’ case depended.
The respondent submits that the applicants wrongly assert that her evidence of receiving $80,000 per year was exhaustive of the amounts paid to her by her husband. She submits that her evidence established that:
(a)she used her personal account to pay for the upkeep of the household, including school fees, children’s clothing, groceries and bills;
(b)when that account was getting low, she would ask Mr Voitin to ‘tip in’ money for these expenses; and
(c)Mr Voitin’s contribution to these family expenses totalled around $80,000 a year, a pattern that was consistent for much of their married life.
The respondent says that the impugned amounts were not the only amounts she received from Mr Voitin or his companies in the relevant period. The respondent also refers to evidence that she received $115,000 during 2016, which was not pressed by the applicants as being trust property. In that respect, the respondent states that she and her companies received at least $43,100 from Mr Voitin in 2016, which the applicants conceded was not trust property, and that $75,000 was paid to her before Mr Voitin’s misappropriation and so could not have been trust property.
Further, the respondent submits that, although Mr Voitin had negligible taxable income during the three years before the receipt, in fact he had a very substantial gross business income. Mr Voitin’s personal income tax returns showed that he had a gross income of some $2,700,000 in 2014, $2,000,000 in 2015 and $1,600,000 in 2016. The respondent’s evidence was that she believed her husband’s legal practice was ‘incredibly successful’. The respondent also notes that the tax returns and the accounts of the relevant corporate entities from whom the funds were paid were not in evidence.
In pointing to possible sources of the impugned funds, the respondent notes that none of the amount was sourced directly from the Stanton Grant trust account. Given the large amount of money available to Mr Voitin, and the fact that the funds were paid from companies whose own financial position was not established on the evidence, it could not be said that the impugned funds were unexplained or suspect.

Decision

As foreshadowed by ground 9, the applicants allege that the judge wrongly applied Briginshaw, and this constituted a specific error by the judge. It is convenient to address that issue first.

Briginshaw

As part of his articulation of the relevant principles, the judge referred to his earlier decision in Chen v Eumeralla Estate Pty Ltd.[54] That was a case which involved allegations of both knowing assistance and knowing receipt. In the context of considering whether certain withdrawals from a bank account had occurred, the judge noted that, if the withdrawals had been made without consent they might constitute criminal offences. In that context, the judge said ‘[w]hilst the quantum of proof remains on the balance of probabilities, these are grave matters, and the gravity of what is alleged must be taken into account in considering whether the allegations … have been made out’.[55] The judge referred to s 140 of the Evidence Act and the decision of Dixon J in Briginshaw, citing the following passage:
When, in a civil proceeding, a question arises whether a crime has been committed, the standard of persuasion is, according to the better opinion, the same as upon other civil issues. But, consistently with this opinion, weight is given to the presumption of innocence and exactness of proof is expected.[56]
[54][2021] VCC 453 (upheld on appeal, although the appeal did not concern this issue: Eumeralla Estate Pty Ltd v Chen [2022] VSCA 78).
[55]Ibid [163].
[56](1938) 60 CLR 336, 363; [1938] HCA 34 (citations omitted).
The judge said that he would apply this approach when making his findings.[57] He did so on the question whether certain payments had been received by the respondent.[58]
[57]Reasons, [70].
[58]Ibid [99], [101].
In relation to the respondent’s knowledge, the judge said that given the gravity of the allegations, there was a need for ‘clear proofs’ and the giving of ‘appropriate weight to the presumption of innocence’.[59]
[59]Ibid [158], set out at paragraph 72 above.
The ordinary standard of proof required of a party who bears the onus in civil proceedings is on the balance of probabilities.
In Re Day,[60] Gordon J summarised the principles in the following way:
However, the seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether an issue has been proved to the reasonable satisfaction of the tribunal. Where, as here, fraud is alleged, ‘reasonable satisfaction’ is not produced by inexact proofs, indefinite testimony, or indirect inferences. This does not mean that the standard of persuasion is any higher than the balance of probabilities. It does mean that the nature of the issue necessarily affects the process by which the reasonable satisfaction is reached.
Why? There is a conventional perception that members of society do not ordinarily engage in fraudulent conduct and a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct.
The nature of the allegation requires, as a matter of common sense, the careful weighing of testimony, the close examination of facts proved as a basis of inference and, on appeal, a comfortable satisfaction that the tribunal reached both a correct and just conclusion.
The tribunal must feel an actual persuasion of the occurrence or existence of a fact before it can be found. Where direct proof is not available and satisfaction of the civil standard depends on inference, ‘there must be something more than mere conjecture, guesswork or surmise’ ― there must be more than ‘conflicting inferences of equal degrees of probability so that the choice between them is [a] mere matter of conjecture’. An inference will be no more than conjecture unless some fact is found which positively suggests, or provides a reason in the circumstances particular to the case, that a specific event happened or a specific state of affairs existed.[61]
[60][2017] HCA 2.
[61]Ibid [15]–[18] (citations omitted).
For present purposes, the following general propositions are relevant. First, there are only two standards of proof, and in civil proceedings the standard is the balance of probabilities. Second, in deciding whether or not a tribunal of fact is satisfied as to the existence of a fact or matter, it is necessary to take into account the gravity or seriousness of the finding. This arises from s 140 of the Evidence Act and from two underlying precepts.
(a)The first precept is that a court or tribunal should not lightly find that a person is guilty of serious wrongdoing because generally people do not behave in that way. Thus, courts are able to proceed in the knowledge that, generally speaking, people do not act fraudulently.
(b)The second precept is that a court should take into account the consequences that may follow from a finding of wrongdoing and that adverse consequences both within and outside of the particular proceeding may need to be reflected in a more cautious approach to fact finding.
The application of s 140 of the Evidence Act and Briginshaw is not binary. Rather, it operates on a spectrum. It is established that, where the allegation is one of fraud, the allegation must be distinctly pleaded and proved.[62] A court should not make a finding of fraud on ‘inexact proofs, indefinite testimony, or indirect inferences.’[63] Of course, the admonition that a court should not act on inexact proof is relevant to all fact finding, and the trier of fact must be vigilant to keep in mind the quality of the evidence and the nature and significance of the proposed finding. However, allegations of criminal wrongdoing are especially serious and warrant particular care.
[62]See also Supreme Court (General Civil Procedure) Rules 2015, r 13.10(3).
[63]Ibid [15] (Gordon J) (citations omitted).
The principles apply both to intermediate fact finding and in reaching satisfaction as to an ultimate issue. Much will depend on how the allegation of serious wrongdoing arises. Often, in a case based on inferences, the role of Briginshaw will be most acute where the court or tribunal determines what inferences can be drawn from the primary facts as found, and whether it is satisfied as to one or more of the ultimate issues. In a dissenting judgment in Henderson v Queensland,[64] Gageler J observed that the process of inferential reasoning involved in drawing inferences from facts proved by evidence adduced in a civil proceeding cannot be reduced to a formula and is informed by a number of principles, including Briginshaw, and that all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted.[65] Earlier in his reasons, Gageler J quoted the following passage from Bradshaw v McEwans Pty Ltd:
The difference between the criminal standard of proof in its application to circumstantial evidence and the civil is that in the former the facts must be such as to exclude reasonable hypotheses consistent with innocence while [in] the latter you need only circumstances raising a more probable inference in favour of what is alleged. In questions of this sort where direct proof is not available it is enough [if] the circumstances appearing in the evidence give rise to a reasonable and definite inference: they must do more than give rise to conflicting inferences of equal degrees of probability so that the choice between them is mere matter of conjecture. But if circumstances are proved in which it is reasonable to find a balance of probabilities in favour of the conclusion sought then though the conclusion may fall short of certainty it is not to be regarded as a mere conjecture or surmise.[66]
[64](2014) 255 CLR 1; [2014] HCA 52. Although his Honour was dissenting, there is no reason to doubt the correctness of the principles he identified.
[65]Ibid 29 [91]; citing Blatch v Archer [1774] EngR 2; (1774) 1 Cowp 63 at 65 [98 ER 969 at 970].
[66](1951) 217 ALR 1, 5 (Dixon, Williams, Webb, Fullagar and Kitto JJ) (citations omitted).

Relevantly to the present application, the critical issue on which the appeal turns is whether the judge was correct to find that the respondent did not knowingly receive the trust monies. In our view, that was a serious matter, albeit that it did not require proof of fraud or deceit and it did not involve an allegation of criminal wrongdoing. Of course, the judge had to be satisfied, in the sense of an ‘actual persuasion of the occurrence or existence’ of the thing in issue,[67] and the gravity of the allegation was a relevant factor. It may be accepted that people do not lightly obtain and retain money that they know has been paid to them in breach of trust. However, care must be taken that the use of epithets such as clear, cogent, or compelling[68] do not distract from the correct standard, being the balance of probabilities.
[67]Re Day [2017] HCA 2, [18] (Gordon J) (citations omitted).
[68]Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66.
In our opinion, the judge erred in treating the allegations as akin to fraud and in applying the Briginshaw test in the way that he did. Most tellingly, the presumption of innocence had no role to play. Further, the conception that people do not ordinarily engage in criminal or fraudulent conduct was not relevant to the assessment of the respondent’s knowledge. As noted above, in Farah, the High Court observed that a finding of knowing assistance was a serious matter that required a court to have Briginshaw ‘in mind’.[69] However, the elements that must be pleaded and proved are different between the two limbs. Both are fault based, but the need to allege dishonesty in the requisite sense differentiates the second limb from the first.
[69](2007) 230 CLR 89, 162 [170] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ); [2007] HCA 22.
It may be accepted that, along the way to that ultimate finding on knowledge, the judge was invited by the applicants to find that the respondent had participated in the fraudulent scheme to defraud creditors or was aware of her husband’s involvement. In making findings on these matters, the judge was required to have the principles explained in Briginshaw ‘in mind’. However, the judge’s invocation of Briginshaw and the presumption of innocence on the ultimate question of knowledge was in error. In our view, the judge imposed too strict a burden and was too reticent in his approach as to what fairly could be drawn from the evidence, having regard to the nature of the allegations. We would uphold ground 9.

Ground 1 (and the remaining grounds)

As noted above, ground 1 is effectively an overarching ground that seeks to overturn the judge’s ultimate finding on knowledge. The remaining grounds focus on individual aspects of the case and the judge’s treatment of them. In our view, the judge erred in his ultimate conclusion. In explaining why that is so, we will also deal with the remaining grounds of appeal.
The applicants do not submit that the respondent actually knew that the money she had received came from the GP Building Funds and was paid to her in breach of trust. The issue is what she ought to have known about the source of the funds. In this context, this form of knowledge is sometimes called constructive knowledge and is covered by the second, third and fourth Baden categories. Apart from knowing that the money came from her husband, the respondent did not know its source. Did the receipt call for further inquiry? Would an honest and reasonable person seek an explanation about where the money was coming from? Was the failure of the respondent to make such inquiries a wilful or reckless turning away from the obvious lest the truth be known? In assessing what the respondent ought to have known and whether she had turned a blind eye to where the money was coming from, it is necessary to ask what an honest and reasonable person would do in her position.
The knowledge that must be proved is knowledge that the money came from a trust and was paid in breach of trust or fiduciary duty. In that sense, it would not be enough that the respondent had general concerns about her husband’s business practices. It is not enough that the respondent should have embarked on an inquiry of her husband before accepting the payments or that it was unreasonable for her not to take such a step. Rather, the applicants must prove a degree of moral obtuseness on the respondent’s part in that she received payments without another thought, knowing that to ask would reveal an illicit source.
At the time of the receipts the respondent knew that her husband had been involved in improper schemes of some complexity to help his clients defraud their creditors. For a solicitor to be party to a scheme by which fictitious debts are created with an overseas entity, used as a basis for legal proceedings and then deployed in a creditors’ meeting represents egregious wrongdoing. It involves a high level of dishonesty and the perversion of the legal process. It would cause any honest and reasonable person to have grave misgivings about the integrity of the solicitor involved.
The admitted breaches in relation to his trust account are also important. Although they did not involve defalcations, they did involve a mixing of trust and personal property. It must follow, as a matter of logic, that during the period to which the charges related, some payments made by Mr Voitin of a private nature had emanated from his trust account. The fact that there were 57 charges and they resulted in Mr Voitin being prohibited from using a trust account for six months suggests a course of conduct rather than a single or inadvertent breach.
In our view the judge’s assessment of the VCAT determination was overly benign. That evidence did not cease to have relevance because it was not shown to have involved theft or defalcation. The mixing of personal and trust funds is a serious matter. Importantly for present purposes, it must raise in an honest and reasonable person a concern that large or unexplained amounts may have come from a mixed account.
Taken together, the position that emerges of Mr Voitin is of a person who could not readily be trusted in his business and professional dealings, and of someone who had in the past merged his own money and trust money.
The fact that Mr Voitin had been involved in wrongdoing in the past does not mean that he would be involved in wrongdoing in the future and did not of itself provide a basis to impute knowledge to the respondent in relation to particular receipts. But it does provide an important context. Another important part of the picture involves examining whether there were legitimate sources for the receipts.
On this aspect of the matter, there are two sides to the equation. The first is the amount of funds legitimately available to Mr Voitin at the time. The evidence showed that both he and the respondent had negligible taxable income. That does not mean that Mr Voitin did not have funds available to him. More would need to be known about the level of gross income and what deductions were available and whether, for example, they arose from deductible outgoings or depreciation or from some other basis. It appears that Mr Voitin had both a practice as a solicitor and was involved in primary production. The fact that there was no taxable income was relevant but, on its own, was not especially powerful. His tax returns recorded income of around $2,000,000 in each of the years 2014, 2015 and 2016.
The other side of the equation was the amount expended during the relevant time. As already noted, the judge found that around $150,000 had been received by the respondent and it was this amount that needed to be accounted for. In that respect, the judge observed that the applicants’ submission about the lack of taxable income had been blunted by his finding that only a relatively small proportion of the total amount had been received by the respondent. With respect to the judge, that was an unduly narrow way to look at this aspect of the case.
The expert report of Mr Carrafa showed that there was around $2,585,000 of the GP Building Funds that had been expended by Mr Voitin through entities controlled by him on private or unidentifiable matters that could not be accounted for. A brief examination of Annexure A illustrates the movement of $3,245,000 through Mr Voitin’s related entities and to the respondent and entities operated by her. The receipts were not just for usual family expenditure, but were received by businesses operated by the respondent. Further, the judge found that the respondent had ‘showed herself to be a person of commercial acumen.’[70] In this regard, the judge referred to the respondent’s assertions that she was a shelf director of the two Hong Kong companies, Athena and Mandamus; described the respondent as an ‘astute woman’;[71] noted that he found it difficult or impossible to credit that the respondent was as ignorant of major events and business transactions in her husband’s life as she professed to be;[72] and found that it was difficult to accept that the respondent would not generally be aware of the taxable income of her husband.[73]
[70]Reasons, [134].
[71]Ibid [137].
[72]Ibid [142].
[73]Ibid [158].
In the light of these findings, it is inconceivable that the respondent would not have known, in broad terms, about the scale of Mr Voitin’s expenditure and that it ran through corporate entities controlled by him. The fact that Mr Voitin appears to have had a very large amount of money available to him, and at the same time no taxable income, and that these matters were known to the respondent, are plainly relevant to any assessment as to her knowledge of the source of the funds that she received. That is, it must have been known to her that she had received a small proportion of a much larger fund available to her husband. In assessing this aspect of the case solely by reference to the amount received by the respondent the judge failed to take into account the broader picture.
This point can be illustrated by reference to a simple example. The judge found that the GP Building Funds were used to fund a holiday for the Voitin family to Vanuatu. The judge treated 50 per cent of the value of the trip as having been received by the respondent. In considering the respondent’s knowledge, a legitimate question is whether the whole of the $30,000 expended on the holiday is explicable — not simply whether the $15,000 received by the respondent was explicable. That is because the respondent must have known that the whole amount of the trip was available to Mr Voitin, even though the judge treated her as only having received 50 per cent. Given the judge’s findings about the respondent’s knowledge of her husband’s dealings and financial position, this approach can be extrapolated to the $150,000 found to have been received by her, so that it is appropriate to consider whether the amount of money more generally available to Mr Voitin for his personal expenditure, including expenditure that benefited the respondent, but which was not received by her in the necessary sense, was explicable.
In order to explain the receipts, the respondent said she was accustomed, over the course of her marriage, to receiving relatively substantial sums of around $80,000 per year to cover personal and family expenses. The respondent says that receipts of the order in issue here were not unusual or suspicious, were a continuation of the usual practice and gave the respondent no reason to question the source of the money she received.
The judge said that he found the respondent’s explanation ‘difficult to credit’ but was not persuaded as to the respondent’s ‘state of mind’, noting that the applicants’ case lacked ‘positive evidence’.[74] There are three matters that are relevant to assessing the judge’s conclusion.
(a)First, in arriving at that conclusion the judge applied Briginshaw in a way that we have found to be in error.
(b)Second, the judge said that he was not satisfied that he should reject the respondent’s explanations to her state of mind. Although couched in the negative, on a fair reading, the passage amounts to a finding that the judge accepted that the respondent believed that the impugned transfers ‘were just an extension of the pattern which had been followed through the Voitins’ married life’.[75] Given the payments did not reflect the alleged pattern in amounts or frequency and that there was no documentary evidence that adequately established the pattern or showed that these payments were of that kind, the finding is inconsistent with the judge’s stated approach that he would not accept the respondent’s account without independent evidence.
(c)Third, we agree with the applicants’ submission that this critical finding was directed to the actual knowledge of the respondent rather than what she ought to have known.
[74]Ibid [158].
[75]Ibid.
Taking these matters into account, we consider that the judge wrongly concluded that the impugned payments were adequately explained by the respondent’s evidence. Assessing the matter for ourselves, and taking into account that the respondent was not found by the judge to be a credible witness in a number of important respects, we would not accept the proffered explanation as to the respondent’s understanding of the payments.
It is significant that, as a solicitor who operated a trust account Mr Voitin was likely to be in a position to hold client funds that might provide a possible source of unexplained money. In that context, the earlier observations about the VCAT finding assume greater significance.
It is also relevant that part of the money received by the respondent was paid to and in respect of businesses operated by her. It is to be expected that, as an astute business owner, she would wish to have an understanding of the source of the funds, including to ascertain how they should be accounted for in her business.
Bringing the matters considered above together, we are comfortably satisfied that the respondent had the requisite knowledge to found a claim for knowing receipt of trust property. In our opinion she wilfully and recklessly failed to make such inquiries about the source of the $150,000 that an honest and reasonable person would have made, in her position. She ought to have known that the money, which formed part of a larger sum that was obviously available to Mr Voitin, came from a misuse of the Stanton Grant trust account.
For these reasons, we would uphold ground 1.

Remaining grounds

In addressing ground 1, we have already dealt with the remaining grounds.

Conclusion

We would give leave to appeal and allow the appeal. There should be judgment for the applicants.
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ANNEXURE A

[2022] VSCA 210

30 September 2022