R v Kerin Criminal Trial by Judge Alone - [2014] SASC 19

SUPREME COURT OF SOUTH AUSTRALIA
(Criminal)
R v KERIN
Criminal Trial by Judge Alone
[2014] SASC 19
Reasons for the Verdicts of The Honourable Justice Blue
21 February 2014
CRIMINAL LAW - PARTICULAR OFFENCES - PROPERTY OFFENCES - THEFT - GENERALLY
CRIMINAL LAW - PROCEDURE - PLEAS - PLEAS IN BAR - PLEA OF AUTREFOIS ACQUIT OR AUTREFOIS CONVICT
CRIMINAL LAW - PROCEDURE - ADJOURNMENT, STAY OF PROCEEDINGS OR ORDER RESTRAINING PROCEEDINGS - STAY OF PROCEEDINGS - ABUSE OF PROCESS
EVIDENCE - DOCUMENTARY EVIDENCE - STATUTORY PROVISIONS RELATING TO BUSINESS RECORDS
EQUITY - TRUSTS AND TRUSTEES - POWERS, DUTIES, RIGHTS AND LIABILITIES OF TRUSTEES - INVESTMENT OF TRUST FUNDS - MODE OF INVESTMENT - GENERALLY
Criminal trial by Judge alone.
The accused is charged with three counts of theft. Count 1 relates to dealings by the accused under a power of attorney with $200,000 belonging to Miss Fahey transferred by the accused from an investment with AXA to Osvest Pty Ltd, a company of which the accused was Chief Operating Officer, for the purpose of derivatives trading by Osvest. Counts 2 and 3 are alternatives: they relate to dealings by the accused with share trading assets worth $85,000 which the accused caused to be liquidated and transferred to Osvest’s bank account for derivatives trading and Osvest’s general purposes. Count 2 alleges that the assets were beneficially owned by the Fahey estate and count 3 alleges in the alternative that they were beneficially owned by the Batten estate.
The accused pleaded not guilty to counts 1 and 2 and autrefois acquit to count 3. In the alternative, the accused sought a permanent stay of count 3 as an abuse of process. Upon a ruling that the plea of autrefois acquit was not available, the accused pleaded not guilty to count 3.
Held (convicting the accused of counts 1 and 2):
As to count 1:
1. The accused dealt with the funds of $200,000 without Miss Fahey’s consent because he was acting for the purposes and in the interests of Osvest and himself and not of Miss Fahey. Alternatively, the accused dealt with the funds without Miss Fahey’s consent because he was not acting or seeking to act with reasonable diligence to protect the interests of the donee within the meaning of section 7 of the Powers of Attorney and Agency Act 1984 (SA). The accused did not honestly believe that he was acting with Miss Fahey’s consent (at [285]-[309]).
2.      The accused intended to make a serious encroachment on Miss Fahey’s proprietary rights because he intended to treat her property as his own to dispose of regardless of her rights and to deal with the property in a way that created a substantial risk of which he was aware that she would not get it back or its value would be substantially impaired (at [311]-[312]).
3.      The accused acted dishonestly according to the standards of ordinary people, knew that he was so acting and did not honestly believe that he had a legal or equitable right to so act (at [314]-[318]).
As to count 2:
4.      The share trading assets at all material times were beneficially owned by Miss Fahey up to her death on 26 November 2007 and thereafter by her estate (at [323]).
5.      The accused dealt with assets of the Fahey estate without the owners’ consent because he had no authority from the executors and trustees to deal with the assets after 26 November 2007. The accused did not honestly believe that he had the owners’ consent (at [325]).
6.      The accused intended to make a serious encroachment on the owners’ proprietary rights because he intended to treat the property as his own to dispose of regardless of the Fahey estate’s rights and to deal with the property in a way that created a substantial risk of which he was aware that the Fahey estate would not get it back or its value would be substantially impaired (at [326]-[328]).
7.      The accused acted dishonestly according to the standards of ordinary people, knew he was so acting and did not believe that he had a legal or equitable right to act (at [329]-[332).
As to count 3:
8.      The plea of autrefois acquit was not available in respect of count 3 (at [167]-[170]).
9.      It was not an abuse of process for the prosecution to lay and prosecute count 3 because the count of which the accused had been acquitted in the October 2012 trial was not the same or substantially the same offence (at [175]-[176]).
10.    On the assumption, contrary to the finding at (4. above), that the share trading assets did not belong beneficially to Miss Fahey after 8 October 2007, those assets belonged beneficially thereafter to the Batten estate (at [341]).
11.    The accused dealt with the assets without the owners’ consent because he did not have authority from one of the executors and trustees, Mrs Wade, and in any event did not have the authority of the other executor and trustee, Mrs Wilkshire, to deal with the funds in February 2008 for derivatives trading or Osvest’s general purposes. The accused did not honestly believe that he had the owners’ consent (at [346]-[359]).
12.    The accused intended to make a serious encroachment on the Batten estate’s proprietary rights because he intended to treat the funds of $85,000 as his own to dispose of regardless of the rights of the Batten estate and intended to deal with the property in a way that created a substantial risk of which he was aware that the owners would not get it back or its value would be substantially impaired (at [360]).
13.    The accused acted dishonestly according to the standards of ordinary people, knew he was so acting and did not honestly believe that he had a legal or equitable right to so act (at [361]-[363).
14.    Accused convicted of counts 1 and 2 (at [369]).
Bankruptcy Act 1966 (Cth) Part X; Criminal Law Consolidation Act 1935 (SA), s 130, s 131, s 131(5), s 132, s 132(1), s 132(2), s 134, s 134(1), s 134(1)(b), s 134(2), s 134(3); Evidence Act 1929 (SA) s 34P, s 45A, s 45A(2), s 45B, s 45B(2); Powers of Attorney and Agency Act 1984 (SA) s 7, referred to.
Island Maritime Ltd v Filipowski (2006) 226 CLR 328; R v Kerin (2013) 116 SASR 316; Technilock (Australia) Pty Ltd v Mondami Pty Ltd [1999] SASC 320, applied.
Connelly v DPP [1964] AC 1254; Pearce v The Queen (1998) 194 CLR 610; R v Calabria (1982) 31 SASR 423; Walton v Gardiner (1993) 177 CLR 378, discussed.
Australian Growth Resources Corp Pty Ltd v Van Reesema (1988) 13 ACLR 261; Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256; R v Carroll (2002) 213 CLR 635; Rogers v The Queen (1994) 181 CLR 251; Ryan & Ors v ETSA & Ors (No 2) (1987) 47 SASR 239, considered.

R v KERIN
[2014] SASC 19
Criminal: Trial by Judge Alone
BLUE J.
Introduction

This is a trial by Judge alone. The accused, Peter David Kerin, is charged with three counts of theft in contravention of section 134 of the Criminal Law Consolidation Act 1935 (SA) (“the Act”).
The first count relates to funds of $200,000 belonging to Mary Eileen Fahey which between 21 September and 2 October 2007 were withdrawn by the accused (who was a co-donee under a power of attorney from Miss Fahey) from an investment in her name with AXA and deposited into the bank account of Osvest Pty Ltd (“Osvest”) for the purpose of trading in derivatives.
The second and third counts are in the alternative. They relate to transactions between 10 January and 22 February 2008 whereby a share portfolio was liquidated and the proceeds paid into Osvest’s Macquarie account, funds of $85,000 were withdrawn from Osvest’s Macquarie account and deposited into Osvest’s bank account, $60,000 was transferred in turn into Osvest’s derivatives trading account for derivatives trading, the balance of $25,000 was left in Osvest’s bank account for Osvest’s general purposes and $20,000 was returned from Osvest’s derivatives trading account to its bank account for Osvest’s general purposes. Count 2 is founded on the basis that the share trading assets and funds of $85,000 were the property of Miss Fahey’s estate. Count 3 is founded on the alternative basis that they were the property of the estate of Jean Ellen Batten.[1]
[1] I address below who had the legal and beneficial interests in the assets of the Batten estate.
The accused pleaded not guilty to counts 1 and 2 and autrefois acquit to count 3. In the alternative to the plea of autrefois acquit, he sought a permanent stay of count 3 as an abuse of process.[2]
[2] It was agreed by the parties, in light of the fact that this was a trial by Judge alone, that I would not rule on the plea of autrefois acquit or the permanent stay application until the close of the prosecution case.
At the close of the prosecution case, I ruled that the plea of autrefois acquit was not available and that the prosecution of count 3 was not an abuse of process. Thereupon, the accused pleaded not guilty to count 3.
The accused had previously been tried before a jury. He had been found guilty of two counts of theft in similar terms to the first two counts of the current Information.[3] The guilty verdicts on the first two counts were set aside by the Full Court on appeal and the matter remitted for a new trial.[4] The accused had been found not guilty of count 3 by direction of the trial Judge at the close of the prosecution case. That verdict was the basis of the accused’s plea of autrefois acquit on count 3 of the current Information and of the application for a permanent stay of that count. I address below a comparison between count 3 of the previous and current Informations.
[3] The order of the two counts was reversed in the original Information and the original Information was amended during the course of the previous trial in October 2012 before David J (the amendment being the subject of one of the grounds of appeal) such that its amended terms were similar to the current Information.
[4] R v Kerin [2013] SASCFC 56; (2013) 116 SASR 316.
The charges
The current Information[5] reads as follows:
[5] The Information was laid, without opposition by the accused, during the prosecution’s opening at trial in place of an earlier Information. The particulars to count 3 were amended, without opposition by the accused, during the defence case at trial.
First Count
Statement of Offence
Theft. (Section 134 of the Criminal Law Consolidation Act, 1935).
Particulars of Offence
Peter David Kerin between the 20^th day of September 2007 and the 24^th day of October 2007 at Adelaide or other places, dishonestly dealt with property, namely a chose in action in the amount of $200,000.00 once held in the name of Mary Eileen Fahey with Generations Investment Portfolio, AXA, policy number 130056-L9-01, without the owner’s consent, intending to make a serious encroachment on the owner’s proprietary rights.
Second Count
Statement of Offence
Theft. (Ibid).
Particulars of Offence
Peter David Kerin between the 9^th day of January 2008 and the 23^rd day of February 2008 at Adelaide or other places, dishonestly dealt with property, namely a part of a chose in action in the amount of $100,000.00 once held in the name of Mary Eileen Fahey in account no 06 5117 00105394 with the Commonwealth Bank, without the owner’s consent, intending to make a serious encroachment on the owner’s proprietary rights.
Third Count
Statement of Offence
Theft. (Ibid).
Particulars of Offence
Peter David Kerin between the 9^th day of January 2008 and the 23^rd day of February 2008 at Adelaide or other places, dishonestly dealt with property, namely a part of a chose in action in the amount of $85,154.78 once held in the name of Osvest Pty Ltd in the Cash Management Trust Account, account no 122645260 with Macquarie Investment Management Ltd, without the owner’s consent, intending to make a serious encroachment on the owner’s proprietary rights.
The offence of theft is created by section 134 of the Act. Section 134(1) provides:
134—Theft (and receiving)
(1)A person is guilty of theft if the person deals with property—
(a)     dishonestly; and
(b)     without the owner's consent; and
(c)     intending—
(i)to deprive the owner permanently of the property; or
(ii)to make a serious encroachment on the owner's proprietary rights.
Maximum penalty:
(a)     for a basic offence—imprisonment for 10 years;
(b)     for an aggravated offence—imprisonment for 15 years.
The offence of theft comprises four elements:
1.dealing with property;
2.the dealing is without the owner’s consent;
3.the dealing is with the intention of depriving the owner permanently of the property or making a serious encroachment on the owner’s proprietary rights; and
4.the dealing is dishonest.
The first element (dealing with property) is partially defined by section 130. The second element (without the owner’s consent) is partially defined by section 132 and section 130. The second limb of the third element (making a serious encroachment on the owner’s proprietary rights) is defined by subsection 134(2). The fourth element (dishonesty) is defined by section 131.
The prosecution case
The prosecution case was largely documentary. The prosecution tendered various business records, contemporaneous communications, a record of interview of the accused, the transcript of his evidence given at the previous trial and various other documents.
The prosecution called Henry Myszka, a solicitor who acted for The Legion of Mary Adelaide Comitium Incorporated (“The Legion of Mary”) and in due course for the executors and trustees of Miss Fahey’s estate. The transcript of Mr Myszka’s evidence given at the previous trial was tendered. Mr Myszka mainly gave evidence of his communications with the accused and Osvest between 2005 and 2008, all but one of which were in writing. His evidence was not challenged or contradicted by the accused.
The prosecution called Mark Yeomans, a certified financial planner. The transcript of his evidence given at the previous trial was tendered. Mr Yeomans mainly gave evidence of his dealings and communications with the accused in 2007 in relation to investments with AXA and withdrawals made on behalf of Miss Fahey and the Batten estate. His evidence was not challenged or contradicted by the accused.
The prosecution called Helen Gavan, an employee of Morgan Stanley Wealth Management Australia Pty Ltd, formerly Citigroup Wealth Advisors Pty Ltd (“Citigroup”). She mainly gave evidence of dealings by Osvest with Citigroup and the purchase and sale of shares by Osvest through Citigroup in 2007 and 2008. The transcript of evidence given at the previous trial by Renee Boyd, a fellow employee at Citigroup, was tendered and her evidence was adopted by Ms Gavan. The evidence of Ms Gavan was not challenged or contradicted by the accused.
The prosecution called Andrea Neil, a former employee of BrokerOne Pty Ltd (“BrokerOne”) and MF Global Australia Ltd (“MF Global”). Ms Neil mainly gave evidence of dealings and communications between Osvest and BrokerOne/MF Global in 2007 and 2008. Originally BrokerOne and MF Global were competitors but on 27 September 2007 MF Global acquired BrokerOne’s business. All clients’ derivatives trading accounts were effectively transferred from BrokerOne to MF Global on 14 December 2007. Osvest had and operated successive derivatives trading accounts (collectively “Osvest’s derivatives trading account”) with BrokerOne until 14 December 2007 and thereafter with MF Global. Ms Neil also gave evidence concerning derivatives and derivatives markets. Her evidence was not challenged or contradicted by the accused.
The prosecution also tendered the entirety of the transcript of the previous trial.
Count 1
The prosecution case in respect of count 1 relates to dealings by the accused under a power of attorney with property of Miss Fahey, being an investment held with AXA. The prosecution case is that between 21 September and 2 October 2007 the accused dealt with Miss Fahey’s property, being funds of $200,000 held in Miss Fahey’s AXA investment, by transferring them into Osvest’s bank account. The prosecution case is that the funds were transferred into Osvest’s bank account for the purpose of trading in derivatives by Mr Abrahams, who was engaged by Osvest, and that this was to advance the interests of Osvest, of which Mr Williams was the director and the accused was the Chief Operations Officer and in which the accused had a prospective financial interest. The sum of $200,000 was subsequently transferred by the accused from Osvest’s bank account to Osvest’s derivatives trading account on 23 October 2007.
The prosecution case is that, in dealing with Miss Fahey’s funds of $200,000, the accused was purportedly exercising his powers under the power of attorney but in reality was acting in the interests and for the purposes of Osvest and himself rather than Miss Fahey. Alternatively, the accused was not acting with reasonable diligence to protect the interests of Miss Fahey within the meaning of section 7 of the Powers of Attorney and Agency Act 1984 (SA). The prosecution case is that in these circumstances the accused dealt with Miss Fahey’s funds of $200,000 without Miss Fahey’s consent and did not honestly believe that he had consent.
The prosecution case is that, in dealing with Miss Fahey’s funds of $200,000, the accused intended to make a serious encroachment on Miss Fahey’s proprietary rights because he intended to treat the property as his own to dispose of regardless of Miss Fahey’s rights, or to deal with the property in a way that created a substantial risk, of which he was aware, that Miss Fahey would not get her capital back or its value would be substantially impaired. The accused was acting and knew he was acting dishonestly according to the standards of ordinary people and did not believe that he had a legal or equitable right to act in that way.
Count 2
The prosecution case in respect of count 2 is that funds standing to the credit of Osvest’s Macquarie account and a share trading portfolio being traded by Osvest through Citigroup as at January/February 2008 were beneficially owned by the estate of Miss Fahey (Miss Fahey having died on 26 November 2007). For ease of reference, I refer to the Osvest Macquarie account and the share trading portfolio collectively as “the share trading assets”. The prosecution case is that between 9 January and 23 February 2008 the accused dealt with property beneficially owned by the Fahey estate by liquidating the share trading assets valued at $85,000, transferring the funds from Osvest’s Macquarie account into Osvest’s bank account, and transferring $60,000 in turn into Osvest’s derivatives trading account for the purpose of derivatives trading, leaving $25,000 for use for general purposes of Osvest. Subsequently, $20,000 was transferred from the derivatives trading account and back into Osvest’s bank account for use for general purposes of Osvest.
The prosecution case is that the accused had no authority from or consent of the owners to deal with assets of the Fahey estate (his powers under the power of attorney having terminated upon Miss Fahey’s death). In these circumstances, the accused dealt with the assets without the consent of the beneficial owners of the property and did not honestly believe that he had their consent. In dealing with the assets, the accused intended to make a serious encroachment on the owners’ proprietary rights because he intended to treat the property as his own to dispose of regardless of the owners’ rights or to deal with the property in a way that created a substantial risk, of which he was aware, that the owners would not get it back or its value would be substantially impaired. The accused was acting and knew he was acting dishonestly according to the standards of ordinary people and did not believe that he had a legal or equitable right to act in that way.
Count 3

In the alternative to count 2, the prosecution case in respect of count 3 is that, if the share trading assets as at January/February 2008 were not beneficially owned by the Fahey estate, they were beneficially owned by the Batten estate.
The prosecution case is that, by the same acts as are alleged in respect of count 2, the accused dealt with property beneficially owned by the Batten estate without the consent of the Batten estate and did not honestly believe that he had consent. The prosecution case is that the accused did not have the consent of Mrs Wade who was the executor to whom probate had been granted and a co‑trustee of the estate assets or of Mrs Wilkshire who was a co-trustee of the estate assets and a major beneficiary.
The prosecution case is that, in dealing with the property of the Batten estate, the accused intended to make a serious encroachment on the owners’ proprietary rights for the same reasons as in respect of count 2.
The prosecution case is that, in dealing with the property of the Batten estate, the accused was acting and knew he was acting dishonestly according to the standards of ordinary people and did not believe that he had a legal or equitable right to act in that way.
The accused’s case
The accused gave evidence in his own defence. In addition, he tendered various business records, communications and other documents. The accused’s case is that the prosecution has failed to prove some or all of the elements of each count. I express his case in affirmative terms, recognising that the onus remains on the prosecution throughout to prove each element beyond reasonable doubt.
Count 1
In respect of count 1, the accused accepts that he dealt with the property of Miss Fahey in the manner alleged by the prosecution.
The accused’s case is that he did not act without the owner’s consent because he had the consent of his father who gave that consent as a donee under the power of attorney. Alternatively, he acted within the legal power conferred upon him by the power of attorney. Alternatively, he was acting in the interests and for the purposes of Miss Fahey and not in the interests or for the purposes of Osvest or himself and he exercised reasonable diligence to protect the interests of Miss Fahey. Alternatively, he honestly believed that he had the owner’s consent.
The accused’s case is that he did not intend to make a serious encroachment on the proprietary rights of Miss Fahey. He did not act dishonestly according to the standards of ordinary people, did not know that he was so acting and honestly believed that he had a legal right to act in that way.
The accused gave evidence that in March or April 2007 he had a discussion with a duty nurse at Lourdes Valley Nursing Home (whose name he does not recall). The duty nurse told him that Miss Fahey was suffering from a health condition (which he does not recall). He formed the view that Miss Fahey may need expensive medical treatment in future and that it would be desirable to create a buffer of between $20,000 and $50,000 to cover potential medical expenses over the next one to three years. He formed the view that it was desirable to invest some of Miss Fahey’s monies in derivatives trading to achieve a higher return to create the buffer.
The accused gave evidence that he did not wish to use any of the capital of $500,000 held on behalf of Miss Fahey for medical expenses because he wanted to preserve that capital.
The accused gave evidence that, before Mr Abrahams commenced trading in derivatives, Mr Williams and the accused devised a protocol with six elements with a view to minimising the risk of loss. They also engaged Robin Golding to conduct, and themselves conducted, a due diligence investigation of Mr Abrahams.
The accused gave evidence that he recognised that he was in a position of conflict of interest in relation to dealings between Miss Fahey and Osvest. He asked his father, who was a co-donee under the power of attorney, to authorise the investment of the $200,000 through Osvest in derivatives trading. His father required that there be a loan agreement between Miss Fahey and Osvest to ensure that Miss Fahey’s monies would be repaid. He tendered a handwritten note from his father dated 26 June 2007 which stated, inter alia:
Re our discussions about investments, I have considered what you said about investing through Osvest because it should be her advantage as you suggested.
and a handwritten note dated 22 July 2007 which stated, inter alia:
Osvest investment must be a GRO regd agreement to protect her interests. If agt ready before I go, I will sign otherwise you do it. ensure that agt requires repayment by 30/6/08 as discussed.
He referred to a loan agreement dated 2 October 2007 which he drafted, executed on behalf of Miss Fahey and arranged for Mr Williams to execute on behalf of Osvest.
The accused gave evidence that he believed that Miss Fahey would be repaid by Osvest regardless of the result of the derivatives trading because he expected that a company called Sigma Alpha Group Limited (“Sigma”) would obtain a placement of funds in the vicinity of $50 million from one or more large corporate superannuation funds and in turn would place between $5 million and $10 million with Osvest for investment through Osvest’s traders. While there was nothing in writing between Osvest and Sigma in relation to this prospect, the accused gave evidence that he and Mr Williams had several meetings and numerous telephone conversations with Mr Morrow of Sigma over the course of 2006 and 2007 and throughout 2007 Mr Morrow indicated and the accused believed that the placement was imminent.
Count 2
In respect of count 2, the accused’s case is that the share trading assets as at January/February 2008 were not beneficially owned by the Fahey estate.
The accused gave evidence that there had been an exchange (“the Exchange”) effected on 8 October 2007 pursuant to which Miss Fahey’s beneficial interest in the share trading assets was converted into a beneficial interest in a $100,000 loan to Sigma the subject of a convertible note. The Batten estate’s interest in $100,000 in Osvest’s bank account destined to be lent to Sigma was converted into a beneficial interest in or loan funding the share trading assets. There was a telephone meeting between Mr Williams and himself late in the evening of 8 October 2007 at which it was resolved to make the Exchange. The accused prepared minutes of that meeting and a declaration of trust by Osvest of the convertible note in favour of Miss Fahey and posted them under cover of a letter to Mr Williams dated 10 October 2007 with a Post-It note requesting Mr Williams to date them 12 October 2007.
The accused did not get back the minutes which were signed and dated by Mr Williams nor the declaration of trust (which was never signed and dated).
The accused gave evidence denying the proposition, put to him by the prosecutor in cross-examination, that there was no Exchange and it was fabricated by the accused in June 2008 when the relevant documents were created and backdated.[6]
[6] I address the important issue whether an exchange occurred in October 2007 in accordance with the accused’s evidence below. For ease of reference, I refer to the purported exchange as “the Exchange” without connoting a finding that it did or did not occur.
The accused accepts that he engaged in the dealings with the share trading assets and the funds of $85,000 alleged by the prosecution. He denies that he dealt with funds beneficially owned by the Fahey estate. He accepts that, if those funds were beneficially owned by the Fahey estate, he acted without the owners’ consent and intended to make a serious encroachment on the owners’ proprietary rights by treating the property as his own to dispose of regardless of the owners’ rights.
The accused’s case is that he did not act dishonestly according to the standards of ordinary people, did not know that he was so acting and honestly believed that he had a legal right to act in that way.
Count 3
In respect of count 3, the accused’s case is that the share trading assets as at January/February 2008 were beneficially owned by Osvest and not the Batten estate because the relationship between them was one of debtor and creditor and not trustee and beneficiary by reason of the existence of a loan agreement between them dated 4 October 2007. He denies that he dealt with funds beneficially owned by the Batten estate. His case is that he acted in accordance with authority conferred upon him by Mrs Wade in her capacity as an executor of the Batten estate being the executor to whom probate had been granted and alternatively that he honestly believed that he had her consent and hence the Batten estate’s consent.
The accused gave evidence that Mrs Wilkshire had previously put pressure on Mrs Wade to pay her more than 50 per cent of the annual net income of the Batten estate as had been agreed in 1998. In 2007, Mrs Wade requested him to pay all of the funds of the Batten estate to Mrs Wilkshire to stop the pressure. He advised Mrs Wade against such a course. He recommended to Mrs Wade that $100,000 of the Batten estate’s funds be invested in derivatives trading to produce a higher return to increase the half share of income paid annually to Mrs Wilkshire. The accused tendered a copy of a letter from him addressed to Mrs Wade dated 28 September 2007. The letter said that he confirmed telephone conversations in which he informed Mrs Wade that he would make a partial redemption of the funds invested with AXA to invest through the vehicle of Osvest and through a derivatives trader based in South Melbourne until about at least the middle of January 2008.
The accused’s case is that, by virtue of her request to him in 2007, he had a general authority from Mrs Wade to invest part of the Batten estate’s funds in any manner he considered appropriate. Alternatively, he had Mrs Wade’s specific authority conferred in September 2007 to invest part of the funds of the Batten estate in derivatives trading as set out in his letter dated 28 September 2007.
The accused’s case is that he did not intend to make a serious encroachment on the Batten estate’s proprietary rights. He did not act dishonestly according to the standards of ordinary people, did not know that he was so acting and honestly believed that he had a legal right to act in that way.
Background
In June 1984, the accused was admitted as a solicitor and barrister of the Supreme Court. Between 1984 and 1987, he was employed as a solicitor at Reilly Ahern & Kerin. His father, Kevin Kerin, was a partner in that firm.
In 1987, the accused commenced practise as a solicitor on his own account under the name Peter Kerin & Associates. In 1999, he commenced practise on his own account under the name Millennium Law. He continued to practise as a solicitor until December 2006.
Throughout his practise as a solicitor, the accused practised primarily in the field of non-litigious commercial law. His practise included wills and estates.
In January 2007, the accused commenced practising as a strategic, business and property development advisor. He practised under the name Strategic & Business Advisory Services. The proprietor of the business was Armalite Finance Pty Ltd (“Armalite”), of which the accused was the sole director and shareholder (holding the shares on trust for Reliability Plus Ltd). The accused used the net income generated by the business to meet his living expenses.
Mary Fahey
Mary Eileen Fahey was born on 7 May 1907. She was a founding member of The Legion of Mary which was established in 1934. Joan Cahill and Joan Virtucio were fellow members.
As at 1985, Miss Fahey lived in a house which she owned at Robsart Street, Parkside (“the Parkside property”). She conducted a bank account with the Commonwealth Bank of Australia (“Miss Fahey’s bank account”). She was a client of Reilly Ahern & Kerin and in particular of Kevin Kerin.
On 18 December 1985, Miss Fahey executed an enduring power of attorney appointing Kevin Kerin and the accused as joint and several attorneys (“the Power of Attorney”). They each accepted the appointment and acknowledged that they were subject to the requirements of the Powers of Attorney and Agency Act 1984 (SA).
In January 2003, Miss Fahey instructed the accused to prepare a will. On 21 January 2003, Miss Fahey executed the will witnessed by the accused. The will appointed Joan Cahill and Joan Virtucio as executrixes. The will devised the Parkside property (or its proceeds if sold) to Ms Cahill and Ms Virtucio as joint trustees on trust for The Legion of Mary. The balance of the estate was bequeathed to Ms Cahill and Ms Virtucio as joint trustees on trust as to defined assets or percentages for six friends of Miss Fahey or their descendants.
By July 2003, Miss Fahey had moved out of her Parkside home into the Lourdes Valley Nursing Home. On 7 October 2005, Miss Fahey was diagnosed with dementia and was accordingly from then on unable to manage her affairs. In October 2005, the accused received a letter from Lourdes Valley Nursing Home saying that Miss Fahey was no longer competent to manage her affairs and enclosing a letter by a doctor certifying that this was so.
In November 2005, Mr Myszka on behalf of The Legion of Mary wrote to Kevin Kerin and the accused. He requested that, as Miss Fahey’s attorneys, they make an inter vivos gift of the Parkside property to The Legion of Mary in light of the terms of Miss Fahey’s will. In response, the accused sent several letters to Mr Myszka but ultimately in July 2006 Mr Myszka informed the accused that he was not further instructed in the matter.
In July/August 2006, Kevin Kerin and the accused became signatories to Miss Fahey’s bank account.
In January 2007, Kevin Kerin and the accused decided to sell the Parkside property. On 25 January 2007, they appointed Klemich Real Estate as agent. As at mid February 2007, the Parkside property was believed to have a net value of approximately $470,000.
On 24 February 2007, the accused and his father sold the Parkside property at auction for $602,000 with settlement on 10 April 2007. After settlement, part of the sale proceeds was used to pay an outstanding debt due to Lourdes Valley of $13,344.
Jean Batten
As at 1995, Jean Ellen Kathleen Batten was a client of the accused. Mrs Batten owned two houses at 34 and 37 Marian Place, Prospect. She lived at 34 Marian Place, Prospect. She held approximately $50,000 in two accounts maintained with the Archdiocesan Development Fund (later renamed the Catholic Development Fund)[7] (“Mrs Batten’s CDF accounts”).[8]
[7] For ease of reference, I refer to it as “the Catholic Development Fund” regardless of its name at the relevant time.
[8] The accounts were not bank accounts but were operated by depositors as if they were bank accounts.
On 7 July 1995, Mrs Batten executed a will prepared and witnessed by the accused. The will appointed Mrs Batten’s daughter, Mrs Wilkshire, and Mrs Batten’s friend, Mrs Wade, to be executrixes of her will. The will devised and bequeathed the whole of her property to Mrs Wilkshire and Mrs Wade as joint trustees upon separate testamentary trusts as follows:
1.her trustees were to hold the property situated at 34 Marian Place, Prospect (or its sale proceeds or any replacement property) upon trust for Mrs Wilkshire during her lifetime (including any net income) and after her death and upon his turning 25 for Mrs Batten’s grandson and Mrs Wilkshire’s son, Karl Batten;
2.her trustees were to hold the proceeds of Mrs Batten’s CDF accounts upon trust solely for Mrs Wilkshire but on the basis of paying a fixed amount of $5,000 per annum to her ; and
3.her trustees were to hold the residue (including the property at 37 Marian Place, Prospect) upon trust solely for Mrs Wilkshire.
The will was structured in this way because Mrs Batten instructed the accused that she did not trust her daughter to conserve assets.
On 19 July 1995, Mrs Batten died. Mrs Wade instructed the accused to apply for probate. On 11 August 1995, the accused wrote to the Catholic Development Fund and informed them of Mrs Batten’s death, that he acted on instructions from Mrs Wade, one of the executors who proposed to apply for probate, and that the other executor was Mrs Batten’s daughter, Mrs Wilkshire. He said that Mrs Batten’s wish was that the accused administer and oversee the administration of the estate. Thereafter, the Catholic Development Fund permitted the accused to make deposits and withdrawals from Mrs Batten’s CDF accounts without requiring the execution of any authority by Mrs Wade and Mrs Wilkshire. On 30 August 1995, probate was granted to Mrs Wade with leave reserved for Mrs Wilkshire to apply for probate.
In August/September 2005, the property at 37 Marian Place, Prospect was sold for $125,500 and the proceeds used to purchase a different property in the name of Mrs Wilkshire. However, Mrs Wilkshire moved into 34 Marian Place, Prospect shortly after Mrs Batten’s death and remained there until it was sold in January 2008.
On 3 January 1998, the property situated at 34 Marian Place, Prospect was sold for $140,000. On 30 January 1998, the net proceeds of $133,008.03 were deposited into one of Mrs Batten’s CDF accounts. It appears that around January 1998 an arrangement was made between Mrs Wade and Mrs Wilkshire whereby Mrs Wilkshire agreed not to draw her full entitlement of the net income from the sale proceeds of 34 Marian Place, Prospect together with $5,000 per annum from the monies originally held in Mrs Batten’s CDF accounts but instead to receive only 50 per cent of the net combined investment interest.
As at the beginning of February 2007, the total funds held in Mrs Batten’s CDF accounts were approximately $208,000.
In about January 2007, the Catholic Development Fund informed the accused that it had decided to close accounts which were arguably commercial in nature. On 1 February 2007, the accused wrote to the Catholic Development Fund requesting two cheques drawn on Mrs Batten’s CDF accounts for their closing balances, the cheques being made payable to “the Estate of Jean Kathleen Batten (deceased)”. On 5 February 2007, the Catholic Development Fund sent to the accused two cheques totalling $208,729.02 payable to “JE Batten (estate of)”.
The accused sought advice from Brian Carpenter, a specialist estate solicitor, concerning the investment of the funds. Mr Carpenter referred the accused to Mr Yeomans.
Investments with AXA
On 12 February 2007, the accused met with Mr Yeomans to seek advice concerning the investment of the estimated $470,000 expected from the sale proceeds of Miss Fahey’s Parkside property (yet to be sold) and approximately $208,000 which had been held in Mrs Batten’s CDF accounts. Mr Yeomans completed a client questionnaire in the presence of the accused based on his answers to questions in respect of each of Miss Fahey and the Batten estate.
In respect of Miss Fahey, as a result of the accused’s answers to questions concerning investment strategy, Mr Yeomans identified that a balanced fund in an AXA Generations Investment Portfolio was an appropriate investment. A balanced fund was ranked third in a range of five funds from conservative to aggressive. The accused specifically requested that 80 per cent of the funds be invested in a balanced fund in accordance with Mr Yeomans’ advice and 20 per cent of the funds be invested in the more conservative mortgage fund.[9]
[9] The investments in the two funds were not bank accounts but they were operated by investors as if they were bank accounts. For ease of reference, I treat both investments as if they were in a single investment.
The accused gave $4,000 of Miss Fahey’s funds to Mr Yeomans, to send to AXA to open a Generations Investment Portfolio in the name of Miss Fahey (“Miss Fahey’s AXA investment”). On 16 February 2007, an account was opened by AXA at the request of the accused in the name of “The Estate of Jean Ellen Kathleen Batten”.

In respect of the Batten estate, as a result of answers by the accused to questions concerning investment strategy, Mr Yeomans identified that a moderately defensive fund (ranking second in the range of funds from conservative to aggressive) in an AXA Generations Investment Portfolio was appropriate but 10 per cent should be invested in a defensive fund (the most conservative option and essentially cash).
The accused indorsed as “executor” in favour of AXA the two 5 February 2007 cheques drawn by the Catholic Development Fund in favour of the Batten estate and gave them to Mr Yeomans to send to AXA to open a Generations Investment Portfolio account. On 16 February 2007, an account was opened by AXA at the request of the accused in the name of “The Estate of Jean Ellen Kathleen Batten” (“the Batten estate’s AXA investment”).
After the meeting, Mr Yeomans prepared two letters addressed to the accused and two Financial Plans each dated 12 February 2007. He sent the letters and plans to the accused some time after the meeting.
On 2 March 2007, the accused made various amendments to each client questionnaire which Mr Yeomans had completed in his presence. Amongst other things, he increased the amount to be invested from the net sale proceeds of the Parkside property to $560,000 in light of the higher than expected sale price achieved at auction on 24 February 2007. He returned the amended client questionnaires to Mr Yeomans.
On 10 April 2007, upon settlement of the sale of the Parkside property, the accused sent a cheque for $500,000 to Mr Yeomans to be credited to Miss Fahey’s AXA investment. The accused banked the balance of the net proceeds of $82,679.65 into Miss Fahey’s bank account on 10 April 2007.
Osvest
In September 2004, the accused and Mr Williams incorporated Osvest. The accused and Mr Williams became its directors, with the accused as managing director and Mr Williams as chairman of directors. Osvest’s shares were held by Armalite (90 per cent) and Mr Williams (10 per cent). In turn, the accused was the sole director and shareholder of Armalite. The shares held in Osvest by Armalite were held on trust for Reliability Plus Ltd. This was an entity owned and controlled by a client of the accused, Mr Tokataake, of Vanuatu.
Mr Williams’ background was in the media. In the 1990s, he was employed by the ABC as manager of news and current affairs. The accused gave evidence that Mr Williams had also been a part time trader in derivatives. At the beginning of 2007, Mr Williams needed to obtain a regular income and he returned to the media taking a job at SBS. Mr Williams was approximately 60 years old in 2007.
Osvest was incorporated with a view to providing financial product advice under an Australian Financial Services Licence. Originally, the accused and Mr Williams intended to arrange investments in an offshore managed investment fund managed by ClubInvest.
In October 2004, the accused and Mr Williams opened a bank account with Westpac Banking Corporation in the name of Osvest (“Osvest’s bank account”).
In June 2005, the accused resigned as a director of Osvest and in October 2005 he was appointed as its Chief Operations Officer.
In September 2005, the Australian Securities and Investments Commission issued an Australian Financial Services Licence to Osvest. Osvest borrowed $20,000 from Armalite to fund the security bond required to be lodged before grant of the licence.
In October/November 2005, ClubInvest was placed into administration and subsequently into liquidation. Osvest could not proceed with its business plan of arranging investments in ClubInvest’s managed investment fund.
In December 2006, Robin Golding was appointed Chief Investment Officer of Osvest. The accused gave evidence that he had a background in the financial industry working in Australia and New Zealand, ultimately managing the trade division of large companies and financial institutions. Mr Golding was approximately 65 years old as at 2007 and had retired, although he operated a part time consulting business.
At some point after ClubInvest was placed into administration and Osvest recognised that it could not proceed with its business plan, discussions took place between the accused, Mr Williams and Mr Golding concerning Osvest engaging in other forms of funds management utilising funds of other persons or entities. The accused gave evidence that there was an expectation and arrangement between Mr Williams, Mr Golding and himself that, upon Osvest embarking upon a substantive funds management business, the equity in Osvest would be divided 40 per cent (Armalite), 40 per cent (Mr Williams) and 20 per cent (Mr Golding). At the same time, Osvest would commence to pay commercial remuneration to the accused for his work as Chief Operations Officer. While the accused did not ultimately receive any remuneration from Osvest for his work as Chief Operations Officer or otherwise, he had the prospect of receiving a substantial benefit if Osvest achieved a substantial funds management business.
In February 2007, the accused, Mr Williams and Mr Golding on behalf of Osvest met with Rupert Clifton-Bligh of Odyssey Funds Management Ltd (“Odyssey”). Mr Clifton-Bligh informed the Osvest officers that Odyssey had in the order of $10 million in funds under management. There was a discussion about Osvest utilising Odyssey’s Financial Services Licence and Osvest placing funds with Odyssey for management.
On 27 April 2007, the accused and Mr Williams on behalf of Osvest completed and signed an application to open a share trading account with Citigroup. They authorised Mr Clifton-Bligh to act as Osvest’s authorised representative to buy and sell shares.
On 2 May 2007, Citigroup opened a share trading account in the name of Osvest (“Osvest’s ordinary share trading account”) and granted to Osvest a margin lending facility with a credit limit of $250,000 associated with a second share trading account (“Osvest’s margin lending share trading account”). Osvest granted a charge in favour of Citigroup to secure its indebtedness under the margin lending facility. For ease of expression, I refer to both share trading accounts with Citigroup collectively as “Osvest’s share trading account”.
On 3 May 2007, Osvest opened a cash management account with Macquarie Investment Management Ltd (“Osvest’s Macquarie account”) for the purpose of paying for and receiving the proceeds of shares bought and sold via Citigroup.[10] The accused in the application to open the account described himself as Chief Operations Officer with authority to act on behalf of Osvest.
[10] This account was not a bank account but was operated by depositors as if it were a bank account.
In May 2007, the accused was informed by Mr Williams that there was a derivatives trader in Melbourne who might potentially be engaged by Osvest to undertake derivatives trading on its behalf and that his name was Leonard Abrahams. On 22 May 2007, Mr Abrahams sent an email to Mr Williams, which Mr Williams forwarded to the accused, concerning his background. It showed that Mr Abrahams had been employed in the corporate advisory division of KPMG Peat Marwick in the early 1990s. He had previously been employed in the corporate advisory division of another “Big 6” accounting practice.
The accused gave evidence that Mr Abrahams was in his early to mid 40s in 2007. Mr Abrahams had left KPMG Peat Marwick in the early 1990s to become a private trader. In late May 2007, the accused travelled to Melbourne to meet Mr Abrahams. Mr Abrahams was conducting his derivatives trading from a room in a rented house at South Melbourne. Mr Williams met Mr Abrahams a week or two later.
In May 2007, Mr Abrahams asked Mr Williams for a loan of $100,000 to fund derivatives trading by Vinciamo Pty Ltd (“Vinciamo”), a company with which Mr Abrahams was associated. The accused mentioned the request to an acquaintance, Mr Bennett, who agreed to provide $100,000 to lend to Vinciamo. A loan agreement was executed by Osvest and Vinciamo. The agreement was dated 31 May 2007 and stamped by Revenue SA on 28 June 2007. It provided for a loan of $100,000 by Osvest to Vinciamo for seven months repayable on 31 December 2007. Interest at the absolute rate of 30 per cent of the principal was payable by seven monthly instalments. The loan was guaranteed by Mr Abrahams, his wife and a third guarantor.
At the end of May 2007, Mr Bennett deposited amounts totalling $100,000 into Osvest’s bank account and on 1 June 2007 that amount was paid by Osvest to Vinciamo pursuant to the loan agreement. Osvest held the loan to Vinciamo on trust for Mr Bennett.
Investment of $100,000 in share trading
On 6 June 2007, the accused wrote to Mr Yeomans enclosing a withdrawal authority executed by him authorising AXA to withdraw $100,000 and pay it into Miss Fahey’s bank account. This occurred on 20 June 2007.
On 28 June 2007, the accused transferred $100,000 from Miss Fahey’s bank account into Osvest’s Macquarie account to be traded in Australian equities by Mr Clifton-Bligh.
It is an agreed fact that as at 30 June 2007 Osvest’s total equity stood at $41,587 and its total liabilities stood at $55,135.
On 2 July 2007, the accused sent by email to Mr Williams an investment management agreement and account opening form between Osvest and Odyssey to be signed later that day by Mr Williams and Mr Clifton-Bligh. The agreement was executed by them, dated 5 July 2007 and stamped by Revenue SA on 9 July 2007.
Between 9 July and 29 August 2007, Mr Clifton-Bligh on behalf of Osvest purchased 10 parcels of Australian shares and sold two parcels, leaving a small balance in Osvest’s Macquarie account of $114.78 by 3 September 2009. The share trading assests were held by Osvest on trust for Miss Fahey.
Investment of $200,000 in derivatives trading
On 21 September 2007, the accused wrote to Mr Yeomans enclosing a withdrawal authority executed by himself authorising AXA to withdraw $200,000 from Miss Fahey’s AXA investment to pay into Osvest’s bank account. This occurred on 2 October 2007.
On 28 September 2007, the accused sent to Mr Williams an application to BrokerOne to open a derivatives trading account in the name of Osvest (“Osvest’s derivatives trading account”). The application form was contained in a Product Disclosure Statement issued by BrokerOne. The application was signed by the accused and in due course by Mr Williams. The accused and Mr Williams were shown as authorised signatories for the account. The application was sent by Mr Williams to BrokerOne on 28 September 2007 together with a letter drafted by the accused and signed by Mr Williams authorising Mr Abrahams to trade in derivatives on behalf of Osvest.
In early October 2007, a loan agreement was executed by the accused on behalf of Miss Fahey and by Mr Williams on behalf of Osvest for a loan of $200,000 by Miss Fahey to Osvest repayable by or on 30 June 2008 together with simple interest calculated at 15 per cent per annum. The agreement was dated 2 October 2007 and stamped by Revenue SA on 10 October 2007.
On 5 October 2007, $50,000 was deposited into Osvest’s bank account. Those monies were sourced from the Meaney estate, of which Kevin Kerin and the accused were executors.[11]
[11] The $50,000 from the Meaney estate does not form part of any of the counts against the accused laid in the Information. I have referred to it to provide context.
On 23 October 2007, a Trading Execution and Management Agreement between Osvest and Mr Abrahams was executed by Mr Williams and Mr Abrahams.[12] The accused sent to BrokerOne by email a letter authorising Mr Abrahams to trade on Osvest’s derivatives trading account. He directed that daily and monthly statements be emailed to himself and Mr Abrahams.
[12] The copy tendered in evidence is unsigned. A chronology prepared by the accused in June 2008 records that it was signed on 23 October 2007.
On 23 October 2007, the accused arranged the transfer of $250,000 from Osvest’s bank account to Osvest’s derivatives trading account. Those monies represented $200,000 sourced from Miss Fahey’s AXA investment on 2 October and $50,000 sourced from the Meaney estate on 5 October 2007.
The transfer of Miss Fahey’s funds of $200,000 out of Miss Fahey’s AXA investment into Osvest’s bank account to use for derivatives trading is the subject of count 1.
Between 24 October and 21 November 2007, Mr Abrahams conducted derivatives trading on behalf of Osvest. Set out in the table below are:
1.the number of buy and sell contracts into which he entered and which were closed out each day;
2.the profit or loss made on closed out contracts each day;
3.the number of buy or sell contracts still open at the end of each day; and
4.the total profit or loss made each day on the assumption that all open contracts would be closed out the next day at market prices prevailing at the close of the previous day.

Date Contracts Closed Out Profit/Loss on closed out contracts Contracts Open Profit/Loss taking into account assumed close outs

24.10 15 $    9,380 0 $    9,380

25.10 198 $ 47,694 33 buy $ 39,519

26.10 375 $ 17,187 34 sell $ 11,187

29.10 644 $ 89,267 25 sell $ 24,667

30.10 398 -$ 98,759 0 -$ 98,759

31.10 453 -$ 18,655 38 sell -$ 59,655

1.11 540 $ 36,427 9 sell $ 17,752

2.11 445 -$ 46,075 0 $ 46,075

5.11 280 -$159.488 15 buy -$158,838

6.11 418 -$ 29,057 0 -$ 29,057

7.11 422 $ 33,452 30 buy $ 38,458

8.11 787 $    7,104 10 buy -$   4,208

9.11 656 $ 65,626 0 $ 65,626

12.11

40

$ 12,103[13]

125 sell

-$ 102,193[14]

13.11 97 -$ 38,248 117 sell

14.11 707 -$ 11,458 0 -$ 11,458

15.11 474 $ 76,397 0 $ 76,397

16.11 328 -$111,310
   50 sell

     6 buy
-$129,066

19.11 382 $    7,677 0 $   7,677

20.11 567 -$164,569 0 -$164,569

21.11 341 -$ 11,975 0 -$ 11,975
[13] The daily activity statement for 12 November was not tendered. I infer that the profit was $12,103 from the opening account balance shown on the daily activity statement for 13 November. This will be slightly inaccurate due to currency fluctuations overnight on the night of 12 November.
[14] The daily activity statement for 12 November was not tendered. The combined loss over both days taking into account assumed close outs as at the end of 13 November was -$90,090.

On 29 and 30 October 2007, Armalite deposited into Osvest’s bank account a total of $50,000 which was transferred by Osvest on 30 October 2007 into Osvest’s BrokerOne account.
On 14 December 2007, BrokerOne closed its account with Osvest and MF Global opened a new account (bearing the same account number) in the name of Osvest. Thereafter, derivatives trading conducted by Osvest was conducted through MF Global instead of BrokerOne.[15]
[15] As observed above, for ease of expression, I refer to both accounts as “Osvest’s derivatives trading account” as if they were the same account.
Transfer of $100,000 of Batten estate funds to Osvest
On 21 September 2007, the accused wrote to Mr Yeomans enclosing a withdrawal authority executed by the accused authorising AXA to withdraw $100,000 from the Batten estate’s AXA investment and pay it into Osvest’s bank account. This occurred on 4 October 2007.
In early October 2007, a loan agreement was executed by the accused on behalf of the Batten estate and by Mr Williams on behalf of Osvest for the loan of $100,000 by the Batten estate to Osvest payable on 30 June 2009 together with simple interest calculated at 15 per cent per annum. The agreement was dated 4 October 2007 and stamped by Revenue SA on 10 October 2007.
It is an agreed fact that Mrs Wilkshire did not at any time have direct input into the administration of the Batten estate and gave no directions to Mrs Wade, the other executor, or the accused in relation to the use of any funds. It is further agreed that from time to time Mrs Wilkshire requested money from the estate to be paid to her and Mrs Wade conveyed to the accused any such requests.
October and November 2007
As observed above, it is in dispute whether there was a director’s meeting of Osvest on 8 October 2007 and whether the Exchange occurred. I address these contested issues below.
On 9 October 2007, the accused and Mr Williams arranged for $100,000 to be withdrawn from Osvest’s bank account and transferred into Sigma’s bank account. The payment was made pursuant to a convertible note issued by Sigma dated 8 October 2007 in respect of a loan for six months and one day at an interest rate of 16 per cent per annum if repaid on time and with an option to convert the loan into shares in Sigma. The term of the loan was later extended to 12 months.
The accused gave evidence that Graham Morrow was the principal person involved in Sigma. Mr Morrow was approximately 65 years old as at 2007. Mr Morrow had been involved in the establishment and operation of large superannuation master trusts in the 1980s and had retired to the Gold Coast in approximately 1990. He informed the accused that he was bored in retirement and wanted to resume working in the field of superannuation master trusts.
Between 27 September and 29 November 2007, Mr Clifton-Bligh purchased four further parcels of Australian shares and sold four parcels of Australian shares. All transactions conducted up to 9 October were conducted on Osvest’s ordinary share trading account. All transactions on and after 11 October 2007 were conducted on Osvest’s margin lending share trading account.
The death of Miss Fahey
On 26 November 2007, Miss Fahey died at the age of 100. The accused was informed of her death within a day or two. It is an agreed fact that no person with an interest in the Fahey estate following her death (specifically neither the executors Ms Cahill and Ms Virtucio as trustees nor the beneficiaries of the estate) gave consent to the accused to deal with the property of the estate in any way.
On 11 December 2007, Mr Myszka, on behalf of Ms Cahill and Ms Virtucio as executors, wrote to Kevin Kerin and the accused requesting a statement of Miss Fahey’s assets and liabilities as at the date of her death and information as to the location of the assets.
On 11 February 2008, the accused wrote to Mr Myszka saying that Miss Fahey’s funds were invested through three channels, namely Miss Fahey’s bank account, Miss Fahey’s AXA investment and Osvest. In relation to the last investment, he said that, for particulars of the investment, Mr Myszka could write to Mr Williams, the chairman and managing director of Osvest. He observed that his father as attorney under the Power of Attorney had an inability to authorise the payment of accounts since 27 November 2007 (implicitly as a result of Miss Fahey’s death on 26 November 2007).
Liquidation of shares and transfer of share trading proceeds
On 10 January 2008, the accused booked flights to Melbourne for Mr Williams and himself on 19 January. On 19 January 2008, the accused and Mr Williams flew to Melbourne to meet with Mr Abrahams. Mr Abrahams informed them that in the 1990’s he had lost millions of dollars of clients’ funds through derivatives trading and had become bankrupt. It was agreed that Osvest would provide further funds to Mr Abrahams to engage in further derivatives trading with a view to recouping the losses incurred in October/November 2007. It was agreed that the accused would attend in Melbourne and be present while Mr Abrahams engaged in the trading. The accused and Mr Williams intended to obtain the further funds by liquidating the share portfolio being traded by Mr Clifton-Bligh and transferring the remaining share trading assets into Osvest’s bank account.

Between 21 January and 5 February 2008, Mr Clifton-Bligh sold the six parcels of shares which had been purchased by Osvest and were held in the portfolio as at 19 January 2008. On 8 February 2008, the remaining funds held in Osvest’s share trading account were transferred to its Macquarie account. This resulted in a balance in Osvest’s Macquarie account of $85,154.78.
On 14 February 2008, $85,000 was transferred from Osvest’s Macquarie account to its bank account. On 15 February 2008, $60,000 was transferred from Osvest’s bank account to Osvest’s derivatives trading account for derivatives trading.
Between 19 February 2008 and 3 March 2008, Mr Abrahams conducted derivatives trading on behalf of Osvest. The accused attended in Melbourne to observe the trading between the nights of 19 and 21 February and again between the nights of 25 and 28 February 2008. Set out in the table below are:
1.the number of buy and sell contracts into which he entered and which were closed out each day;
2.the profit or loss made on closed out contracts each day;
3.the number of buy or sell contracts still open at the end of each day; and
4.the total profit or loss made each day on the assumption that all open contracts would be closed out the next day at market prices prevailing at the close of the previous day.

Date Contracts Closed Out Profit/Loss on closed out contracts Contracts Open Profit/Loss on assumed close outs

19.02 53 $ 14,061 0 $14,061

20.02 255 $ 10,179 0 $10,179

21.02 391 $ 17,023 0 $17,023

22.02 0 -$ 42[16] 0 -$ 42

25.02

270

$ 35,565[17]

0

$ 35,565

26.02 320 0

27.02 372 -$ 26,184 0 -$ 26,184

28.02 314 $ 34,558[18] 0 $ 34,558

29.02 110 -$ 28,338 0 -$ 28,338

03.03 55 -$ 56,649 0 -$ 56,649
[16] There were no transactions on this day but the small loss is the result of a commission adjustment.
[17] The daily activity statements for 25 and 26 February were not tendered. I infer that the combined profit for the two days was $35,565. This will be slightly inaccurate due to overnight currency fluctuations.
[18] The daily activity statement for 28 February was not tendered. I infer that the profit was $34,558. This will be slightly inaccurate due to overnight currency fluctuations.

On Friday 22 February 2008, at the end of the first week’s trading which had produced a net profit of $41,221, $20,000 was transferred from Osvest’s derivatives trading account back into its bank account for Osvest’s general purposes. The balance of Osvest’s bank account after the transfer stood at $45,558.19 of which $45,000 had been derived directly or indirectly from Osvest’s Macquarie account. Those funds were used for the general purposes of Osvest. A total of $22,000 was paid to Cogent Capital Pty Ltd, a company associated with Mr Abrahams, $16,000 was transferred to Osvest’s account with Interactive Brokers in Hong Kong, $3,000 was paid to Mr Bennett and a total of $2,280 was paid for ASIC and audit expenses.
On Friday 29 February 2008, the accused flew back to Adelaide from Melbourne. Mr Abrahams engaged in derivatives trading during the day (on the Sydney Futures Exchange) and during the night. He engaged in further derivatives trading either over the weekend or on Monday 3 March. He incurred total losses over that period of approximately $85,000 as appears from the table above. The accused gave evidence that, when he learned of the losses, he decided not to continue with derivatives trading and did not return to Melbourne for the purposes of any further derivatives trading.
During the trading between 19 and 28 February 2008, Mr Abrahams traded on the Sydney Futures Exchange as well as on overseas exchanges.
Subsequent communications
On 15 February and 7 March 2008, Mr Myszka wrote to Mr Williams requesting details of the investments held by Osvest on behalf of the Fahey estate. He received no reply.
Following the derivatives trading in February 2008, the accused suffered depression.
On 19 March 2008, Mr Myszka wrote to Kevin Kerin and the accused. He requested that they cause the Osvest monies to materialise by the end of March with full accounts concerning them. He said that two letters to Mr Williams had gone unanswered and he had attempted to contact Mr Williams without success. He enquired about the connection of the accused with Osvest and said that, as Miss Fahey’s attorneys, each of Kevin Kerin and the accused were liable to account to the Fahey estate.
On 11 April 2008, Mr Myszka wrote to Kevin Kerin enclosing copies of previous correspondence with the accused and requesting a response to his letter dated 19 March 2008. On 14 April 2008, Kevin Kerin replied, saying that he had not seen the correspondence previously and was not in a position to engage actively in commercial matters. He referred Mr Myszka to the accused.
On 22 April 2008, the accused attended at Mr Myszka’s office without prior arrangement. He informed Mr Myszka that he was suffering from depression and showed Mr Myszka a letter from his doctor to that effect.
On 5 May 2008, Mr Williams sent by email to Mr Myszka a copy of a letter bearing the date 25 February 2008. In the letter, Mr Williams said that a principal of $300,000 was invested by Miss Fahey with Osvest with a maturity date of 30 June 2008. The letter was drafted by the accused.
On 21 May 2008, probate was granted in respect of Miss Fahey’s will.
On 20 May 2008, Mr Myszka sent an email to Mr Williams seeking details of the investment with Osvest. On 28 May 2008, Mr Williams sent an email to the accused in the following terms:
We need to answer this man’s questions. How much money have we allocated from this estate to the various investments and what paperwork have we to say where it is. Let’s talk about this as soon as we can and draft an email for an answer tomorrow.
On 6 June 2008, the accused wrote a letter to Mr Myszka saying that he was still suffering the effects of depression.
On 9 June 2008, the accused sent an email to Mr Williams attaching a chronology. The chronology set out details of the transactions undertaken by Osvest with Miss Fahey, the Batten estate, the Meaney estate and Armalite. It set out details of the transactions with BrokerOne and Sigma. It referred to a director’s meeting of Osvest on the evening of 8 October 2007 and set out in full the resolutions which were said to have been made by Mr Williams at that meeting, including the Exchange.
On 12 June 2008, Mr Williams sent an email to Mr Myszka. He said that $200,000 was invested pursuant to a loan agreement with Osvest at 15 per cent per annum payable at maturity on 30 June 2009 and $100,000 was invested pursuant to a convertible note issued by Sigma at 16 per cent per annum payable on maturity on 8 October 2008. The text of the email was taken from a letter in identical terms drafted by the accused.
Between July and November 2008, Mr Myszka sent further letters to Kevin Kerin and the accused and Mr Williams, to which he did not receive a reply. In December 2008, he reported the matter to the police.
Subsequent events
On 20 April 2010, the police seized from Mr Williams’ home address minutes of a meeting of the director of Osvest dated 8 October 2007 and signed and dated 12 October together with a Post-It note (exhibit PP20) and an unsigned and undated declaration of trust by Osvest in favour of Miss Fahey in respect of the Sigma loan and convertible note together with a Post-It note (exhibit PP21).
On 21 April 2010, the accused was interviewed by Detective Brevet Sergeants Della Sala and Seneca. The police seized various items from the accused including his computers.
On 3 July 2010, Mrs Wade died. On 21 October 2011, Mrs Wilkshire died.
In October 2012, the previous trial proceeded before a jury. At the conclusion of the prosecution case, the accused made a no case to answer submission in relation to count 3. The essence of the submission was that there was no evidence concerning the merits of the investment of the $100,000 by way of loan to Sigma and hence no basis on which it could be found that the accused acted dishonestly. The trial Judge upheld that submission and directed the jury to acquit the accused of count 3. The jury subsequently found the accused guilty of counts 1 and 2. Those verdicts were later set aside by the Full Court on appeal.
Derivatives trading
As observed above, Ms Neil gave evidence concerning the nature of derivatives and derivatives trading. In addition, BrokerOne’s product disclosure statement which was provided to Osvest in or before September 2007 was tendered and it contains an explanation of derivatives and derivatives trading.
Some derivatives are traded on formal exchanges just as some shares are traded on formal exchanges. The only types of derivatives which were contemplated to be traded by Osvest and the accused and which were actually traded were exchange-traded derivatives. Some exchange-traded derivatives are known as futures. For ease of reference, I treat “futures” and “derivatives” as synonyms even though there are other types of derivatives which are not futures.
The subject matter of a derivative is an exchange-traded futures contract which is traded on a derivatives exchange. The subject matter of the contract may be a tangible thing (a physical commodity or a security), in which case the contact is to deliver (sell) or take delivery of (buy) a specified amount of a standardised commodity or security. Otherwise, the contact is to make a cash adjustment based on an increase or decrease in the price of a commodity or security, financial instrument or stock index. In each case, the “buyer” is predicting a rise and the “seller” is predicting a fall in the defined subject matter at an agreed time in the future.
Each derivatives contract is made between a buyer and seller. The nominal buyer and seller are each futures brokers registered on derivatives exchanges. The brokers effectively act as undisclosed principals for their clients. A broker entering into a contract is liable to the counterparty as a principal. Each broker has a duty to account to or right of recourse against its client in respect of the profit or loss made on the transaction. Brokers derive revenue by charging transaction fees to their clients.
A derivative (or future) is effectively the bundle of rights and obligations arising under the derivatives (or futures) contract. It is a chose in action and hence a form of property.
Derivatives contracts are entered into via a derivatives exchange. Generally, this is effected electronically by the exchange’s computer systems, although some overseas exchanges still use the historical open outcry method.
Where a client instructs his or her broker to enter into a contract to deliver a commodity or security, a client is said to enter into a “sell” contract and where a client instructs a broker to enter into a contract to take delivery of a commodity or security, the client is said to enter into a “buy” contract (“deliverable contracts”). The same buy and sell terminology is applied to derivatives contracts (“cash settled contracts”) which only involve a cash adjustment based on a change in price according to whether the client has to pay cash if the price of the underlying subject matter increases (a “sell” contract) or receives cash if the price increases (a “buy” contract). In practise, the commodity or security the subject of a deliverable contract is not usually physically delivered but instead there is a cash settlement in the same manner as under a cash settled contract.
The subject matter of a derivatives contract which is traded on a given exchange is standardised so as to make the derivative fungible. For example, where the subject matter of a derivatives contract traded on the Sydney Futures Exchange is a stock index by reference to the Australian Stock Exchange, the subject matter is always the SPI-200 Index as at a specified date towards the end of one of the months of March, June, September or December. Contracts are entered into in quanta called “lots”. A single lot is defined for each different type of derivative. It is defined in terms of tick value. For example, the tick value of a single point on the SPI-200 Index (for example if the Index moved from 5,000 to 5,001) is $25.
If a client “buys” a single lot of the SPI-200 Index traded on the Sydney Futures Exchange for, say, December 2007, the client can effectively close out that contract by acquiring a “sell” contract for one lot of the SPI-200 Index for December 2007. In that event, the two contracts are equal and opposite and can be effectively offset by the client. The mechanism for the offsetting is that the relevant clearing house (in the present example the clearing house associated with the Sydney Futures Exchange) takes a novation of the client’s rights and obligations under each contract so as to interpose itself into each contract and remove the client (or technically the client’s broker) as a party to the contract.
Closing out can only be achieved in respect of two contracts on the same exchange in respect of identical lots. Upon closing out, the client will either make a profit or loss depending on whether the price of the underlying subject matter has risen or fallen and whether the contract provides for payment or receipt of cash in the event of a rise or fall. Where the contract is a “buy” contract, and the market price has increased since it was acquired, the client will make a profit and vice versa.
Participants in the derivatives market are classified as either hedgers or speculators. Hedgers are persons or entities who buy or sell or intend to buy or sell an underlying commodity or security the subject of a deliverable derivatives contract and are participating with a view to hedging future risk. Speculators are persons or entities who are merely speculating on whether the market price of the underlying subject matter in question will increase or decrease over time (which might range from milliseconds to months or years). Osvest and the accused did not intend to engage (or engage) in hedging but rather in speculation.
The relevant derivatives exchanges upon which Osvest contemplated trading were as follows:
·the Sydney Futures Exchange (SFE) in Australia;
·the London International Futures & Options Exchange (LIFFE) in the United Kingdom;
·the Eurex Echange (Eurex) in Germany;
·the Chicago Mercantile Exchange (CME) in the United States;
·the Chicago Board of Trade (CBOT) in the United States; and
·the Singapore Futures Exchange (SIMEX) in Singapore.
The derivatives which Osvest contemplated trading were five share price indices and one security as follows:
·SPI-200 Index (generally traded on the SFE);
·FTSE-100 Index (generally traded on the LIFFE);
·DAX Index (generally traded on the Eurex);
·Nikkei 225 Index (generally traded by Osvest on the Simex);
·E-Mini S&P 500 Index (generally traded on the CME); and
·US T-Bond (generally traded on the CBOT).
Futures brokers require clients to deposit an initial margin before buying or purchasing any derivatives on behalf of the client. The initial margin is intended to give some security to the broker against the risk that a loss will be incurred on the derivative (ie that the price will move in the opposite direction to that backed by the client). The amount of the initial margin varies according to the particular derivative and varies from time to time. In late 2007, the initial margin for one lot of SPI-200 Index traded on the SFE through BrokerOne was $6,000. This would provide security to the broker for an adverse movement in the share price index of 240 basis points (eg a movement from 5,000 to 5,240 if a client was acquiring a sell lot or from 5,000 to 4,760 if the client was acquiring a buy lot).
The risk or exposure to the client is not confined to the amount of the initial margin. For example, if the share price index moved from 5,000 to 0 and the client had acquired a sell lot, the client would suffer a loss of $125,000. Conversely, if the share price index moved from 5,000 to 10,000 and the client had acquired a buy lot, the client would suffer a loss of $125,000. For this reason, the product disclosure statement issued by BrokerOne described derivatives as highly leveraged.
Autrefois acquit and abuse of process
My reasons for rejecting the accused’s plea of autrefois acquit in respect of count 3 and dismissing his application for a permanent stay of count 3 as an abuse of process are set out below.
Autrefois acquit
In Connelly v DPP,[19] the House of Lords addressed the circumstances in which a plea of autrefois acquit will be upheld. Lord Morris of Borth-y-Gest summarised the principles in the following terms:
[19] [1964] AC 1254.
In my view, both principle and authority establish:
(1)that a man cannot be tried for a crime in respect of which he has previously been acquitted or convicted;
(2)that a man cannot be tried for a crime in respect of which he could on some previous indictment have been convicted;
(3)that the same rule applies if the crime in respect of which he is being charged is in effect the same, or is substantially the same, as either the principal or a different crime in respect of which he has been acquitted or could have been convicted or has been convicted;
(4)that one test as to whether the rule applies is whether the evidence which is necessary to support the second indictment, or whether the facts which constitute the second offence, would have been sufficient to procure a legal conviction upon the first indictment either as to the offence charged or as to an offence of which, on the indictment, the accused could have been found guilty;
(5)…
(6)that on a plea of autrefois acquit or autrefois convict a man is not restricted to a comparison between the later indictment and some previous indictment or to the records of the court, but that he may prove by evidence all such questions as to the identity of persons, dates and facts as are necessary to enable him to show that he is being charged with an offence which is either the same, or is substantially the same, as one in respect of which he has been acquitted or convicted or as one in respect of which he could have been convicted;
(7)that what has to be considered is whether the crime or offence charged in the later indictment is the same or is in effect or is substantially the same as the crime charged (or in respect of which there could have been a conviction) in a former indictment and that it is immaterial that the facts under examination or the witnesses being called in the later proceedings are the same as those in some earlier proceedings;
(8)…
(9)that, apart from cases where indictments are preferred and where pleas in bar may therefore be entered, the fundamental principle applies that a man is not to be prosecuted twice for the same crime.[20]
[20] Ibid at 1305-1306.
Lord Morris of Borth-y-Gest referred to the new offence charged being the same, or substantially the same, as the earlier offence of which the defendant was convicted or acquitted or could have been convicted. Lords Hodson, Devlin and Pearce took a narrower view in this particular respect. Lord Hodson formulated the test as being:
Even if the same evidence is given to prove separate offences it is well settled that whether or not the facts are the same in both trials is not the true test; the test is whether the acquittal on the first charge necessarily involved an acquittal on the second …[21]
and Lord Devlin (Lord Pearce relevantly agreeing) formulated the test as being:
For the doctrine of autrefois to apply it is necessary that the accused should have been put in peril of conviction for the same offence as that with which he is then charged. The word “offence” embraces both the facts which constitute the crime and the legal characteristics which make it an offence. For the doctrine to apply it must be the same offence both in fact and in law.[22]
Lord Reid agreed that the doctrine did not apply on the facts of the case but did not formulate a general principle.
[21] Ibid at 1333.
[22] Ibid at 1339-1340.

Assuming that, immediately before the meeting on 8 October 2007, the relationship between Osvest and the Batten estate was purely that of debtor and creditor, the effect of the resolution by Mr Williams on behalf of Osvest was to change the relationship such that thereafter Osvest held the share trading assets on trust for the Batten estate. This is because the resolution provides explicitly for the transfer of the beneficial proprietorship of the share trading assets from Miss Fahey to the Batten estate.
On the premise at [335] above, I am satisfied beyond reasonable doubt that the share trading assets were beneficially owned by the Batten estate as at January/February 2008. For the reasons given at [324] above, I am satisfied beyond reasonable doubt that the accused dealt with property beneficially owned by the Batten estate by the January/February 2008 dealings.
Without owners’ consent
Actual consent
The prosecution tendered a letter marked “File Copy” from the accused addressed to Mrs Wade dated 28 September 2007. The letter refers to several telephone conversations between the accused and Mrs Wade over the week between 21 and 28 September 2007. The accused did not give evidence of the contents of those telephone conversations other than indirectly by reference to the letter itself.
I am not satisfied that any conversations took place between Mrs Wade and the accused in September 2007 concerning the investment of Batten estate funds in derivatives trading or that the accused sent that letter to Mrs Wade in September 2007. Mrs Wade died in July 2010 and no evidence was adduced by either the prosecution or the accused in relation to communications between the accused and Mrs Wade other than the evidence given by the accused himself. However, the prosecution did not challenge the accused in cross-examination as to the authenticity or accuracy of the letter or the conversations which it purported to confirm and the prosecution has the onus of proof beyond reasonable doubt. I proceed on the assumption that the letter was sent to Mrs Wade in September 2007 and there were conversations between Mrs Wade and the accused in the terms said to be confirmed by the letter.
The letter relevantly stated:
RE: AXA - “Generations Investment Portfolio” account #: 0130054 L9 01
Further to my telephone calls to you on Friday the 21^st of September, 2007 and earlier this week, enclosed herewith is a copy of the letter dated Friday the 21^st of September, 2007 from Strategic And Business Advisory Services to Mr. Mark Yeomans at Trilogy Financial Services in relation to a partial redemption of funds currently invested with the AXA – Generations Investment Portfolio account as per your general authorisation to me in this regard.
I confirm that the partial redemption will, through the vehicle of Osvest Pty. Ltd. (of which I’m the Chief Operations Officer), be invested through a derivatives trader based in South Melbourne, Victoria until, initially, about the middle of January, 2008 at which time Mr. Paul Williams, the Chairman & Managing Director of Osvest Pty. Ltd. and Mr. Robin Golding, the Chief Investment Officer of Osvest Pty. Ltd., will review the investment so that if, for example, it performs poorly, the funds will be re‑invested with the AXA – Generations Investment Portfolio account as above.
…
On the face of the letter, Mrs Wade either acquiesced in or authorised the accused investing $100,000 of funds which had been invested with AXA in derivatives trading to be undertaken by a derivatives trader based in South Melbourne, being Mr Abrahams, until about the middle of January 2008. At about the middle of January 2008, the investment was to be reviewed.
I am satisfied beyond reasonable doubt that the authority given by Mrs Wade to the accused in September 2007 did not authorise the transfer and utilisation of the sum of $85,000 in February 2008.
Assuming that Mrs Wade had the capacity to act alone in respect of assets of the Batten estate, the authority which she gave was confined to trading in derivatives over the period from October 2007 to January 2008. She gave no authority to trade in derivatives after January 2008. The authority was given on the basis that the funds would be utilised as the initial derivatives trading in circumstances in which there was no prior trading record.
By contrast, the circumstances in February 2008 were very different. Almost the whole of $300,000 which had been invested by Osvest in derivatives trading through Mr Abrahams had been lost. Mr Abrahams had defaulted in repayment of the loan of $100,000 borrowed from Mr Bennett in May 2007 and had admitted to having lost millions of dollars in the 1990s through derivatives trading. The ostensible purpose of the derivatives trading in February 2008 was not to make a return on the new funds invested as such, but rather to recoup the losses suffered by others in October/November 2007. The accused did not suggest that he discussed the proposed derivatives trading with Mrs Wade in February 2008 or obtained any authority from her to engage in such trading at that time.
In addition, out of the total sum of $85,000, a total of $45,000 was paid into Osvest’s bank account for the general purposes of Osvest as opposed to being used in derivatives trading. Any authority given by Mrs Wade in September 2007 which might have survived until February 2008 was incapable of authorising the transfer of funds for the general purposes of Osvest as opposed to being utilised in derivatives trading.
The accused contends that he had Mrs Wade’s consent because she had made a general request to him to do so something with a portion of the money in the hope of making a better return and that this conferred upon him a general authority to invest part of the funds of the estate in any manner which he thought fit. Assuming that the conversation occurred in accordance with the accused’s evidence, I am satisfied beyond reasonable doubt that Mrs Wade did not thereby confer any general authority upon the accused to invest part of the funds of the estate in any manner which he thought fit. Rather, the accused was still required to obtain specific authority from Mrs Wade to make a specific type of investment.
I am satisfied beyond reasonable doubt that the accused dealt with the property without the owners’ consent.
While it is not strictly necessary to decide, Mrs Wade herself did not have the capacity to authorise the use of the funds in question. As observed at [59] above, Mrs Batten’s will did not make any devises or bequests to the ultimate beneficiaries. Instead, the whole of the estate was devised and bequeathed jointly to Mrs Wade and Mrs Wilkshire who were to hold the assets on a series of testamentary trusts. Relevantly, the monies which had been invested with the Catholic Development Fund were to be held on trust solely for Mrs Wilkshire but on the basis of limited annual payments and the proceeds of sale of 34 Marian Place, Prospect were to be held on trust for Mrs Wilkshire during her lifetime and thereafter for her son Karl Batten provided that he attained the age of 25 years. Probate was granted to Mrs Wade solely in her capacity as an executrix and, in the absence of Mrs Wilkshire applying for probate, thereafter Mrs Wade had authority to act alone in her capacity as executrix. However, the grant of probate did not affect the fact that the assets of the estate were left to Mrs Wade and Mrs Wilkshire jointly as trustees. Mrs Wade alone had no authority to act as the legal owner of the assets or as trustee alone.
I am also satisfied beyond reasonable doubt that the accused dealt with the property of the Batten estate for the purposes and in the interests of Osvest and himself and not of the Batten estate.
Deemed consent
The prosecution must prove beyond reasonable doubt not only that the accused did not have the actual consent of the owners but that he did not honestly believe, from the words or conduct of the owners, that he had their consent to the dealings. The accused gave evidence that he believed at the time that he had the owners’ consent if he had the consent of Mrs Wade even if he did not have the consent of Mrs Wilkshire. He did not advert to the law being that the estate’s assets had vested in Mrs Wade and Mrs Wilkshire jointly as trustees and the irrelevance of the fact that Mrs Wade alone had been granted probate as an executor. I am not satisfied beyond reasonable doubt that the accused did not have the belief of which he gave evidence. I therefore proceed on the assumption that his belief concerning Mrs Wade’s capacity alone to consent was correct.
The accused accepted in cross-examination that he did not consult with Mrs Wade or anyone with an interest in the Batten estate before the $85,000 was withdrawn from Osvest’s Macquarie account. The accused did not give evidence that in February 2008 he believed that he had Mrs Wade’s consent to invest some or all of the sum of $85,000 in derivatives trading. Initially, in cross‑examination, he gave evidence that he did not believe he required Mrs Wade’s consent because the monies belonged beneficially to Osvest pursuant to the October 2007 loan agreement. Later in cross-examination, he gave evidence that he did not regard the relationship between Mrs Wade and Osvest as that of debtor and creditor but rather as trustee and beneficiary. On the assumption that the 8 October 2007 meeting took place in accordance with the accused’s evidence, I am satisfied beyond reasonable doubt that the accused knew that the share trading assets were held on trust by Osvest for the trustees under Mrs Batten’s will.
In cross-examination, the accused gave evidence that he believed that he had Mrs Wade’s consent because she had made a general request that he do something with a portion of the money in the hope of making a better return. I reject that evidence. On the basis that Mrs Wilkshire had said in 1998 that she was prepared to relinquish her full entitlements under Mrs Batten’s will, it is not credible that the only action contemplated by Mrs Wade or the accused to deal with demands by Mrs Wilkshire was either to give Mrs Wilkshire all of the assets of the estate or to take greater risks in investing estate assets in the hope of obtaining a better return. An obvious and much more satisfactory alternative would have been to offer to pay, or pay, Mrs Wilkshire up to her full entitlements under Mrs Batten’s will such that she could have had no complaint. I am satisfied beyond reasonable doubt that the accused invented this rationale in an attempt to justify his utilisation of the funds of the Batten estate.
Nevertheless, assuming that the conversation between Mrs Wade and the accused occurred in accordance with the accused’s evidence, I am satisfied beyond reasonable doubt that the accused knew that the conversation was incapable of constituting a general authority for him to exercise a general discretion to utilise the funds in any manner which he saw fit. Rather, the accused knew that he needed specific authority from Mrs Wade to make a specific type of investment.
It is also the accused’s case that he believed that he had Mrs Wade’s consent because she had agreed in September 2007 to part of the funds invested with AXA being invested in derivatives trading. Assuming that a conversation occurred in accordance with the accused’s letter to Mrs Wade dated 28 September 2007, I am satisfied beyond reasonable doubt that the accused did not believe that Mrs Wade’s agreement in September 2007 to investing in derivatives trading amounted to consent to derivatives trading in the very different circumstances pertaining in January/February 2008.
I am satisfied beyond reasonable doubt that the accused did not believe, from the words or conduct of Mrs Wade, that he had her consent to deal with the funds of $85,000 for derivatives trading and Osvest’s general purposes in January/February 2008.
Serious encroachment on proprietary rights
By his dealings, he treated the sum of $85,000 as his own to dispose of regardless of the owners’ rights. I am satisfied beyond reasonable doubt that he intended to treat that sum as his own to dispose of regardless of the rights of the Batten estate. I am also satisfied beyond reasonable doubt that he intended to deal with the property in a way that created a substantial risk, of which he was aware, that the owners would not get it back or that its value would be substantially impaired.
Dishonesty
Standards of ordinary people
Ordinary people are aware that solicitors, advisors and agents who are entrusted by the executors and/or trustees of a deceased estate are required to deal with estate assets in accordance with the authority conferred upon them by the executors and/or trustees and to do so in the interests and for the purposes of the deceased estate and not in their own interests or for their own purposes. I am satisfied beyond reasonable doubt that the accused dealt with the property of the Batten estate without the authority of Mrs Wade (or Mrs Wilkshire) and so acted in his own interests and for his own purposes as opposed to the interests or for the purposes of the estate. I am satisfied beyond reasonable doubt that he dealt with property of the Batten estate dishonestly according to the standards of ordinary people.
Knowledge that so acting
I am satisfied beyond reasonable doubt that the accused knew that he was dealing with the property of the Batten estate without Mrs Wade’s authority and further that he knew that he was acting in his own interests and for his own purposes and not in the interests or for the purposes of the Batten estate.
Mistaken belief in right to act
I am satisfied beyond reasonable doubt that the accused did not honestly believe that he had a legal or equitable right to deal with the funds of $85,000 in February 2008 for derivatives trading and for the general purposes of Osvest.
Conclusion
If I had concluded that the Exchange occurred in October 2007, I would have been satisfied beyond reasonable doubt of each of the elements of count 3.
Summary of findings
I summarise my findings in relation to each count.
In respect of count 1, I find beyond reasonable doubt that:
1.the accused between 21 September and 2 October 2007 caused $200,000 to be withdrawn from Miss Fahey’s AXA investment and paid into Osvest’s bank account for the purpose of derivatives trading by Osvest and thereby dealt with Miss Fahey’s property;
2.the accused together with Mr Williams opened a derivatives trading account on behalf of Osvest with BrokerOne between 28 September and 23 October 2007;
3.in October 2007, the accused together with Mr Williams caused Osvest to appoint Mr Abrahams to conduct derivatives trading on behalf of Osvest;
4.as at September/October 2007, the accused did not intend to impose and there was not imposed on Mr Abrahams a trading mandate in respect of the derivatives trading containing the elements asserted by the accused;
5.as at September/October 2007 the accused knew that derivatives trading involved high risks;
6.the accused caused $250,000 which included $200,000 derived from Miss Fahey’s AXA investment to be transferred from Osvest’s bank account to Osvest’s derivatives trading account on 23 October 2007 for the purpose of derivatives trading by Osvest;
7. as at September/October 2007, it was the ambition of Osvest and the accused to establish Osvest as a derivatives trader for the purposes of attracting investment funds;
8.the purpose of the accused in withdrawing $200,000 from Miss Fahey’s AXA investment and paying it into Osvest’s bank was to establish Osvest as a derivatives trader;
9.if Osvest could establish itself as a derivatives trader and attract investment funds, the accused stood to gain financially by receipt of a commercial remuneration for his role as Chief Operations Officer of Osvest and as a result of Armalite being allocated equity in Osvest;
10.the intended use of Miss Fahey’s funds of $200,000 for derivatives trading was not a diversion or distraction from Osvest’s business plan but was part of that plan;
11. in dealing with Miss Fahey’s funds of $200,000, it was not the purpose of the accused to provide a buffer to meet possible future health expenses;
12.the accused did not have any firm expectation as at September/October 2007 that Osvest would receive investment trading funds placed by Sigma;
13.in dealing with Miss Fahey’s funds of $200,000, the accused was acting for the purposes and in the interests of Osvest and himself and not those of Miss Fahey and for this reason the dealings were without the consent of Miss Fahey;
14.in dealing with Miss Fahey’s funds of $200,000, the accused was not acting with reasonable diligence to protect the interests of the donor within the meaning of section 7 of the Powers of Attorney and Agency Act 1984 (SA) and for this reason the dealings were without the consent of Miss Fahey;
15.the accused did not honestly believe that he was acting in accordance with the authority conferred by the Power of Attorney and knew that he was acting in the interests and for the purposes of Osvest and himself and not in those of Miss Fahey;
16.the accused did not have and did not believe that he had consent to deal with Miss Fahey’s property by reason of his communications with his father;
17.the accused intended to treat Miss Fahey’s funds as his own to dispose of regardless of Miss Fahey’s rights so as to constitute a serious encroachment on the proprietary rights of Miss Fahey;
18.the accused intended to deal with Miss Fahey’s funds in a way that created a substantial risk, of which he was aware, that she would not get them back or that their value would be substantially impaired so as to constitute a serious encroachment on the proprietary rights of Miss Fahey;
19.the accused acted dishonestly according to the standards of ordinary people and knew that he was so acting;
20.the accused did not honestly believe that he had a legal or equitable right to deal with Miss Fahey’s funds in the way in which he did.
In respect of count 2, I find beyond reasonable doubt that:
1.at all material times Osvest held the share trading assets on trust for Miss Fahey and, after her death on 26 November 2007, the Fahey estate;
2.there was no Exchange effected in October 2007 between Miss Fahey’s beneficial interest in the share trading assets and funds of $100,000 in Osvest’s bank account destined to be lent to Sigma;
3.in January/February 2008, the accused caused the share trading assets to be liquidated and the proceeds of $85,000 to be paid into Osvest’s bank account for the purposes of derivatives trading and the general purposes of Osvest and thereby dealt with Miss Fahey’s property;
4.in February 2008, the accused caused $60,000 to be transferred from Osvest’s bank account to its derivatives trading account for the purpose of derivatives trading and thereby dealt with Miss Fahey’s property;
5.in February 2008, the accused caused $20,000 to be transferred from Osvest’s derivatives trading account to its bank account for Osvest’s general purposes and thereby dealt with Miss Fahey’s property;
6.the accused had no authority to deal with assets of the Fahey estate after Miss Fahey’s death on 26 November 2007;
7.the accused dealt with the funds of $85,000 without the owners’ consent;
8.the accused intended to treat the Fahey estate’s property as his own to dispose of regardless of the owners’ rights acting so as to constitute a serious encroachment on the proprietary rights of the Fahey estate;
9.the accused intended to deal with the Fahey estate’s property in a way that created a substantial risk, of which he was aware, that the owners would not get it back or that its value would be substantially impaired acting so as to constitute a serious encroachment on the proprietary rights of the Fahey estate;
10.the accused acted dishonestly according to the standards of ordinary people and knew that he was so acting so as to constitute a serious encroachment on the proprietary rights of the Fahey estate;
11.the accused did not honestly believe that he had a legal or equitable right to deal with the Fahey estate’s property in the way in which he did.

In respect of count 3, on the assumption (contrary to my finding) that the Exchange was effected on 8 October 2007 in accordance with the evidence of the accused, I find beyond reasonable doubt that:
1.with effect from 8 October 2007, Osvest held the share trading assets on trust for the Batten estate;
2.in January/February 2008, the accused caused the share trading assets to be liquidated and the proceeds of $85,000 paid into Osvest’s bank account for the purposes of derivatives trading and the general purposes of Osvest and thereby dealt with the Batten estate’s property;
3.in February 2008, the accused caused $60,000 to be transferred from Osvest’s bank account to its derivatives trading account for the purpose of derivatives trading and thereby dealt with the Batten estate’s property;
4.in February 2008, the accused caused $20,000 to be transferred from Osvest’s derivatives trading account to its bank account for Osvest’s general purposes and thereby dealt with the Batten estate’s property;
5.as at January/February 2008, the accused did not have the consent of Mrs Wade and Mrs Wilkshire as trustees under Mrs Batten’s will to invest funds of the Batten estate in derivatives trading or use them for the general purposes of Osvest;
6.in January/February 2008, the accused did not have the consent of Mrs Wade to invest funds of the Batten estate in derivatives trading or use them for the general purposes of Osvest;
7.in January/February 2008, the accused did not believe that he had the consent of Mrs Wade to invest funds of the Batten estate in derivatives trading or use them for the general purposes of Osvest;
8.the accused intended to treat the sum of $85,000 as his own to dispose of regardless of the owners’ rights so as to seriously encroach on the owners’ proprietary rights;
9.the accused intended to deal with the sum of $85,000 in a way that created a substantial risk of which he was aware that the owners would not get it back or its value would be substantially impaired so as to seriously encroach on the owners’ proprietary rights;
10.the accused acted dishonestly according to the standards of ordinary people and knew that he was so acting;
11.the accused did not honestly believe that he had a legal or equitable right to deal with the funds of $85,000 for the purposes of derivatives trading and for the general purposes of Osvest.
Conclusion
I find the accused guilty of theft as charged in counts 1 and 2.

Date	Contracts Closed Out	Profit/Loss on closed out contracts	Contracts Open	Profit/Loss taking into account assumed close outs
24.10	15	$ 9,380	0	$ 9,380
25.10	198	$ 47,694	33 buy	$ 39,519
26.10	375	$ 17,187	34 sell	$ 11,187
29.10	644	$ 89,267	25 sell	$ 24,667
30.10	398	-$ 98,759	0	-$ 98,759
31.10	453	-$ 18,655	38 sell	-$ 59,655
1.11	540	$ 36,427	9 sell	$ 17,752
2.11	445	-$ 46,075	0	$ 46,075
5.11	280	-$159.488	15 buy	-$158,838
6.11	418	-$ 29,057	0	-$ 29,057
7.11	422	$ 33,452	30 buy	$ 38,458
8.11	787	$ 7,104	10 buy	-$ 4,208
9.11	656	$ 65,626	0	$ 65,626
12.11	40	$ 12,103[13]	125 sell	-$ 102,193[14]
13.11	97	-$ 38,248	117 sell	-$ 102,193[14]
14.11	707	-$ 11,458	0	-$ 11,458
15.11	474	$ 76,397	0	$ 76,397
16.11	328	-$111,310	50 sell 6 buy	-$129,066
19.11	382	$ 7,677	0	$ 7,677
20.11	567	-$164,569	0	-$164,569
21.11	341	-$ 11,975	0	-$ 11,975