Hanover Investments P/L v Thallon Designs P/L

[2003] NSWSC 1193

CITATION:	Hanover Investments P/L v. Thallon Designs P/L [2003] NSWSC 1193
HEARING DATE(S):	1-6 September; 22-26 September 2003
JUDGMENT DATE:	19 December 2003
JURISDICTION:	EQUITY
JUDGMENT OF:	Bryson J at 1
DECISION:	Judgment for defendants. See [60] Cross-claim dismissed. See [62]
CATCHWORDS:	TRUSTS AND TRUSTEES- After end of domestic relationship between Story (Appointor of Trust) and 2D, plaintiff claiming to be New Trustee of T & C Trust sued to establish charges over 2D's house by tracing proceeds of disposition of Option to Purchase investment property through several forms of investment- Option was assigned to 1D and P alleged that 1D declared trust of the option and proceeds by document under seal and signed by 1D's directors (who were 2D and 3D)- Defendants disputed authenticity of declaration of trust- on complex facts it was found that the declaration of trust was not authentic document of 1D- numerous factual questions relating to tracing- appointments of new trustees were not within power in Deed of Settlement and plaintiff had no standing to enforce interests of T & C Trust.
LEGISLATION CITED:	Trustee Act 1958 (Victoria)
PARTIES :	HANOVER INVESTMENTS PTY LTD - Plaintiff THALLON DESIGNS PTY LTD - 1st Defendant LYNETTE COLLEEN THALLON - 2nd Defendant LILLIAN THALLON - 3rd Defendant
FILE NUMBER(S):	SC 2941/1998
COUNSEL:	J.K. Chippindall - Plaintiff M. Orlov - Defendants
SOLICITORS:	Peter Wayne & Associates - Plaintiff Messrs Gray & Perkins Solicitors - Defendants

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRYSON J.

FRIDAY 19 DECEMBER 2003

2941/1998 HANOVER INVESTMENTS PTY LTD v. THALLON DESIGNS PTY LTD, LYNETTE COLLEEN THALLON & LILLIAN THALLON

JUDGMENT

1 HIS HONOUR: These proceedings were commenced in the Supreme Court of Queensland on 22 December 1997 and later transferred to this Court. The plaintiff claims to be the trustee traced through two appointments of new trustees of T & C Investment Trust (T&C Trust), sometimes called the T & C Investment Fund. T & C Trust was created by a Deed of Settlement dated 26 June 1985 by which Rhonda Leslie Walker settled $25 on Fleetwood Star Pty Ltd on a discretionary trust of which various relatives of Mr Gregory Laird Story and his spouse are Principal Beneficiaries and Mr Story and his spouse are Secondary Beneficiaries. During his lifetime Mr G.L. Story is the Appointor. Mr Story is the true protagonist of T & C Trust, which he has used and effectively controlled as the vehicle for many business enterprises of his own. The initial trustee Fleetwood Star was controlled by Mr Story and his wife, known as Trish, and Mr Story has had control of the two companies which have been treated by him successively as new trustees. These proceedings are complex but essentially the plaintiff seeks remedies by establishing charges over the second defendant’s house for what are alleged to be traceable proceeds of trust property.

2 Mr Story and his wife were married in 1978 and separated in 1989. Thereafter there were disputes between them about settlement of property and other matrimonial matters before the Family Court of Australia for some years. The state of contention made it difficult for Mr Story to direct affairs of T & C Trust and to control acts of Fleetwood Star in ways he wished; he complained that Mrs Story and her lawyer controlled decisions by Fleetwood Star, and controlled signing what he regarded as necessary documents very closely, and that this prevented successful outcome of various business ventures.

3 A Deed dated 7 March 1994 Exhibit A/2/72, according to its terms, brought about the retirement of Fleetwood Star as trustee, and the appointment by Mr Story as Appointor of Hanover Properties Pty Ltd as incoming trustee of the Trust. A further deed dated 22 September 1995 (Exhibit A/2/108) purported to bring about the retirement of Hanover Properties Pty Ltd and the appointment by Mr Story as Appointor of the plaintiff Hanover Investments Pty Ltd as incoming trustee. Both these deeds refer to cl.23 of the Trust Deed as the source of Mr Story’s power to remove any trustee of the trust and to appoint any new trustee, but cl.23 does not contain any such provision. Clause 8(u) of the Trust Deed empowers the trustee, that is Fleetwood Star, to appoint a new trustee and cl.23 vests power to remove a trustee and appoint a new trustee in “such person or persons as may from time to time be appointed by the Appointor … or where no such appointment has at any time been made, in the trustee …”. It is Mr Story’s evidence in his affidavit of 1 June 1998 para.3 that he has not ever appointed any such person. References in the Deed of Settlement to places in Victoria as the addresses of the parties, and to Victorian statutes, show that the proper law of the Deed of Settlement was the law of Victoria, and the Deeds by which Mr Story purportedly appointed new trustees do not conform with the statutory provisions for appointment of new trustees in the Trustee Act 1958 of Victoria s.41, or with the corresponding legislation of any other State; see Jacob’s Law of Trusts in Australia 6th ed at pp369,370.

4 Accordingly the plaintiff has no standing to sue for remedies in the interests of the T & C Trust. In my opinion the proceedings should be dismissed for this reason. The defendants’ counsel referred to these circumstances but did not give them prominence in his submissions. As much else was debated in a hearing which took 10 days, and I am satisfied, for reasons which I will state, that the T & C Trust, by whomever it ought properly to be represented, is not entitled to the remedies claimed I will deal further with what I regard as the important issues. A great mass of material was put in evidence and many matters which could be thought to be relevant to the probabilities or to credit were pursued at length, and I do not find it necessary to deal with all of them.

5 There is a shadow over the authenticity of the Deed dated 7 March 1994. Exhibit 6 is a copy of a fax message from Mr Story to Mr H. Edwards, apparently a lawyer, dated 3 July 1995; Ms Lyn Thallon obtained this copy from Mr Story’s records. In the fax message Mr Story asked Mr Edwards to do a draft of “Appointment of a new trustee to the T & C Investment Fund which should be Hanover Properties Pty Ltd which is to replace Fleetwood Star Pty Ltd”. It is anomalous that he asked for such a draft on 31 July 1995 as, on its face, there had already been an appointment of Hanover Properties Pty Ltd as new trustee on 7 March 1994. Although this is unresolved, I do not regard it as an important issue.

6 The issues in the litigation are closely related to the personal relationship between Mr Story and the second defendant Ms Lynette Colleen Thallon, usually referred to as Lyn Thallon and also known as Le Roy, her surname in her former marriage. Mr Story and Ms Lyn Thallon lived together as domestic companions from Easter 1990, sometimes with discords, until they separated about December 1994 or January 1995. The litigation arises out of the difficulties of recognizing the separate interests of one and of the other, and of entities associated with them, in the transactions of this period and in later transactions. Thallon Designs Pty Ltd, the first defendant, is a company formed in October 1988, which at the commencement of the relationship was under the control of Ms Lyn Thallon. It carried on business in supplying interior decoration, principally window blinds, for Defence Service Housing. The business was successful for several years, but it came to an end in 1991. Ms Lyn Thallon and her mother Mrs Lillian Thallon, who is the third defendant, at all times have been in control of Thallon Designs’ affairs, at least according to the control which as directors and shareholders they were entitled to have and ought to have had. The company came to be a vehicle for investment in various ventures which cannot be fully traced, and for several years it was very largely under the actual control of Mr Story.

7 The credit of Mr Story and the credit of Ms Lyn Thallon are the most important issues in these proceedings. At the heart of the case is the issue whether a document dated 4 February 1992 (Exhibit A/1/4) headed “Declaration of Trust” authentically is what on its face it appears to be. The document is in these terms:

DECLARATION OF TRUST

THALLON DESIGNS PTY LTD CAN 003 591 839 of 39 Queen Street, Auburn, NSW declares that the assignment of the Option Agreement between Viewent Pty Ltd and Noel George Dan in relation to the property at 69 Bradley’s Head Road, Mosman will be entered into on behalf of the T&C Investment Trust and that all proceedings arising therefrom are the property of the said Trust.

Declared at Sydney this 4th day of February 1992.

THE COMMON SEAL of THALLON L. D Thallon
DESIGNS PTY LTD CAN 003 591 839 Director
was hereunto affixed in accordance
with its Articles of Association in L Thallon
the presence of: Secretary

8 This document exists in two versions; document 4 is a Xerox copy of the document without the impression of the seal of Thallon Designs and Document 4A bears the original signatures of directors and the impression of the seal. If this document authentically is what it purports to be, a Declaration of Trust made by Thallon Designs on 4 February 1992, the T & C Trust is, in principle, entitled to be treated as the owner in equity of all traceable proceeds of the Option Agreement.

9 I take a very adverse view of Mr Story’s credibility as a witness. He was in the witness box under cross-examination for almost two sitting days. On important facts his evidence and the case the plaintiff advanced is inconsistent with answers he gave on oath in an examination before officers of the Australian Securities Commission on 23 December 1996. When confronted with what, on any fair view, were inconsistencies he was not able to acknowledge that the inconsistencies existed, or to explain them. He gave answers which seemed to suggest that before the Commission he had answered “by the card” and had not been asked questions which confronted him with the necessity of explaining the whole position. This was manifestly wrong. There are insurmountable inconsistencies between the state of the affairs of Mr Story and of the trust as they appear from documents, including documents verified by him, in Family Law and Bankruptcy proceedings in the period 1990 to 1993, and the picture which the plaintiff’s case would depict in which Mr Story was able to lay out significant resources which did not belong to Ms Lyn Thallon on a venture of taking an option to purchase the house at 69 Bradley’s Head Road Mosman for $1.5m, with a view to redevelopment. According to Mr Story’s documents from that period there were enormous deficiencies of resources to obligations both for himself and for the T & C Trust, and I find it extremely improbable that Mr Story either had the resources or would have had the wish to undertake what might well be a profitable business venture, to the advantage of the T & C Trust, after incurring huge obligations in a continuing series of commercial calamities, so that any commercial gains for the T & C Trust would have been at the risk of the claims of creditors, or of Mrs Story.

10 It was plain to me that Mr Story is a person of high ability, and a wide range of commercial experience, much of it extremely adverse, which could only have been undertaken by a resourceful and talented person. However I also formed a very strong impression, based upon observation of him as he gave evidence and on consideration of his answers, that he was in no way frank, open or honest, and that at every stage his evidence was tailored to the pursuit of advantage, although he is intellectually equipped to give complete and correct explanations of complex transactions, even after many years, when he chooses to do so; he is also well equipped to give plausible self-serving explanations of events if he does not regard accuracy as called for. I am extremely mistrustful of Mr Story and of his evidence.

11 I took a somewhat more favourable view of Ms Lyn Thallon and her credibility, but that is no great accolade. In her case and in her evidence she depicted herself as having been completely overborne by Mr Story in their relationship, to the point where she signed documents, including blank documents, at his requirement and without her understanding them, and embarked, for years with no limitations, on any commercial transaction which he required, extending to opening bank accounts, the need for which she did not know, moving deposits of money for purposes she did not understand, signing letters which she did not comprehend, signing pieces of paper which were obviously to be used for letters or business documents but were in blank, and furnishing him with funds from her own resources, including proceeds of the sale of a house she owned and in which for one period they both lived. In the case she presented she maintained little control or attention to her own interests and for years put herself completely in his hands without understanding what was taking place. The highest point of what she says she did in this way is that in August and September 1991, 16 days after the birth of Emily, their daughter, she went to Bremen in Germany, accompanied by the child, and opened a bank account there in her own name, for the purpose of Mr Story using it to receive a deposit of money, in a transaction which she did not understand, with money in which she had no interest although the account was in her name; she had no other business in Germany, returned within about 10 days, and has never claimed to own that money. This is only the most graphic of many instances in which, according to her evidence, she surrendered her time and resources to the pursuit of Mr Story’s schemes.

12 Mr Story’s dominance over Ms Lyn Thallon’s affairs and business was real and continued throughout their relationship. Ms Lyn Thallon and Mrs Lillian Thallon let control of Thallon Designs and its affairs, including its documents, pass out of their hands completely and inappropriately, so that the company was under the control of Mr Story for several years. Ms Lyn Thallon had no real idea of many aspects of her own interests, what investments she had, what assets she could rely on having, and what results she could expect Mr Story to bring about in her interests. He controlled all significant dealings with her assets and she fell in with this. Mr Story’s evidence depicts a generally similar picture but with an even greater surrender of control to himself. I find it difficult to accept that Ms Lyn Thallon had as small an understanding of what was happening to her resources as she depicts, and that she allowed the situation to continue for several years. Although she was greatly outclassed, in academic training and business experience, by Mr Story, she is not a person without talent, she has had considerable experience of the world and its ways in a series of relationships with men, including her marriage which lasted some years, and she has made a modest success in life in a number of different branches, including a hairdressing business, work as a model, work in real estate sales, advertising management for a magazine, and, in relation to Mr Story’s ventures, participation in the management of a real estate development. It is clear to me that she has a sound grasp of how many beans make five, and it is very unlikely that she was as uncomprehending of her own and Mr Story’s business affairs, over some years, as her evidence depicted. Whatever is the truth about how much she understood, he exercised control over her affairs. While I regard her credibility as considerably better than that of Mr Story, the circumstance that the burden of proof lies on the plaintiff and not on the defendants is a considerable advantage to the defendants in the disposition of these proceedings.

13 In the Amended Statement of Claim para.3 it is alleged that Thallon Designs made the written declaration of trust on 4 February 1992. In para 2 of the Amended Defence it is admitted that Ms Lyn Thallon and Mrs Lillian Thallon signed a document bearing the typewritten date 4 February 1992 and containing a purported declaration of trust, and it is alleged that they signed it in or about August 1995, that the seal was affixed by Mr Story or some unknown person at his direction without authority of the directors, that the directors did not at any time resolve or declare a trust and that Thallon Designs did not make a written declaration of trust.

14 There is no evidence that Ms Lyn Thallon and Mrs Lillian Thallon, the directors of Thallon Designs on 4 February 1992 and at any other possibly relevant time, ever passed a resolution as directors, or in any manner however informal ever decided to declare a trust such as the document would show; except for what appears in the document itself. No evidence establishes who composed the document, or when it was typed out or by whom, and no evidence establishes any event in or around 4 February 1992 when it was placed before Ms Lyn Thallon and Mrs Lillian Thallon and signed by them, or any event in which they decided to put the seal on it, or any event in which the seal was put on it. There is no proof that the document came from some source which could be thought of as the records of the company, or of T & C Trust, and there is no proof that it is referred to in any minute of the company. Although there was much evidence about facts and circumstances surrounding obtaining the option to purchase the property at 69 Bradleys Head Road, Mosman, and dealing with the option by assigning it, obtaining extensions of it and then, without its being exercised, by on-selling the option, in a marked contrast of intensity the vital document was simply tendered into evidence, with nothing to assist its acceptance but the admitted fact that the directors signed it. Although Mr Story gave affidavit evidence that Ms Lyn Thallon agreed that he could use Thallon Designs for an unspecified property deal in which he wanted to keep control of potential profit for his family trust, he did not in his evidence in chief deal with the creation or with the execution and sealing of the Declaration of Trust. He did not deal with these matters until re-examination when his counsel obtained leave, and he did not explain what had happened to the document since February 1992, or how he came to be in a position to produce it.

15 Ms Thallon’s evidence would show that records of the company, which were stored in a house occupied by herself and Mr Story, have not been seen by her since an occasion when they moved house, except that she saw some of them in an office used by Mr Story; and that other records of the company passed into the hands of an accountant recommended by Mr Story and she has not seen them since. This evidence, which I accept, and the circumstances of Mr Story’s actual control over Thallon Designs and its affairs for several years make it highly probable that he could produce any records of the company which he wished to produce, and prove the source of a document as being in the company’s records if he chose to do so.

16 The document has not been handled in a way which it would be appropriate for it to be treated, particularly by a person with Mr Story’s business experience, if it were authentic. In particular, it has not ever been stamped. Mr Story’s own evidence would show that he has a university degree in Law; at one point a Master’s Degree is referred to, although he has not practised law, and that, and more significantly his commercial experience, make it highly improbable that if such a document existed, and valuable interests depended on it, it would be left unstamped not only for years, but even at the point of tendering it in evidence. A duty stamp, bearing a date, would have made a very useful contribution to resolution of disputes about the authenticity of the document. There is no reference to the Deed of Trust in any of the many documents in evidence which are in any way contemporaneous with the option to purchase 69 Bradleys Head Road and later dealings with that option. These documents include extensive correspondence, and several legal bills relating to work associated with the option, none of which mention the preparation, execution or existence of the Deed of Trust in any way however indirect. Mr Story alleged that conduct of Ms Lyn Thallon at an interview with Mr Robertson, solicitor, in some way supported the plaintiff’s case: but Mr Robertson was not called to support this assertion.

17 Ms Lyn Thallon gave evidence of her becoming aware that the house at 69 Bradley’s Head Road, which was in a very deteriorated state, was available for sale, and becoming interested in acquiring it, with a view to possibly living in it (which would have been a rather large project involving renovation). In her account, Mr Story was a very active participant, and took much of the initiative in the purchase, but it was seen by her as the purchase of an option by Thallon Designs, for her benefit. Mr Story’s evidence would show that she had next to no part in locating the property and deciding to take an option over it.

18 Curiously there is no clear evidence from either side establishing the source of $15,000 which was paid to Dr Dan the grantor of the option in consideration for the option. I will review evidence relating to the resources available to Mr Story and to the T & C Trust at the time; from that evidence it is more than unlikely, it is in fair terms impossible that Mr Story or the T & C Trust had $15,000 available to lay out to purchase an option to buy a house, or any rational basis for looking forward to buying a house for $1,500,000. Mr Story sought to explain the absence of reference to the option, and to the payment out of $15,000, in various places where it was his duty to disclose them, by suggesting that in the context of his affairs the amount of money and the prospects of turning an advantage from the option were of quite small significance. Ms Lyn Thallon in fact had resources available at the time; she owned invested funds, in the order of $100,000 if not more, when the relationship began, and she had further resources as she owned a house in Centennial Avenue, Lane Cove, which she had sold in May 1991 for $340,000; the house was free of mortgage debt as the result of property settlement arrangements in her divorce. Her evidence also would show that Thallon Designs itself had some reserves of cash, although no documents confirming this are available. In an extensive cross-examination with lengthy reference to such of the documents bearing on her bank funds and other resources as were available, she was quite unable to show how $15,000 of her money had actually gone into the option. The cheque butts and bank records are incomplete and little positive conclusion can be based on them. The conclusion that overall from 1991 to 1994 the activities of both were largely financed by her resources follows from the fact that she had significant resources, by his own documents from that period he had none, and she is the only source of funds that can be seen. As I earlier said she has the advantage of not bearing the onus of proof, there was certainly no demonstration that money of hers had not been applied to the option, or that money from any other source had been applied to the option, and on overall view of probabilities and the circumstances of Mr Story and of the T & C Trust, I see no source from which it can have come other than a source associated with Ms Lyn Thallon.

19 I regard as very improbable that Ms Lyn Thallon would have intentionally entered into a transaction by which the option to purchase 69 Bradleys Head Road, Mosman became an asset of a discretionary trust under the control of Mr Story and of which persons closely associated with Mr Story, but not including Ms Lyn Thallon, were the beneficiaries. That Ms Lyn Thallon would have intended her money to go towards an investment which potentially could benefit Mr Story’s wife or his children is altogether improbable; that she may have laid out money which could potentially benefit Mr Story himself is less improbable, but bearing in mind that there was no potential that Ms Lyn Thallon would be a beneficiary of the T & C Trust, still markedly improbable. It is even more improbable that Mrs Lillian Thallon would have joined in such a decision. Of course the effect of the evidence of both is that they deny having done so. In the circumstances of the trust as they appear from Mr Story’s other documents, the advantages of the proposed venture would have to be astonishingly large before the profits overtook the deficiencies in the T & C Trust and produced any advantage for anyone other than creditors. That Ms Lyn Thallon intentionally made money available potentially to produce advantages for the creditors of Mr Story is in my appraisal quite impossible.

20 The circumstances have to be looked at in the context of Mr Story’s affairs at the time.

21 On 4 October 1990 Mr Story made an affidavit – Exhibit 10 – in Family Law proceedings against Mrs Story in which in compliance with Order 17 r.2 of the Rules of Court of the Family Court of Australia he gave particulars of his financial resources. He disclosed an interest with his wife in the former matrimonial home at 27 Moruben Road, Mosman, and gave an estimated value of $1,500,000 subject to a mortgage debt of $1,050,000; he also disclosed interests in contents of the matrimonial home and a bank account jointly with Mrs Story, but no other assets of significant value. He disclosed one share in Fleetwood Star the value which he said was nil, and units in a unit trust which he said had no value; he said that the T & C Investment Fund had a net deficiency of $1,301,605.00 and further contingent liabilities; he disclosed an interest in shares in Keenhand Pty Ltd which he valued as nil; and he disclosed his clothing and personal effects. He disclosed no other assets of value, and said he had no income. He said he had weekly expenses of $535 and listed many personal current liabilities, of overwhelming amounts. These included a loan debt to W.M. Boulton of $132,301.00, many debts to building suppliers and commercial enterprises, many debts to legal firms and accountants and, among many other debts, a debt to Ms Lyn Thallon referred to as L. Leroy for “arrears of board and contribution towards food and telephone $5,760.00.” He said he had received a demand from Bill Acceptance Corporation for $3,450,000 principal and $199,684.09 interest owing by Keenhand Pty Ltd which he had guaranteed. He also referred to a liability of himself and Mrs Story to Mercantile Credit Ltd for $3,200,000, a further unquantified liability for “Half of any loss incurred by Esanda Ltd in their finance of the joint venture development in Brisbane”, further guarantee liability to David Sasson & Partners Pty Ltd & Others for $783,750.00, an estimated guarantee liability to trade creditors of Progress Pacific Construction Pty Ltd for $200,000 and several other significant amounts. In a reference in the affidavit to his living arrangements he said “I presently live with Lyn Leroy and her two children in their home. I pay board to Lyn, contribute towards the food and household supplies of the household and pay the telephone account … these payments are in arrears in the sum of $7,760.00.” (Elsewhere in the affidavit this amount is given as $5,760.00.)

22 This affidavit depicts Mr Story and the T and C Trust as altogether and irretrievably overwhelmed by massive debts, as of October 1990. In his answer and Cross Application in the Family Court proceedings (Exhibit 11) dated 9 August 1990 Mr Story gave a much more detailed account of his affairs, including his employment history and generally his resources, and those of his wife, and of his business ventures; the picture presented by this document is one of a cumulation of economic disasters.

23 Exhibit 12 is a copy of an affidavit and financial report by Mr M.R. Broadfoot, chartered accountant, filed in the Family Law proceedings on 5 October 1990 on Mr Story’s behalf, which reported on his financial interests and gave an appraisal of their value as a negative $1,361,105.00.

24 Exhibit 13 is an affidavit and valuation by Mr B.R. James, chartered accountant, filed in the Family Law proceedings on 11 January 1991 on behalf of Mrs Story, giving an altogether different valuation of one aspect of Mr G.L. Story’s interests, described as a 60% indirect interest in the Trio Group Ltd. Exhibit 14 is a message from Mr Story to his lawyers of 17 January 1991 attacking the reasoning in that valuation and maintaining that the true position was:

This leaves us in at best a break even position.

The calculations, based on Deloitte’s analysis, after deducting interest payments on the $9.2 million, puts the Company in a significant loss position.

25 Exhibit 16 is an affidavit verifying a statement of affairs sworn by Mr Story on 16 March 1992 in Bankruptcy proceedings; the nature of the bankruptcy proceedings does not clearly appear but they may have been proceedings under Pt.X of the Bankruptcy Act. In this document Mr Story swore to the truth of a statement of affairs according to which he had no assets, he had liabilities to unsecured creditors and to secured creditors in excess of the securities totalling $12,194,144.00, and he verified a list of unsecured creditors totalling $771,087 included among which were “7. DeputyChild Support Registrar … $21,122 1991 maintenance” and “10. Le Roy, L, $65,355 1990-91 loan”. Elsewhere his evidence shows that in May 1992 he paid over $22,000 for child support with money borrowed from Ms Lyn Thallon for the purpose.

26 Exhibit 17 is a letter written by chartered accountants on behalf of Mr Story on 18 March 1992 referring to his bankrupt estate and putting forward a proposal that his affairs be dealt with under Pt.X on the basis that Ms Thallon was prepared to contribute $50,000 for the benefit of his creditors in a composition.

27 Exhibit 18 is a Statement of Financial Circumstances verified on affidavit by Mr Story in the Family Law proceedings on 7 December 1993. The property there disclosed is not of significant value except for an interest with Mrs Story in the contents of the matrimonial home for which he gave an estimated value of $150,000. He gave particulars of the affairs of Fleetwood Star which he said had traded in its capacity as trustee of the T & C Investment Fund and the T C Investment Fund Unit Trust; he said the value of his shares in Fleetwood Star was nil, and gave some information about its affairs including that he owed $2,472,655 to Mercantile Credits Ltd and $25,244,408 to Esanda Finance Corporation Ltd secured on a property at 710 Military Road, Mosman, which had a current market value of $6,000,000. He listed a number of other guarantee obligations for large amounts, and personal debts totalling $221,297.07 of which $48,200 was owing to Ms Lyn Thallon. This statement shows Mr Story as having overwhelming debts and obligations, and no significant resources with which to meet them.

28 In these circumstances it is overwhelmingly unlikely that Mr Story took part in some arrangement in which $15,000 from whatever source, and a business venture of taking an option to purchase 69 Bradleys Head Road, Mosman, were subjected to a trust for the T & C Investment Trust. Mr Story’s verified statements of his financial resources in the years from 1990 to 1993 show that the T & C Investment Trust was a lost cause into which it would have been folly to put resources; it is quite improbable that he committed such a folly.

29 In my finding Ms Lyn Thallon, in March 1992, saw the dealings with the house at 69 Bradleys Head Road as a venture undertaken by Thallon Designs, in her own interests and with money which she controlled, in the contemplation (which was not altogether realistic) that she might be able to acquire the house at 69 Bradleys Head Road and live in it, but in any event in the contemplation that the venture was for her own benefit. I do not find it possible to believe that she then knowingly participated in a decision to declare a trust of the property for the T & C Investment Trust.

30 The option was granted by an agreement in writing of 4 February 1992 in which Dr N G Dan was the intending vendor and Viewent Pty Ltd was the intending purchaser. Viewent Pty Ltd was a company under the control of Mr M.T. Smith, who was an associate of Mr Story and agreed to make Viewent available as the nominal participant in the option agreement, on the understanding, which was carried out almost immediately, that the interest of Viewent would be assigned to Thallon Designs. A deed dated 5 February 1992 between Viewent and Thallon Designs assigned Viewent’s interest in the option agreement to Thallon Designs. This deed contained an acknowledgement by Viewent that the option fee of $15,000 payable pursuant to the option agreement had been advanced to Viewent by Thallon Designs. The option agreement enabled the option to be exercised by a nominee, and Viewent executed a nomination form in blank leaving the name to be filled in.

31 Ms Lyn Thallon signed a letter dated 6 February 1992 to Mr Smith confirming a profit sharing arrangement (and no evidence refers to this having been carried out). All arrangements for the option, and for the participation of Viewent, were actually made by Mr Story with Mr Smith and agents for Dr Dan. The option was later extended, first in a document which referred to Viewent Pty Ltd and later by a Deed dated 8 February 1993 between Dr Dan and Thallon Designs which among other things had the effect of recognising the assignment, and extended the option agreement to 16 November 1993 in consideration of $7,500. The house and the grounds themselves required some degree of management and maintenance. In February 1993 the house burnt down, not inopportunely. Considerable endeavour was put into proposals and applications for development consent to the Municipality of Mosman. This involved endeavour by Mr Story and by consultants. Mosman Council determined a development application on 22 April 1993 for “Proposed Aged and Disabled Persons’ Housing comprising of four-story residential building containing 24 self-contained units.” Real estate agents were then retained to sell the option, and this led to a deed dated 15 June 1993 (Exhibit A/1/42) by which Thallon Designs sold the option to A.S.G. Holdings Pty Ltd and Brentwood Capital Pty Ltd for an agreed sum of $610,000 and a further payment the amount of which was to depend on the outcome for an amended development application and of development of the property. (In August 1995 $240,000 was paid under this obligation.) These arrangements were varied by a deed dated 27 July 1993 (Exhibit A/1/52), the option was varied by a deed between Dr Dan and Thallon Designs dated 29 July 1993 tab.53, and the arrangements were completed early in August 1993 by events which included exercise of the option, entry into an agreement for sale of land between Dr Dan and A.S.G. Holdings and Brentwood Capital and completion of the agreement for sale of the option.

32 The proceeds of the sale of the option were paid into a separate bank account opened for the purpose by Messrs Robertson Saxton & Associates solicitors, whose documents show that they acted for Thallon Designs, and that when instructions were given to them in writing they were usually signed by Ms Lyn Thallon, but that their main contact with Thallon Designs was through Mr Story. Messrs Robertson Saxton made payments out of the bank account on written instructions on behalf of Thallon Designs signed by Ms Lyn Thallon. In this way Messrs Robertson Saxton paid their own fees and fees to Phillip Perry architect associated with the development applications, and over a period from September 1993 to December 1993 they made a number of payments to share brokers for the purchases of shares. On 24 January 1994 when the funds were almost exhausted Messrs Robertson Saxton, in a letter directed to Mr Story (Exhibit A/2/70) accounted for their dealings by forwarding a copy of the bank passbook with notations explaining disbursements of funds. The shares and similar investments purchased in this period were purchased in the name of Thallon Designs.

33 In the Statement of Claim it is alleged that many purchases of shares in the period from January to March 1994 in the name of Hanover Properties Pty Ltd were made out of these funds and were made by Hanover Properties Pty Ltd as trustee of the T & C Investment Trust. There is no evidence by which funds arising from the sale of the option can be traced so as to be shown to have been used for these purchases by Hanover Properties Pty Ltd; this series of purchases, which were alleged to total $250,549.00, begins on 11 January 1994, at which time the funds held by Messrs Robertson Saxton were almost exhausted, amounting to no more than $3810.79 on 13 January, and not possibly being a source for the continuing series of purchases in large amounts thereafter. It should also be noticed that 7 March 1994 the date of the deed (Exhibit A/2/72) by which Hanover Properties was purportedly appointed new trustee was later than the date of most of these purchases.

34 However those events may be, there is no record in evidence reliably dated to the period from 1992 to 1994 which identifies any of these transactions with the T & C Trust, and no record which earmarks any of these investments as assets of the T & C Trust. It is an elementary obligation of a trustee, the wisdom of which is emphasised when transactions are complex, to keep records identifying transactions as trust transactions, and at annual or other regular intervals to prepare accounts; and trustees’ accounts prepared on a proper basis should identify the trust assets. The position shown by the documents in evidence, with the sole exception of the declaration of trust dated 4 February 1992 the authenticity of which is challenged, is to the effect that Thallon Designs was the principal in the option transactions, and was involved in them for its own benefit. This position is confirmed by circumstances which make it very improbable that any money needed and employed for the series of transactions was provided from any source other than Thallon Designs, Ms Lyn Thallon and interests of hers; the deficiency in resources of the T & C Trust and of Mr Story was altogether overwhelming. I do not see the making of some investments in the name of Hanover Properties as an anomaly in this picture because it has not been shown that those investments were made with proceeds of the sale of the option; that proposition has not been carried past the level of mere assertion.

35 Another chapter of events opened on 21 April 1994 when Mr Story, writing on behalf of Hanover Properties Pty Ltd, (Exhibit A//275) wrote to accountants in Perth who appear to have been conducting the registry of ownership of units in the Benwood Property Trust seeking information about the formalities necessary for a transfer of 1,631,146 units then in the name of Meristem Pty Ltd. On 22 April 1994 (Exhibit A/46) Meristem wrote to Mr Story as director of Hanover Australia Ltd enclosing a signed transfer and certificates for a total of 1,631,146 units in the Benwood Trust “… in exchange for a cheque for $688,343.60 and a letter of undertaking from Metro in relation to contingency consideration.” The undertaking was furnished by the company referred to as Metro on 26 April 1994 (Exhibit A/2/78) and confirmed contingencies in which additional consideration would be paid. In a series of events over some days from about 21 April 1994 to 27 April 1994 sufficient money to pay $688,343.60 consideration for purchase of the units was assembled from many sources and then paid over to Meristem Pty Ltd. A number of these circumstances require further explanation.

36 The purchaser referred to as Metro was Metro Trade & Commerce Ltd., which was incorporated in Belize on 30 March 1993. Mr Story said in an affidavit “Metro was a shelf company, purchased by me.” A certificate dated 21 April 1994 in Exhibit A/3/140, the provenance of which is not established by any evidence, states to the effect that Truvend Pty Ltd was the registered proprietor of 1000 ordinary US $1 shares in Metro Trade & Commerce Ltd. Also under Tab 140 is a document signed by Mr Story and dated 19 April 1994 entitled Company Order Form and directed to Overseas Company Registration Agents Ltd (at an address not shown), which appears to bespeak a company named Metro Trade & Commerce Ltd, the director of which was to be Truvend Pty Ltd, which was to be the shareholder of 1000 shares. Metro appears to have first become involved in any affairs relating to the present parties in April 1994; documents relating to the company, including a common seal, were forwarded to Mr Story on 28 April 1994 by Australian and International Corporate Services Ltd (Exhibit A/2/81); the letter was addressed to Mr Greg Story, Hanover Properties Ltd and Mr Story was asked to sign and return an agreement for Company Management services.

37 Exhibit G is a Minute of a meeting of directors of Metro held on 26 April 1994 at which the only person present is said to have been Ms Lyn Thallon (who signed the minute on 28 April 1994); the minute records this resolution: “Benwood Property Trust. IT WAS RESOLVED to authorise L.C. THALLON to execute an agreement with Meristem Pty Ltd dated 26th April 1994 in relation to purchase of units in Benwood Property Trust.” This appears to refer to the document (Exhibit A/2/78) dated 26 April 1994 executed under the common seal of Metro and signed by Ms Lyn Thallon as director and again as secretary of Metro. Metro in a letter signed by Ms Lyn Thallon wrote to the accountants conducting the registry of Benwood Property Trust on 29 April 1994 Tab 82, asking for the new certificate for the units to be forwarded. On 17 May 1992 Metro in a letter signed by Ms Lyn Thallon (Exhibit A/2/84) wrote to the Foreign Investment Review Board seeking approval for the acquisition of the units.

38 As appears from Exhibit G, Ms Lyn Thallon acted as sole director of Metro in April 1994. In later events in 1997 she continued to act in that way, and was accepted by persons dealing with the company as its director and as the person in complete control of its affairs. There are no registers or records of Metro in evidence, the account given to the ASC by Mr Story supports the view that in 1997 Mr Lyn Thallon was in control and entitled to be in control of the affairs of Metro, and there is no substantial reason why I should not act on the basis that she was.

39 In a letter dated 17 May 1994 from Metro to the Foreign Investments Review Board, Ms Thallon said, “The ultimate control of Metro is in Australia and its only activity and asset is the units in the trust.” There is no indication in the evidence that this was not the correct position. Answers given by Mr Story on his examination by the ASC are to the effect that Ms Lyn Thallon was the director of Metro and that it was her company; and there is no other indication in that evidence.

40 Truvend Pty Ltd was a company formed on 11 December 1991 the directors of which, in April 1994 were Mrs Lillian Thallon and Mr Michael T. Shanley; of its 100 shares 99 were then owned by Thallon Designs and one by Mrs Lillian Thallon. According to register documents at Tab 137 Mr Story became the sole director of Truvend on 31 December 1995 and Mrs Lillian Thallon and Mr Shanley then resigned; also, at some time not established but probably late in 1995, all the shares passed to Mr Story.

41 There is no document in evidence, either from this period or from any later time, recording that the Benwood Property Trust units transferred to Metro were held or were intended to be held by Metro on trust for the T & C Trust, or for any trust at all. There is no document recording whether or not it was intended that any constructive trust or resulting trust would or would not arise out of the circumstances in which the money paid for the acquisition of the units was assembled, either almost all of it or (and the facts are obscure) all of it out of bank accounts of Ms Lyn Thallon. The money was assembled with at least seven cheques on accounts conducted by Ms Lyn Thallon in at least five different bank branches, some in the name Lynette Thallon and some in the name Lynette Leroy; with variations. Mr Story had a central part in the arrangements for the acquisition of the units and for Metro to be the purchaser, and if he had understood that the true beneficial owner of the units was to be a trust over which he had practical control to the point where from time to time he spoke of its assets as his own, it is extremely unlikely that he would have failed to obtain some acknowledgement of the position from Metro, or from Ms Lyn Thallon, and it is extremely unlikely that he would also have omitted to make some record himself. For this chapter of events, as for the earlier chapter, there are no accounts, records or earmarks tending in any way to establish that the units were impressed with any trust.

42 The events are consistent with the funds for acquisition of units having been assembled from sources traceable to Thallon Designs’ venture in the house at Bradleys Head Road, and to other sources traceable to Ms Lyn Thallon’s own resources from her house and other assets which she owned at the initiation of the relationship with Mr Story, from assets which Thallon Designs may have had, and possibly from assets which Mr Story may have directed into her ownership. In a realm of events where many things which happened had an air of irregularity and Mr Story exercised control, for some years, over resources of Ms Lyn Thallon and of Thallon Designs, the ownership of which was strongly associated with her and not at all associated with Mr Story, the conclusion that Mr Story and interests associated with him had at their disposal so large a sum as $688,343.00, and that the participation of Ms Lyn Thallon and Thallon Designs was no more than as ciphers for him, could not be reached without full and clear demonstration. It is not possible to see clearly the sources of all the moneys in the many bank accounts in names which represented Ms Lyn Thallon out of which the consideration for purchase of the units was assembled, but the ordinary and unremarkable view that the money was in bank accounts in her name or controlled by her because it was her money is the view on which I act in the absence of any sound reason to find otherwise. If it were to be concluded that Metro held the units on a resulting or constructive trust the existence of which is to be inferred from the sources of funds used to purchase the units, the only reasonably available conclusion is that that was a trust in favour of Ms Lyn Thallon.

43 After the transfer of these units Hanover Australia Ltd, a company established by Mr Story, became the manager of Benwood under a resolution of an Extraordinary General Meeting of the unit holders held in 1994. Mr Story and Hanover Australia continued to act as manager, and to have practical control of the affairs of the property trust, not without challenge but with the support of Ms Lyn Thallon and Metro, for several years. The challenge arose when in 1996 units in Benwood were purchased by Verus Ltd and associates of Verus requisitioned an Extraordinary General Meeting with the object of having the unit holders resolve to change the manager from Hanover Australia to Verus Capital Ltd. Mr Story was able to defeat this resolution, and in doing so he had the benefit of a proxy from Metro.

44 In December 1996 the Australian Securities Commission was engaged in an investigation into the affairs of the Benwood Property Trust. Evidence does not establish what gave rise to this investigation, or what outcome it had, although it could well have been related to dissatisfaction by interests associated with Verus Capital with the outcome of the Extraordinary General Meeting of 1996 and with Hanover Australia Ltd remaining as manager. Although this does not clearly appear, the form of the questions seems to indicate that the examiners were concerned to establish the true beneficial ownership and entitlement to control voting for the units which Metro had acquired from Meristem. In the transcript of his examination (Exhibit A/3/117) Mr Story said, among many other things, to the following effects.

45 At p7 he said that Thallon Designs was an investment company, that Mr Story’s involvement was not as an office holder but that he provided Thallon Designs, in particular Ms Lyn Thallon, with professional advice from time to time about investments. At pp33 and 34 he said that he knew of Metro Trade & Commerce Ltd, a unit holder in Benwood Property Trust because he was involved in advising the investment in the trust that was made by Metro; that he gave the advice to Lyn Thallon and that her role with Metro was that she owned it. When recounting his advice he said (t34) “… And I put it to Lyn that with my expertise and know-how and her capital, that this was an opportunity where she could make an investment, and I could be involved in the management, and hopefully improve on her investment from her initial entry price … It was as a result of my putting up a proposal or proposition to Lyn that it would be a good investment for her.” He said that Metro was a company incorporated in Belize, that it had an office in the Isle of Man and a postal address in Hong Kong, and that he did not believe it had any directors or shareholders apart from Ms Lyn Thallon.

46 Mr Story said (t36) that the purpose of Metro at the time it was incorporated was “It was to be an investment vehicle for Lyn. Its first investment was going to be units in Benwood Property Trust.” He further explained (t36) “She [Ms Lyn Thallon] had emphasised her desire for privacy. I had thought about how that could be effected, and I suggested to her that establishing a company off shore such as Hong Kong, Isle of Man, Cook Island, Bermuda, those – or even in the UK, or wherever was a way which would provide her with the privacy she required”. In an examination which continued for some hours and is transcribed on many pages, Mr Story did not ever suggest otherwise than that Ms Lyn Thallon was the only director and secretary of Metro and that its purchase of Benwood Property Trust units was an investment of hers. Expressions he used confirmed the view that it was an investment of hers, and that it was capital of hers, in many ways, and did not ever suggest otherwise. Mr Story confirmed several times that Ms Lyn Thallon was the only director and shareholder of Metro (t47, 67).

47 When asked (t51) “Do you know how Metro paid Meristem for their units?” Mr Story gave a series of answers which uniformly spoke of the money, and the bank accounts from which it was drawn, as money of Ms Lyn Thallon. The evidence which he gave on this subject (at t51 & 52) is altogether inconsistent with his then having any belief that Ms Lyn Thallon was not the principal in providing the money, or that the money was the property of a trust in which Mr Story had an interest however indirect, or that the money and the units purchased by it were not rightfully at the disposition of Ms Lyn Thallon. The case which the plaintiff presents before me, in support of which Mr Story’s evidence before me was given, is entirely inconsistent with his sworn answers at the examination.

48 In 1997 Ms Lyn Thallon exerted control over the Benwood units and over the affairs of Metro in several ways. She set about establishing where the unit certificate was, and among other things inquired of Mr Story for the unit certificate; these inquiries and his response are recorded in her letter to him of 11 March 1997 (Exhibit A/3/120). Her solicitor Mr Haege of Messrs Gadens Ridgeway was able to obtain the issue of a duplicate certificate; that is to say, the Benwood Property Trust and its share registrar accepted that Ms Lyn Thallon was the director and that she was in control of the affairs of Metro, and acted on that basis. Mr Haege obtained replacement certificate dated 2 April 1997 (Exhibit A/3/123). Mr Haege then negotiated the sale of the units in a sale that yielded $518,573.89 after brokerage. The cheque for the proceeds of sale was paid into an ANZ V2 Plus account in the name of and conducted by Ms Lyn Thallon with the ANZ Bank, and was thereafter disposed of at her direction.

49 Mr Haege acted for Ms Lyn Thallon in relation to the examination summons. Subsequently he advised her and spoke to Mr Story in connection with the inquiries for the unit certificate, and he also had dealings with Benwood’s registrar. Mr Haege also conducted dealings with a sharebroker about the proposed sale of the units. It is Mr Haege’s evidence that he had a conversation with Mr Story by telephone on 16 April 1997. Initially he inquired about documents of Truvend and of Metro, but he went on to ask Mr Story “Where did the money for Metro’s acquisition of the units in Benwood come from?” It was Mr Haege’s evidence that Mrs Story replied “It came from her bank account” and the conversation proceeded: Haege “So it was her money”. Story: “It was under her control”. Haege: “Where did she get it from?” Story: “It depends how far back you trace it”. In a conversation of some length it is Mr Haege’s evidence that he also said “If the units were sold where would the sale proceeds go?” and that Mr Story said: “To Lyn in repayment of her loan account”.

50 After this conversation Mr Haege negotiated for the sale of the units at 32 cents per unit and then on 28 April 1998 he informed Mr Story by telephone of the sale. Mr Story protested, saying: “I am not pleased to hear this and I can’t believe it” and also: “I will get legal advice to stop the sale” and “It is wrong morally and legally.” Mr Story protested in various ways, and on grounds which were not clear but did not include a claim that the units were assets of a trust controlled by Mr Story. Mr Story disputed Mr Haege’s evidence in a number of respects and claimed that Mr Story had also said “Lyn is acting as trustee only and cannot deal in the units” in the first conversation, and to similar effect in the later conversation. He also disputed that he had said that the proceeds would go “To Lyn in repayment of the trust loan account”. Both Mr Story and Mr Haege were cross-examined in detail about these conversations. I unhesitatingly prefer the evidence of Mr Haege about these conversations, not only on the basis of the support largely although not completely available to Mr Haege’s evidence from his notes, but also on the basis of Mr Haege’s demeanour, which was the demeanour of a clear and confident witness; Mr Haege’s evidence also has the advantage that it is generally well in accord with the probabilities.

51 If Mr Story had known or believed that the Benwood units owned by Metro were subject to a trust in favour of the T & C Trust, or that the units were not at the disposition of Ms Lyn Thallon, he would not have given the answers he gave to the ASC examiners, and he would not have spoken to Mr Haege in the terms I have found he did. He would not have left Ms Lyn Thallon to act as she chose in holding and later in disposing of the units, and he would probably have taken concrete action, such as initiating litigation and claiming orders restraining her from selling the units, or from disposing of the proceeds: he would have done much more than protest to Mr Haege in vague terms.

52 The remedies claimed by the plaintiff relate to tracing Ms Lyn Thallon’s dispositions of proceeds of the sale of the Benwood units. This opens a further chapter with which it is not necessary for me to deal in all detail because it is, on the basis of what I have said so far, in my opinion altogether clear that the plaintiff and the T & C Investment Trust have not been shown to have any beneficial interest in proceeds of the sale of the Benwood Property Trust Units.

53 Mr Story and Ms Lyn Thallon separated, and their domestic relationship ended, around December 1994 or January 1995. At this turn of events Ms Lyn Thallon began to assert and exercise control over her own affairs and destiny. Mr Story paid her $100,000 and provided her with some other resources. She set about finding a house in which to live, and not unreasonably she made observations to the effect that she expected Mr Story to provide her with a house, as when the relationship had begun she had a house and at the end she did not. Ms Thallon bought a house property at 75 Belgrave Street, Cremorne, for $360,000; this purchase was settled on 1 November 1995. A large part of the purchase price was proceeds of the final payment of $240,000 of the consideration on the sale of the option which was dependent on the outcome of development. Thallon Designs executed an acknowledgement in August 1995 (Exhibit A/2/103) to the effect that Thallon Designs accepted $240,000 in full satisfaction of the obligations of ASG Holdings and Brentwood Capital and their guarantors; and $240,000 was paid into Thallon Designs’ bank account on 22 August 1995. When the purchase was settled on 1 November 1995 $125,000 of the settlement moneys was obtained by an advance on a registered first mortgage from Quantum Securities Pty Ltd; Mr Story negotiated this advance and guaranteed the mortgage; and for some time he made payments of moneys falling due under the mortgage. The deposit of $36,000 and the balance of purchase money of $199,000.00, with adjustments, can with fair certainty be traced to the final payment of $240,000 arising from the option. Among other dispositions of the proceeds of the sale of the Benwood Units, Ms Thallon used money traceable to those proceeds to repay the mortgage to Quantum, thus relieving Mr Story of his guarantee liability, and for extensive improvements to the property. The plaintiff claims to be entitled to charges over the property in respect of these moneys, but is not entitled to that relief.

54 Mr Story’s participation in these events and his co-operation, which was necessary for raising the finance, were obtained by a highly confrontational event which occurred in early to mid August 1995 at the house at 106 McPherson Street, Mosman, then occupied by Ms Thallon; Mrs Lillian Thallon and her partner Mr John Dawkins were present in the house. When Mr Story arrived at the house Mrs Thallon and Mr Dawkins withdrew to the kitchen. Mr Story had a briefcase from which he took a bundle of documents, in Ms Lyn Thallon’s estimation about 15 or 20 pages, and he required her to sign a number of the documents. She began to do so, and after a while asked for an explanation of what she was signing; she received a reply which explained next to nothing saying “They’re old shares and old paper work.” She was confronted with insistent and overbearing behaviour by Mr Story; part of which in her evidence was that he said “You sign this stuff. You’ll get your house. I’m doing your bloody paper work. Just sign.” For (at least) one document Mr Story said that Mrs Lillian Thallon was to sign as she was the director of Thallon Designs. Ms Lyn Thallon’s evidence is to the effect that she pointed out that one document which she was to sign as director of Thallon Designs was dated 1992; that she asked for an explanation, and that Mr Story responded with insistence. Ms Lyn Thallon, influenced by the indication that it was necessary to sign the documents if she was to obtain a house, persuaded Mrs Lillian Thallon to sign two documents. She asked for a further explanation of why a document was dated 1992 and received no substantial explanation; Mr Story said “They are just shares,” referred to them as paper work, and gave no real explanation.

55 Mr Story gives a somewhat different account of the events but Ms Lyn Thallon’s account is corroborated in some significant ways by the evidence of Mrs Lillian Thallon and of Mr Dawkins, and in my view her account of the events in which she signed documents in August 1995 is substantially correct. Although there is no clear proof, it was probably on this occasion that Ms Lyn Thallon and Mrs Lillian Thallon signed the document which bears date 4 February 1992. There cannot be a completely clear finding to this effect because they did not read or understand or clearly see the document.

56 Mr Story’s evidence about when the document dated 4 February 1992 was signed is to a completely different effect; when he came to deal with the subject (which was only in his re-examination on the third day on which he gave evidence) he said (t128):

Q. “When do you say that document was signed by Mrs Thallon?

A. My belief is it was signed on the date it was dated in the course of the preparation of the transfer of the option from Viewent to Thallon and the execution of another document with Mark Smith.”

He gave further evidence to similar effect (t.129). Even Mr Story’s evidence on this subject is not expressed in a confident way, as he spoke in terms of what he believes, rather than giving a narration of an event which he recollected. However that may be, I disbelieve his evidence that the document was signed on or about 4 February 1992.

57 In my finding the document did not come into existence on or about 4 February 1992, and it did not exist at all during the whole period during which Thallon Designs held the option and later disposed of it and collected the proceeds. By August 1995 Thallon Designs held no property to which a declaration of trust could apply. I also find that there never was any decision by Ms Lyn Thallon and Mrs Lillian Thallon as directors that Thallon Designs should declare a trust in favour of T&C Trust. There is no trace that that document existed and that it was regarded as creating a trust until the proceedings were commenced on 22 December 1997 and a statement of claim was filed thereafter. There never was a decision by the directors of Thallon Designs to declare a trust such as the document appears to declare. They did not ever authorise the seal of Thallon Designs to be placed on the document. Ms Lyn Thallon found Document 4, the form without the seal, in the office used by Mr Story in the City when she went there clandestinely several days after signing documents in August 1995: this strongly suggests that the seal was affixed later.

58 I find on the probabilities that the facts alleged in para.2 of the Amended Defence are correct. I find that the document referred to in para.3 of the Amended Statement of Claim is not authentically what it appears to be on its face, and that Thallon Designs did not make a declaration of trust in its terms on 4 February 1992 or at any time in association to the acquisition of an option to purchase 69 Bradleys Head Road, Mosman. The proceeds of disposition of the Benwood units which came under Ms Lyn Thallon’s control are not impressed with any trust for the T & C Trust.

59 Allegations in the Statement of Claim and claim (ab) suggest there may be other property held by one or more defendants which represents proceeds of the option agreement and is subject to the trust. No evidence identifies any other items of property than the house at Belgrave Street, and these claims were not advanced at the hearing.

60 For these reasons I will give judgment for the defendants upon the plaintiff’s claim.

61 The defendants relied on other matters of defence on which it is, in the circumstances, not necessary to adjudicate.

62 In a cross-claim Thallon Designs and Mrs Lyn Thallon claimed an accounting by Mr Story of his dealings with their property, and an inquiry to establish the position. Defendants’ counsel did not ask that relief be granted in the event that the defendants succeeded upon the plaintiff’s claim. I do not see any practical possibility of establishing, in any clear or fair way, what in truth were the dealings by Mr Story with the property of the cross-claimants during the lengthy period of his dominance, and I have no confidence that dismissal of the plaintiff’s claim and failure of the plaintiff to establish any equity is an outcome the justice of which could be improved on. An accounting would be mutual if it were to be just, Ms Lyn Thallon would be required to account for all dealings in which Mr Story was involved and she is in no position to explain much of what happened. It is unlikely that, even after a complex inquiry, there would be any closer approach to achieving justice than what is achieved by leaving the parties where they stand. The parties should be left where they were when the music stopped. For these reasons the cross-claim will be dismissed.

63 Orders:

(1) On the plaintiff’s claim, give judgment for the defendants with costs.

(2) On the cross-claim, give judgment for the cross-defendants.

(3) Order that each party to the Cross-claim pay his, her or its own costs of the Cross-claim.

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Last Modified: 12/22/2003