Re Global Finance Group Pty Ltd (In liq) - [2002] WASC 63

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: RE GLOBAL FINANCE GROUP PTY LTD (In Liq)(Supervisor Appointed) and GLOBAL MORTGAGE INVESTMENTS PTY LTD (in Liq); EX PARTE SIMON ANDREW READ and JEFFREY LAURENCE HERBERT (As Liquidators of Global Mortgage Investments Pty Ltd and as Liquidators of Global Finance Group Pty Ltd) & ORS [2002] WASC 63

CORAM: McLURE J

HEARD: 17-21 & 25 SEPTEMBER 2001, 13, 20 & 27 FEBRUARY & 14 MARCH 2002

DELIVERED : 5 APRIL 2002

FILE NO/S: CIV 2153 of 1999

MATTER :Sections 89 and 92 of the Trustees Act 1962 (WA)
AND
GLOBAL FINANCE GROUP PTY LTD (In Liq) (Supervisor Appointed)
(ACN 009 380 205)
AND
GLOBAL MORTGAGE INVESTMENTS PTY LTD (In Liq)
(ACN 063 849 669)
EX PARTE
SIMON ANDREW READ and JEFFREY LAURENCE HERBERT (As Liquidators of Global Mortgage Investments Pty Ltd and as Liquidators of Global Finance Group Pty Ltd)
GLOBAL FINANCE GROUP PTY LTD (In Liq)
GLOBAL MORTGAGE INVESTMENTS PTY LTD (In Liq)
First Applicants
JEFFREY LAURENCE HERBERT (As Supervisor of Global Finance Group Pty Ltd) (In Liq)
Second Applicant
AND
THE TREASURER OF THE STATE OF WESTERN AUSTRALIA
First Respondent
ALL PERSONS IDENTIFIED IN GLOBAL FINANCE PTY LTD'S LEDGER CARDS AS AT 21 JULY 1999 AS MONEY MARKET INVESTORS
Second Respondents
ALL PERSONS LISTED IN THE SCHEDULE TO THE APPLICATION OF THE SECOND APPLICANT DATED 13 SEPTEMBER 2000 AS BORROWERS
Third Respondents
ALL PERSONS LISTED IN THE SCHEDULE TO THE APPLICATION OF THE SECOND APPLICANT DATED 13 SEPTEMBER 2000 AS INVESTORS
Fourth Respondents
ALPHA SUPER CO PTY LTD
WALBROOK INVESTMENTS PTY LTD
THIRLMERE CONSULTING AND FINANCIAL MANAGEMENT SERVICES
Fifth Respondents

Catchwords:

Trusts - Mixed funds in trust account operated by finance broker - Identification of claimants - Whether trust funds held on a Quistclose purpose trust - Tracing of funds into and out of trust account - Loss of funds in trust account - Allocation of loss - Whether rule in Clayton's Case applies - Whether pari passu principle should apply - Whether funds can be traced out of trust account to mortgages

Legislation:

Corporations Act 2001 (Cth), s 437(A), s 437(B), s 474 and s 479

Finance Brokers Control Act 1975 (WA), s 4, s 47 and s 48
Property Law Act 1969 (WA), s 34
Supreme Court Act 1935 (WA), s 37
Transfer of Land Act 1893 (WA), s106, s 107 and s 108

Trustees Act 1962 (WA), s 89 and s 92

Result:

Preliminary questions answered

Category: A

Representation:

Counsel:

First Applicants            :     Mr M J Hawkins
Second Applicant          :     Mr M J Hawkins
First Respondent           :     No appearance
Second Respondents     :     No appearance
Third Respondents        :     Refer Schedule A
Fourth Respondents      :     Refer Schedule B
Fifth Respondents         :     No appearance

Solicitors:

First Applicants            :     Clayton Utz
Second Applicant          :     Clayton Utz
First Respondent           :     No appearance
Second Respondents     :     No appearance
Third Respondents        :     Refer Schedule A
Fourth Respondents      :     Refer Schedule B
Fifth Respondents         :     No appearance

Case(s) referred to in judgment(s):

Adamson v Hayes (1973) 130 CLR 276
Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (2000) 171 ALR 568
Austin v Khaliffe [1966] 2 NSWLR 632
Australian Securities Commission v Melbourne Asset Management Nominees Pty Ltd (1994) 49 FCR 334
Bacon v Pianta (1966) 114 CLR 634
Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567
Barlow Clowes International Ltd (in liq) v Vaughan [1992] 4 All ER 22
Barnes v Addy (1874) 9 LR Ch App 244
Bishopsgate Investment Management Ltd (in liq) v Homan [1994] 3 WLR 1270
Boscawen v Bajwa [1996] 1 WLR 328
Brady v Stapleton (1952) 88 CLR 322
Burdick v Garrick (1870) LR 5 Ch App 233
Cory Brothers & Co Ltd v Owners of the Turkish Steamship Mecca (The Mecca) [1897] AC 286
Devaynes v Noble; Clayton's Case (1816) 1 Mer 572
Eron Mortgage Corp (Trustee) v Eron Mortgage Corp 1999 ACWSJ 19321; 86 ACWS (3d) 263
Foskett v McKeown [2000] 2 WLR 1299
Hagan v Waterhouse (1992) 34 NSWLR 308
Hodges & Hurley v Kovacs Estate Agency Limited [1961] WAR 19
James Roscoe (Bolton) Ltd v Winder [1915] 1 Ch 62
Law Society of Upper Canada v Toronto - Dominion Bank (1998) 169 DLR (4th) 353
Lipkin Gorman (a firm) v Karpnale Ltd (1991) 2 AC 548
Lupton v White (1803) 15 Ves 432
Mann v Hulme (1961) 106 CLR 136
Mark Anthony Conlan (as Liquidator of Oakleigh Acquisitions Pty Ltd) & Ors [2001] WASC 230
Mark Anthony Conlan (as Liquidator of Oakleigh Acquisitions Pty Ltd) and Ors v Registrar of Titles & Ors [2001] WASC 201
Re Australian Elizabethan Theatre Trust (1991) 102 ALR 681
Re Diplock's Estate; Diplock v Wintle [1948] Ch 465 (CA) affd (1951) AC 251 (HL)
Re Eastern Capital Futures Ltd (in Liq) (1989) BCLC 371
Re Goldcorp Exchange Ltd [1994] 3 WLR 199
Re Grey (No 2) (1900) 26 VLR 529
Re Hallett's Estate (1880) 13 Ch D 696
Re Joscelyne (1963) Tas SR 4
Re Kayford [1975] 1 WLR 279
Re Laughton [1962] Tas SR 300
Re Moffitt, Zwerling & Kemler PC 875 F.Supp. 1152 (E.D.Va. 1995)
Re Nanwa Gold Mines [1955] 1 WLR 1080
Re Oatway [1903] 2 Ch 356
Re Ontario Securities Commission and Greymac Credit Corp (1986) 55 OR (2d) 673
Re Registered Securities Ltd [1991] 1 NZLR 545
Re Sayer [1957] Ch 423
Re Shoreline Currencies (Australia) Pty Ltd (in liq), unreported; SCt of NSW (Kearney J); 14 October 1988
Re Stillman and Wilson (1950) 15 ABC 68
Re Universal Distributing Co Ltd (in liq) (1993) 48 CLR 171
Space Investments Ltd v Canadian Imperial Bank of Commerce Trust Co (Bahamas) Ltd [1986] 1 WLR 1072
Taylor v London & County Banking Co [1901] 2 Ch 231
Taylor v Plumer (1815) 3 M&S 562
United States v Moffitt, Zwerling and Kemler 83 F 3d 660 (4th cir 1996)
Whitehand v Jenkins, unreported; SCt of Vic (Ormiston J); 6 February 1987
Windsor Mortgage Nominees Pty Ltd v Cardwell (1979) CLC 40‑540

Case(s) also cited:

13 Coromandel Place Pty Ltd v CL Custodians Pty Ltd (in liq) (1999) 17 ACLC 500
AMKMK v Chettiar [1955] AC 230
Austin-Fell v Austin-Fell [1990] Fam 172
Australian Securities Commission v Buckley; Becke v National Australia Bank Ltd, unreported; SCt of NSW (Santow J); 20 December 1996
Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch 25
Carson v Wood (1994) 34 NSWLR 9
Commissioner for Stamp Duty (NSW) v Pearse (1953) 89 CLR 51
DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431
Farnell v Cox (1898) 19 LR (NSW) Eq 142
Federal Commissioner of Taxation v Galland (1984) 4 FCR 566
Federal Commissioner of Taxation v Galland (1986) 162 CLR 408
Foskett v McKeown [1998] Ch 265
Greater Pacific Investments Pty Ltd (in liq) v Australian National Industries Ltd (1996) 39 NSWLR 143
Hancock v Smith (1889) 41 Ch D 456
Harman v Glencross [1986] Fam 81
Hospital Producs Ltd v United States Surgical Corporation (1984) 156 CLR 41
J&H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546
Kenna & Brown Pty Ltd v Kenna (1999) 32 ACSR 430
Lord Provost of Edinburgh v Lord Advocate (1879) 4 App Cas 823
Maguire & Tansey v Makaronis (1997) 188 CLR 449
Mineral & Chemical Traders Pty Ltd v T Tymczyszym Pty Ltd (in liq) & Horn (1994) 15 ACSR 398
Morlea Professional Services Pty Ltd v Richard Walter Pty Ltd (in liq) [1999] FCA 1820
Oakleigh Acquisitions Pty Ltd (in liq); Ex parte Conlan [2000] WASC 41
Orakpo v Manson Investments Ltd [1978] AC 95
Re Berkeley Applegate (Investment Consultants) Ltd [1989] Ch 32
Re British Red Cross Balkan Fund [1914] 2 Ch 419
Re Corbenstoke Ltd (No 2) [1990] BCLC 60
Re Crest Realty Pty Ltd (No 2) (in liq) [1977] 1 NSWLR 664
Re G B Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674
Re Jones (1953) 16 ABC 169
Re Ontario Securities Commission and Greymac Credit Corporation (1985) 51 OR (2d) 212
Re Rhodesia Goldfields Ltd; Partridge v Rhodesia Goldfields Ltd [1910] 1 Ch 239
Re Sherry (1884) 25 Ch D 692
Re Staff Benefits Pty Ltd (in liq) [1979] 1 NSWLR 207
Re Stuart; Smith v Stuart [1897] 2 Ch 583
Re Suco Gold Pty Ltd (in liq) (1983) 33 SASR 99
Re T H Knitwear (Wholesale) Ltd [1988] 1 Ch 275
Re Tilley's Will Trust [1967] Ch 1179
Roberts Petroleum Ltd v Bernard Kenny Ltd [1983] 2 AC 192
Stewart v Latec Investments Ltd [1968] 1 NSWR 432
Trustee of the Property of F C Jones & Sons (a firm) v Jones [1997] Ch 159
U T C Ltd (in liq) v N Z I Securities Aust Ltd (1991) 4 WAR 349

TABLE OF CONTENTS

Introduction

Facts

(i) Background
(ii) GFG's Accounting System
(iii) Money Market Accounts
(iv) Project Accounts
(v) Overdrawing of Project Accounts
(vi) GFG Accounts
(vii) GMI Mortgages
(viii) Trust Account Balance as at Appointment of Voluntary Administrators
(ix) GFG Assets - Other
(x) Unsecured Creditors

Questions for Determination
The Respondents
The Trust Account and the Control Act
The Law of Tracing - General Principles
Question 1 - Whether the Trust Account Records Reflect the Intentions of GFG and GMI
Question 2 - The Effect of Overdrawing Individual Ledger Accounts

(i) Legal Principles
(ii) The Claimants and the Basis of the Claims
(iii) The Ledger Records as a Potential for the Basis for Distribution
(iv) Application of the Principles

The Distribution Alternatives
Question 3(a) – The First Alternative
Question 3(b) – The Second Alternative
Question 3(c) – The Third Alternative
Question 3(c)(v) – GMI Mortgages
Question 3(c)(vi) – Funds From the Sale of Security Properties
Question 3(c)(ix) – Reversal of Journal Entry
Question 3(c)(x) – Mr Margaria's Related Entities
Question 3(d) – The Fourth Alternative
Question 4 – GMI Mortgages
Question 5 – Liquidators' Costs
Question 6 – Payment of Legal Advisors
Question 7 – Interim Payments to Investors
Other Matters

(i) Project 1018
(ii) Projects 1163 and 1238 - Ryder
(iii) Project 1378 – Newrose Holdings Pty Ltd

Power to Make Orders

Conclusions
SCHEDULE A
SCHEDULE B
SCHEDULE C

McLURE J:

Introduction

At all material times Global Finance Group Pty Ltd ("GFG") carried on business as a licensed finance broker pursuant to the Finance Brokers Control Act 1975 ("Control Act"). Global Mortgage Investments (WA) Pty Ltd ("GMI") was a wholly owned subsidiary of GFG.
On 19 February 1999, Jeffrey Herbert and Simon Read were appointed joint and several voluntary administrators of GFG. On 20 April 1999, the creditors of GFG appointed Messrs Herbert and Read as joint and several liquidators of GFG. On 23 July 1999, the Finance Brokers Supervisory Board ("Board") appointed Mr Herbert the supervisor of GFG's finance‑broking business.
On 26 February 1999, Messrs Herbert and Read were appointed joint and several voluntary administrators of GMI. Messrs Herbert and Read were appointed joint and several liquidators of GMI on 25 April 1999.
GFG, GMI, Messrs Herbert and Read in their capacities as liquidators of GFG and GMI and Mr Herbert in his capacity as supervisor of GFG, have applied by originating summons for orders pursuant to s 89 and s 92 of the Trustees Act 1962 concerning the distribution of moneys held in trust by GFG and related matters. GFG had a single trust account. As at 19 February 1999 the balance in the trust account was $1,598,961.
GFG's principal activity consisted of the raising of funds from lenders ("investors") for the purpose of advancing secured loans to applicants for finance ("borrowers") in connection with property acquisitions and development.
In summary, this case concerns the identification of the persons entitled to claim from the trust account, how the funds are to be distributed between the claimants and the rights of investors to mortgages registered in GMI's name.
On 26 October 1999 the Court ordered that notice of the originating summons filed in the action be given by way of advertisement in "The West Australian" and by circular letter to each investor and borrower and other persons who may be a potential claimant.
In February 2000 the Court ordered that all persons who have a claim against the GFG trust account and mortgages held by GMI be bound by the orders and directions made in the proceedings.
In December 2000, March 2001 and August 2001 the second applicant caused circulars to be forwarded to all investors, borrowers and creditors advising them in relation to the proceedings and providing copies of orders made by the Court on 12 December 2000, 20 March 2001 and 24 August 2001. These orders related to, inter alia, the questions to be determined by the Court as preliminary issues. In order to fully appreciate the questions, it is necessary to firstly set out the relevant facts.

Facts

(i) Background

The applicants relied on a number of affidavits sworn by Mr Herbert. That evidence, largely uncontradicted, establishes the following facts. GFG was incorporated on 10 April 1989. At all material times its directors and shareholders were John Margaria and Albert Margaria.
GFG advertised for investment funds with particular emphasis on retirees. People responding to GFG's advertisements would usually be provided with relevant promotional material. At the same time as it was attempting to secure funding from investors, GFG sought and received applications for finance from prospective borrowers.
After receipt of applications for loan finance GFG would send a letter of offer to prospective investors in duplicate (known as a "Proposal Letter"). There were five types of Proposal Letter which reflected the nature of the proposed transaction as follows:
1.security property being purchased or refinanced, and all funds being expended at settlement;
2.security property being purchased or refinanced, with interest for the term of the loan to be held by GFG;
3.security property being purchased or refinanced, with buildings to be constructed thereon, and with both construction costs and interest for the term of the loan to be held by GFG;
4.security property being purchased or refinanced and subsequently subdivided, and with both subdivision costs and interest for the term of the loan to be held by GFG;
5.security property being refinanced enabling the borrower to raise working capital, with interest for the term of the loan to be held by GFG.
Recipients of Proposal Letters interested in taking up the offers were instructed to sign the attached copy of the Proposal Letter, indicate the amount of the loan they wished to make and return the duplicate copy to GFG.
Details of funds pledged by investors to particular investments were recorded by GFG on a pre‑printed untyped form referred to by GFG personnel as a "scoreboard sheet". The information typically recorded on a scoreboard sheet was:
•the borrower's name and project number;
•the address of the security;
•the amount, interest rate and term of the loan;
•security value and loan to value ratio;
•the name of the proposed investor showing the date the Proposal Letter was sent, the response, the date of the response, the amount pledged and the date when funds would be available.
Once the required funds were agreed to be provided by investors for a particular investment as recorded on the relevant scoreboard sheet, GFG advised the borrower and instructed its solicitors to prepare mortgage documents. No loan agreement was prepared. However, the mortgage specified, inter alia:
(i)the interest rate payable;
(ii)the commencement and repayment dates;
(iii)the principal sum being advanced;
(iv)the times and manner for payment of interest;
The mortgage used standard terms for all transactions save where construction was proposed, in which case additional covenants relating to works were added. Attached to the mortgage provided to the borrower for signature were a statement of costs, mortgagor's authority, requisitions on title and certification by the company director.
The statement of costs was provided to the borrower at or prior to the date of execution of the mortgage. This document specified the:
(i)amount of brokerage payable;
(ii)solicitors costs and stamp duty payable;
(iii)FID/BAD costs;
(iv)inspection and settlement fees payable and sundry disbursements;
(v)rate of interest payable to the borrower for credit funds held.
The statement of costs was signed by the borrower to indicate acceptance of the specified terms.
After an application for finance was approved, a project number was allocated to the proposed loan, and a loan file (referred to as a "project file") was created. Each project file was labelled with the project number, the name of the borrower and the address of the property to be mortgaged.
Following execution of the mortgage and signing of the statement of costs, the mortgage was returned to GFG's solicitors for stamping. GFG's solicitors then contacted the borrower's settlement agent to arrange settlement. The solicitors would advise GFG of the funds required at settlement and GFG would draw cheques against the relevant project account and deliver them to the solicitors.
In the normal course of events, investors providing the relevant project funding were recorded as mortgagees on the mortgages. However, on occasions when not all loan proceeds were immediately required, a mortgage for the full amount of the proposed loan was prepared as soon as sufficient funds were raised to fund the settlement. The investors who had accepted the project and deposited their funds were documented as mortgagees, with GMI holding shares of the mortgage representing the unfunded portion of the loan.
Once the remaining funds were raised, the shares held by GMI in the mortgage were usually transferred to the new investors. This process involved GFG instructing its solicitors to prepare transfer documents, which were then circulated amongst the relevant investors for execution.
GFG managed all matters relating to the project loans on behalf of both investors and borrowers. Pursuant to, inter alia, the Proposal Letter, GFG agreed to act as the agent of the investors to "administer" all matters relating to the mortgage. GFG undertook that it would attend to the following matters on behalf of investors:
•collection and/or payment of monthly interest;
•supervision of drawdown of funds by the borrower;
•registration of mortgage documents;
•safe custody of security documentation;
•enforcement of mortgagees' rights against the borrower in the event of default;
•attendance at settlement and remittance of capital to investors on completion of loans.
Shortly after the appointment of Messrs Herbert and Read as voluntary administrators, the majority of investors with moneys in the GFG trust account at that date decided they did not wish the administrators to continue to provide the services hitherto provided by GFG as agent and formally terminated the agency arrangements.
GFG also provided services to borrowers. As the majority of the projects involved the raising of funds to cover interest payments to investors for the term of the loan, GFG attended to remitting monthly payments to investors on behalf of the borrowers by drawing against the funds in a project account ledger. At times when an investor wished to redeem funds during the term of the loan, GFG would attract a replacement investor and pay out the redeeming investor, often without the borrower being aware that investors were being changed.
As the expiry date of the loan term approached, GFG would determine from the borrower whether the loan was being finalised or extended. If the borrower requested an extension, a new interest rate would be negotiated and GFG would write to the investors in that project and offer an extension at the new rate. Any investors who wished to redeem their funds would be replaced by new investors attracted by GFG. GFG arranged all necessary documentation on the borrower's behalf.
When a borrower advised that a security property had been sold and it wished to finalise the loan, GFG would arrange the necessary discharge of the mortgage documents and forward these to investors for execution. Once the documents were in order, GFG would liaise with the borrower's settlement agent to arrange settlement and collect the sale proceeds necessary to pay out the investor's principal and interest, plus fees and costs due to GFG.

(ii) GFG's Accounting System

Funds received by GFG from investors and borrowers were receipted and deposited into a single trust account operated by GFG at the ANZ Bank, Mt Lawley Branch. The trust account was a cheque (current) account.
GFG maintained a trust ledger comprised of manually prepared ledger cards falling into three categories, being:
1.Project Accounts;
2.Money Market Accounts;
3.GFG Accounts (these generally recorded fees charged to investors and borrowers for services provided).
Funds received by GFG from investors were receipted and deposited into GFG's single trust account. The receipts indicated whether the funds were to be credited to a Money Market Account or a particular investment proposal referred to as a "project". Payments made by GFG in respect of projects were drawn ostensibly against the funds held in the trust account in respect of the particular project.
Generally, a separate ledger card or account was created for each new project, although occasionally multiple projects were consolidated into one ledger account.
All trust entries were recorded in the trust ledger accounts. Entries were posted from duplicate receipts (used to record receipt of all funds by GFG), chequebook butts and the journal register. Journal entries were raised by GFG from time to time to transfer balances from one ledger account to another.
All trust entries were recorded by Mrs June Margaria. Trust entries were often batched in bundles of several days' credits being posted first, followed by several days' debits and sometimes vice versa. The only time when all postings were up‑to‑date was at month end when trial balances were extracted and reconciled to the bank statement. Accordingly, it is difficult to establish the balance of a Project Account on any given day during a month without reconstructing the ledger for that month by re‑entering all individual transactions in date order. The cost of that process is said by Mr Herbert to be prohibitive.
The balances on all trust ledger accounts were extracted by GFG at the end of each month and listed on a trial balance and the total of all balances reconciled with the trust account balance in the bank statement.
Mr Herbert deposes to the fact that the trust ledger accurately records the transactions which occurred including:
•the receipt of funds from individual investors;
•the allocation of funds received to specific projects;
•the payment of moneys from Project Accounts to or on behalf of the relevant borrowers;
•the receipt of interest from borrowers;
•the payment of interest to investors;
•the deduction from trust account balances of fees payable to GFG and the resulting transfer of balances to GFG Credit Accounts.
In addition, Mr Herbert found a number of transactions which he did not expect and which were not authorised by the investors. They included:
(i)the unauthorised transfer of balances between Project Accounts in the name of the same borrower or an entity controlled by that borrower (referred to as "borrower groups");
(ii)the payment of moneys from the trust account on behalf of borrowers in cases where there were insufficient funds in the Project Accounts to cover the payments and, hence the creation of overdrawn Project Account balances;
(iii)the drawing of fees by GFG in excess of the amounts it agreed it would draw.

(iii) Money Market Accounts

Moneys received by GFG from investors in contemplation of future investment opportunities were deposited into the trust account and a ledger styled "Money Market Account" was created. Further, GFG receipts indicated whether funds were to be credited to a Money Market Account or a Project Account. In addition, moneys retained by GFG after a borrower's loan was repaid was included in a Money Market Account.
Identification of investors' moneys in this category is established from the Money Market Account ledger which correctly records receipt of funds, payment of funds to or on behalf of investors and the transfer of balances between individual Money Market Accounts and Project Accounts by way of journal entries.
Mr Herbert and his staff found no evidence of any material errors in relation to the transactions recorded in these accounts or unauthorised transfers of balances between individual Money Market Accounts or between Money Market Accounts and Project Accounts.
The mixing which is found to be commonplace between Project Accounts in borrower groups (discussed below) did not affect the Money Market Accounts.

(iv) Project Accounts

Once loan approval was given and settlement occurred, a Project Account was opened in the ledger in the name of the borrower for the particular project.
From GFG's records, in particular its scoreboard sheets, receipts and Proposal Letters it can be clearly identified which projects were offered to, and accepted by individual investors, and which project individual investor's funds were credited to. However, the matter is complicated by the transfer, by journal entry, of balances from one Project Account in a particular borrower group to other Project Accounts in that group which, according to Mr Herbert's evidence but was done without the knowledge and consent of the investors. The journal entries started around mid‑1995.
From the commencement of GFG's operations in July 1994 Mr Margaria had close relationships with a number of borrowers and raised numerous loans for them and companies controlled by them. They included Mr Dominic Casella and Mr Narbil Sadek. The Casella group was the largest of the borrower groups. As at 19 February 1999, 92 Project Accounts involving the Casella group were current and the funds in the relevant Project Accounts totalled approximately $455,000.
The Sadek Group comprised Westbid Pty Ltd, Kentucky Nominees Pty Ltd, Newrose Holdings Pty Ltd and Capri Developments Pty Ltd. Two Project Accounts in this group had credit balances totalling $122,000 and one account was overdrawn by $27,000. The remaining four accounts had a nil balance.
Although unauthorised transfers of balances between projects in borrower groups were frequent, Mr Herbert found no instances of the transfer of balances between Project Accounts in different borrower groups or between a Project Account and a Money Market Account.
Occasionally, multiple Project Accounts of a borrower were consolidated into one ledger account. Whilst consolidation of Projects generally occurred with properties at the same location, there were occasions where properties in totally different locations were consolidated.
Mr Herbert divides the Project Accounts into Category A and Category B. Category B Project Accounts relate to borrower groups in which the unauthorised transfer of balances between Project Accounts commonly occurred (Ex 4, Annex JLH1, par 58‑59, par 175). Included within Category B are Project Accounts which have not received unauthorised transfers but from which unauthorised transfers have been made. In the Category A Project Accounts there has been no mixing (transfers in or out) of funds from other projects. In addition to the Casella and Sadek groups, the other Category B borrower groups are:
- Johnson group
- King group
- Olympic Holdings group
- Hillsfield group (this group is exceptional in that there is only one trust account ledger comprised of multiple loans and mortgages).
The unauthorised transfers between Project Accounts in borrower groups usually occurred when a borrower had credit funds in one project and needed funds in another project in circumstances generally where funds were required in the transferee account to:
(a)complete construction of Works;
(b)pay interest to the mortgagees;
(c )repay principal to mortgagees in cases where sales proceeds were inadequate.
An example of the process is in Project 1238 in which the borrower is Selec Pty Ltd, a member of the Casella group. The project involved the development and sub‑division of residential lots at Wattle Grove. The development was to be completed in two stages with proceeds from stage one sales to assist with the costs of developing stage two. As at September 2000, stage one was incomplete and a further $500,000 was required to complete it. The Project Account for Project 1238 was in evidence. It shows what is common to all Project Accounts which is that all funds in the Project Accounts are mixed. That is, there is no appropriations by GFG within the Project Accounts. The Project Account is summarised as follows:
$'000
Loan funds raised 3,105
Payment of:
- Construction and land costs  (1,905)
- Interest(445)
- Global Fees   (104)
(651)
Transfers to 7 other Casella Project Accounts   (852)
(201)
Interest received from Borrower      17
Transfers from 2 other Casella Project Accounts     300
Balance$116
This summary highlights that only $3.105M was raised in lieu of the mortgage value of $3.3M, leaving a deficit of $195,000. Outward transfers of $852,000 exceeded inward transfers of $300,000 leaving a deficit of $552,000.
Of the total interest paid to investors of approximately $445,000, only approximately $17,000 came from the borrower. The remaining $428,000 was paid out of the investors' own funds.
Further, in the large borrower groups there were unauthorised payments to third parties not associated with any project or directly to the borrower for purposes not associated with a project.
There is evidence, which I accept, that GFG acted with the knowledge of a number of Group B borrowers (in particular Casella, Sadek, King and Johnson) in using the trust funds for unauthorised purposes: Ex 4, Annex JLH 2, p354, p355‑358, p 364, p 386 and p 387.
A common occurrence in both categories of Project Accounts was the payment from the trust account of all fees and expenses payable by the borrower, such as the costs associated with the purchase of the security property and the mortgage. It is said these payments were not made with the knowledge or consent of the investors.

(v) Overdrawing of Project Accounts

The trust account as a whole was never overdrawn. However Mr Margaria allowed certain Project Accounts to go into debit, generally in circumstances where:
(i)there were insufficient funds to pay interest;
(ii)there were insufficient funds to repay investors' loans at completion;
(iii)payments were made before all investment funds were received.
Mr Margaria allowed cheques to be drawn against the trust account and debited the payments to the Project Accounts when, in fact, the credit balances in those accounts were insufficient to cover the payments made.
As at 19 February 1999, 26 accounts were overdrawn totalling $206,675.66. Of the 26 accounts:
-19 accounts were overdrawn as a result of interest payments being made to investors when insufficient funds were held in the trust account to the credit of the relevant Project Account;
-three accounts became overdrawn due to minor registration costs being paid from the relevant Project Account;
-one account became overdrawn as a result of the project not proceeding after investor funds were raised. After investor funds had been deposited to the Project Account ledger, the investors were paid interest from their own funds. Four months later, the borrower withdrew from the project which at that stage had still not commenced. The investors were repaid their full principal, leaving the Project Account overdrawn by the amount of the interest paid;
-the remaining three accounts became overdrawn as a result of the investors being repaid in full when the proceeds from the sale of the mortgaged property were insufficient to repay the mortgage.
Since 19 February 1999 Mr Herbert has pursued the borrowers for repayment of the overdrawn balances and has collected 12 overdrawn accounts totalling $30,354.85. Mr Herbert estimates that a further $40,000 may be collectable from the remaining overdrawn accounts.
Mr Margaria's explanation for allowing overdrawn accounts was that they were always "covered" by amounts owing to GFG in the trust account from the total of GFG Credit Accounts. Each month a trial balance was drawn up. A calculation of the total of the overdrawn Project Accounts less the total of GFG Credit Accounts was recorded on each monthly trial balance. This supports Mr Margaria's claim that overdrawn balances were permitted by him because, at least at each month end, they were covered by GFG Credit Account balances.
Mr Margaria's intentions are also confirmed in a letter from him to GFG's auditors in September 1996. He confirms that the overdrawn accounts are covered by GFG's funds in its Credit Accounts and suggests the use of this system was acceptable to the Board.
As at 19 February 1999 the total of the balances of the GFG Credit Accounts exceeded the total overdrawn balances of the Project Accounts.
Mr Herbert extracted from the trial balances as at each month end from 30 June 1996 the total of overdrawn account balances and the total GFG Credit Account balances (less any debit GFG balances) and compared the two. That analysis indicates that the total of GFG Credit Accounts always exceeded the overdrawn balances at the end of each month. However, on occasions the excess was engineered by means of a journal entry transferring funds from a Project Account in credit to an overdrawn account, the journal entry being reversed after the month end.
However, on dates between month ends, overdrawn Project Accounts exceeded total GFG Credit Accounts sometimes by significant margins. In the majority of cases, the deficit was the result of project payments being made before funds from investors who had committed funds to the project were received in full. Such deficits were extinguished by the subsequent receipt of investment funds.
It was suggested by the solicitors for a number of investors that a comparison of overdrawn balances and GFG Credit Accounts should be carried out on all days between month ends to ascertain whether on any day the former exceeded the latter. However, GFG prepared trial balances on a monthly but not daily basis. As GFG's trust account ledger was manual, a daily comparison of GFG Credit Account balances with total overdrawn balances could not be prepared automatically and would entail the calculation over nearly five years of all the daily sum of all GFG Credit Accounts and the daily sum of all Overdrawn Accounts. That exercise would take several weeks and possibly months and in Mr Herbert's opinion would not be feasible. I agree.
However, Mr Herbert carried out an analysis using an estimate of daily overdrawn balances. First he calculated the sum of all GFG Credit Accounts on a daily basis. To overcome the problem occasioned by the fact that entries were recorded on ledger cards out of date sequence as a result of the posting of entries in batches (which does not affect end of month figures) he calculated daily balances for Project Accounts with debit balances greater than $10,000 and for the period from 4 April 1996 he estimated the sum of small overdrawn balances (being an overdrawn balance of less than $10,000). For the period prior to 4 April 1996 Mr Herbert calculated the actual balances for small overdrawn balances. On the assumption that it would be unlikely that the total of small overdrawn balances would exceed $50,000 on any particular day, he allowed $50,000 as a provision for small overdrawn balances from 4 April 1996. In this way Mr Herbert calculated the daily GFG Credit Balances and the daily overdrawn Project Account balances, (the latter being the sum of actual large overdrawn balances and a provision of $50,000 for small overdrawn balances save for prior to 4 April 1996 when actual overdrawn balances were used rather than a provision).
This analysis identified nine periods in which the total daily overdrawn balances exceeded GFG Credit Balances. The periods were:
(i)24 to 28 November 1994;
(ii)27 September 1995;
(iii)15 to 21 January 1996;
(iv)5 to 7 July 1996;
(v)4 to 11 February 1997;
(vi)7 July to 3 August 1997;
(vii)13 to 16 March 1998;
(viii)30 April to 19 May 1998;
(ix)1 to 28 July 1998.
The reasons for the nine periods where overdrawn Project Account balances exceeded GFG Credit Balances are:
•settlement completed prior to receipt of full loans from investors ‑ 7
•investors being repaid the full amount of their investment when sale proceeds from the secured property were insufficient ‑ 1
•interest payments made to investors and borrowers cheque subsequently dishonoured ‑ 1
The overdrawn Project Account balances were cleared by:
•receipt of investor funds which were committed prior to settlement ‑ 4
•receipt of subsequent investors' funds ‑ 2
•transfer of balances owed to the borrower by journal entry from other projects ‑ 1
•partly from sales proceeds/partly from receipt of subsequent investor funds ‑ 1
•payment from borrower ‑ 1.
In all cases, funds were received into the particular projects within a relatively short period of time either from further investors' funds, from the borrower's own resources, from sales proceeds or by a transfer of balances. The receipts totally cleared the overdrawn Project Account balances and reinstated and restored the trust ledger accounts in full.

(vi) GFG Accounts

GFG charged investors collection fees for its services. They were charged by deducting a fee from the investors' monthly interest payments. This was accounted for by debiting the gross payment to the relevant Project Account and crediting the amount deducted (the fee) to the GFG Credit Account titled "Collection Fee".
The fees charged to borrowers are outlined above. Fees charged by GFG to both investors and borrowers were raised by way of journal entries whereby the charges were debited to the relevant Project Account and credited to the relevant GFG credit account.
In addition to GFG Credit Accounts there were GFG Debit Accounts. The Debit Account was styled "Series Bad Debts Account" into which Mr Margaria transferred the debit balances of some overdrawn Project Accounts by way of journal entry when he was of the opinion they were no longer collectable. Mr Margaria advised Mr Herbert that his intention in doing this was that GFG would assume the loss incurred by deducting the resulting debit balance from credit balances on GFG Credit Accounts.
As at 19 February 1999 the total of GFG Credit Accounts amounted to $283,506.28. The balances represented, at any time, GFG's ostensible entitlement to undrawn fees, which it retained in the trust account. GFG Credit Accounts comprised a number of separate ledger accounts including "Late Payment Penalties" (as at 19 February 1999 it was in the sum of $6,460.65) and "Money Market Interest" (as at 19 February 1999 it was in the sum of $15,319.76).
In relation to late payment penalties, from time to time borrowers were unable to remit interest as and when it was due. Instead of notifying investors that a default had occurred, GFG generally transferred balances from its GFG Credit Accounts into the relevant Project Account to enable the payment of interest to the investors to be made on the due date. When borrowers failed to remit the payment of interest by the due date the borrower would be charged a late payment penalty pursuant to the mortgage. When the payment was eventually made by the borrower, GFG would reverse the transfer to its GFG Credit Account, and credit the late payment penalty received from the borrower to the GFG Late Payment Penalty Account. In some instances when borrowers failed to remit interest payment on the due dates, GFG paid the interest due to the investors without transferring balances from its GFG Credit Account to cover the payments made and thus allowed the Project Account to become overdrawn until payment was received from the borrower. Although in such cases GFG had not provided a short term loan, it still transferred the late payment penalty from the Project Account into its Late Payment Penalty Account. The rationale for doing so was that the GFG Credit Accounts "covered" the overdrawn balance arising when the interest concerned was paid.

As to the Money Market Interest ledger, GFG generally had in excess of $1M deposited in its trust account. In order to maximise interest on the amounts deposited, GFG invested trust funds in various cash management accounts and term deposits ("Cash Investments").
Some of the interest earned on the Cash Investments was paid to investors with funds in the Money Market Account. The rate paid to investors was equivalent to the advertised ANZ Bank $50,000 - $100,000 cash management rate, which was below the actual rate GFG was receiving, given that the amounts invested were considerably larger than $100,000.
Prior to 1996, no formal consent was received from investors for the retention by GFG of the surplus interest earned on the Cash Investments. From September 1996, GFG obtained authorities from investors that acknowledged that GFG could retain the additional interest. The authority is in the following terms:
"I/We hereby acknowledge that any funds held by Global Finance Group Pty Ltd on our behalf pending placement into investment will be paid interest at the current ANZ Indicator money market rates of interest as declared from time to time for amounts of $50,000 to $99,000. I/We also consent to any surplus interest received above this rate by Global Finance Group Pty Ltd as a result of incentives provided to it by the Bank for bulk investments will be retained by Global Finance Group Pty Ltd to cover government charges and administration costs on investing these funds."
Borrowers were also paid interest for credit funds held in the Project Accounts. The rate paid to borrowers was generally one per cent less than the rate paid to investors. No formal consent was received from borrowers prior to 1996 for the retention of surplus interest by GFG. Sometime in 1996, the statement of costs indicated that GFG would retain the surplus interest. Since 1996 there were at least three variations to the clause. Two examples are in the following terms:
"Funds held on your behalf by Global Investments will be paid interest at the current money market rate of 5 per cent. Any surplus interest received by Global from its Bank as incentives for bulk investments will be retained to cover administration/government charges on these funds."
"Funds held on your behalf by Global Finance will be paid interest at the current money market rate of 3.5 per cent variable, indexed to movements in official cash rates. Any surplus interest received by Global from its Bank as incentives for bulk investments will be retained to cover administration/government charges on these funds."
Further, it was GFG's policy to charge brokerage fees at the commencement of a loan regardless of whether all funds were raised at the time. As at 19 February 1999 there was six Project Accounts in which brokerage fees had been charged to Project Accounts on the basis of the total amount of the loan when in fact the full amount of the loan had not been raised.

(vii) GMI Mortgages

As at 19 February 1999 GMI was registered as mortgagee on certificates of title relating to 21 projects. GMI did not advance any of the funds loaned to borrowers. It is not in dispute that GMI held the mortgages as trustee.
There are basically three different scenarios in which GMI was registered as mortgagee. They were when:
(i)not all loan proceeds were required immediately and a mortgage for the full amount of the proposed loan was prepared as soon as sufficient funds were raised to fund the settlement. In such cases, the investors who had accepted the project were documented as mortgagees, with GMI holding shares representing the unfunded portion of the loan. Once the remaining funds were raised, the shares held by GMI in the mortgage were usually transferred to the new investors;
(ii)a new loan settlement was urgent and mortgage documents in favour of GMI were prepared simultaneously with Proposal Letters being sent to prospective investors. Once funds were received, settlement was effected and the GMI mortgage was registered. Subsequently, the shares in the mortgage held by GMI were transferred to the investors;
(iii)a loan was raised for a project where the relevant property was due to be strata titled or subdivided in the near future and new individual certificates of title were to be issued by the Land Titles Office. In these cases, a mortgage in favour of GMI was registered at the commencement of the loan. When the new titles were issued, the GMI mortgage was discharged simultaneously with the registration of individual mortgages in favour of the investors over the lots or units they had accepted, and had been allocated to them.
In all cases in which GMI is registered as mortgagee, it is possible to determine from the trust ledger cards the investors for whom the mortgage interests were intended to be held. In ten cases where GMI is registered as mortgagee, transfers of shares from GMI to the relevant investors had been prepared by GFG and were being circulated amongst the investors for execution at the date of Mr Herbert's appointment. In four cases the preparation of transfers from GMI to the relevant investors was not completed, apparently in error. In the remaining three cases, funds were not raised to fulfil the GMI portion therefore transfers are not appropriate.

(viii) Trust Account Balance as at Appointment of Voluntary Administrators

As stated earlier, the total GFG trust account balance as at 19 February 1999 was $1,598,961. Cheques issued but not presented amounting to $218,358 were cancelled after the appointment of the voluntary administrators. However, despite the unpresented cheques being cancelled, GFG's bankers continued to honour unpresented cheques after the date of the appointment.

(ix) GFG Assets - Other

In addition to funds in the GFG trust account represented by the balances in the GFG credit accounts the following amounts were recorded in the books of GFG as at 19 February 1999:

ASSET

ESTIMATED REALISABLE VALUE

                   ($000)

Cash at bank

  11

Furniture and fittings

  12

Tax refund

  80

Subtotal

  103

Secured Loans

  55

TOTAL

  158

(x) Unsecured Creditors

Based on proofs of debt submitted in the liquidation the non‑trust claimants' claims total $528,031.24. Of that sum $475,100 is for the liquidator's fees and costs.

Questions for Determination

The questions for determination are as follows:
1.Whether the first or second applicants as the case may be are justified in treating the trust account records maintained by GFG and GMI as correctly recording the intention of GFG and GMI as trustees, on the basis that a presumption of regularity applies?
2.The effect (if any) at law and in equity:
(a)       on the trust account maintained by GFG;
(b)on the rights enjoyed by claimants on the trust account;
(c)       on the interests in mortgages held by GMI; and
(d)on claimants to interests in mortgages held by GMI,
of the fact that at times an individual ledger account within the trust account became overdrawn.
3.Whether the first or second applicants as the case may be are justified in distributing the trust funds of which GFG is the trustee on the following basis:
(a)That the trust account maintained by GFG and the assets held by GMI are a single mixed fund to be apportioned amongst all claimants on the trust account in proportion to their claims on the trust ("the First Alternative"); or
(b)That the balances recorded in the trust account maintained by GFG be distributed according to the balances as recorded, and the interests held by GMI in any mortgage be transferred to those claimants whose names are recorded in GFG's books as having paid money to GFG for the purpose of being advanced to the mortgagor, on first mortgage security ("the Second Alternative"); or
(c)(i)      The balance of money held for money market investors, as identified by GFG's ledger cards be returned to the money market investors in full, subject to a pro rata reduction for the first and second named first applicants' fees and costs, if required.
(ii)The credit balances of Project Accounts within Category A identified in the Schedule hereto be distributed to the relevant investors in cases where loans are in default or, otherwise, to the borrowers, subject to pro rata reduction for the first and second named first applicants' fees and costs, if required, and a pro rata reduction for the deficiency of the Project Accounts Overdrawn, if any.
(iii)The credit balances of Project Accounts within Category B identified in the Schedule hereto be grouped together to form pools of funds for each individual borrower group, and total funds held for each borrower group be distributed on a pro rata basis to the investors in each borrower group subject to a pro rata reduction for the first and second named first applicants' fees and costs, if required, and a pro rata reduction for the deficiency of the Project Accounts Overdrawn, if any, in accordance with the following formula:
Distribution to each investor in borrower group =
Xx Z
Y
Where:
X =    the individual investor's claim.
Y =the total of all individual investors' claims against each individual borrower group.
Z =the pool of funds for each borrower group.
The individual investor's claim, represented by "X" in the above formula, is calculated as follows:
X = (I + i¹) - (P + F)
Where:
I =Principal amount invested by the individual investor, less any partial return of principal, where applicable.
i¹ =    Sum of interest due from the date of investment to 19 February 1999, less the sum of interest paid to the investor, regardless of the source of payment.
P =The investor's pro rata share (based on the proportion of funds raised for a particular project) of the total legitimate payments made in respect of the subject property from funds applied/sourced from any Category B Project Account.
F =GFG's fees in accordance with the Statement of Costs.
(iv)All overdrawn project accounts be credited with sufficient funds from the GFG Credit Accounts to reduce the overdrawn accounts to a nil balance.
(v)GMI's interest in mortgages be transferred to the investors who, according to the books and records of GFG, provided the funding for the particular project.
(vi)All funds held on trust by the second applicant arising from the sale of the secured properties since the date of the second applicant's appointment, excluding any surpluses, be returned to the registered mortgagees from whom the funds were detained.
(vii)(Consideration deferred pursuant to the Order of Owen J made 20 March 2001).
(viii)(Consideration deferred pursuant to the Order of Owen J made 20 March 2001).
(ix)That the journal entry dated 14 August 1998 in the amount of $142,821.99 in the accounts styled Australian Equities Corporation Pty Ltd Account Numbers 1337‑41 and Garon Pty Ltd Account Numbers 1345‑65 and 1367‑72 be reversed and substituted with a journal entry dated 14 August 1998 in the amount of $99,697.15.
(x)The investments pertaining to Mr Margaria's related entities as listed below be made available for distribution amongst other trust account claimants on a pro rata basis:
Alpha Super Co Pty Ltd ("Alpha")
-Alpha's interest of $10,000 in a registered mortgage from Garon Pty Ltd over Unit 3, 223 Rockingham Road, Spearwood.
-Alpha's Money Market account of $174.19
Walbrook Investments Pty Ltd ("Walbrook")
-Walbrook's Money Market account of $32.62
Thirlmere Consulting and Financial Management Services ("Thirlmere")
-Thirlmere's Money Market account of $914.92
("the Third Alternative")
(d)That the trust balance of each project account be adjusted by:
(i)debiting the unauthorised transfer into each ledger;
(ii)crediting each of those unauthorised transfers to the ledger from which the trust funds came;
(iii)in the event that an unauthorised transfer came from either a borrower or a borrower groups' money market account, or other funds introduced by a borrower, then that authorised transfer be credited to that borrower's money market account.
(iv)any negative trust balances be made up firstly from the borrowers' money market account, and secondly from the GFG credit account;
(v)funds in the adjusted ledgers be distributed to the investors; and
(vi)GMI's interest in mortgages be transferred to the investors who, according to the books and records of GFG, provided the funding for the particular project.
("the Fourth Alternative")
4.Whether the first and second named first applicants in their capacity as liquidators of GMI are justified in treating interests in mortgages held by GMI as being held on trust for:
(a)those investors whose names are recorded in GFG's books as having paid money to GFG for the purposes of being advanced to the relevant mortgagor; or
(b)all beneficiaries of the GFG trust account?
5.Subject to the rendering of proper accounts, are the first and second named first applicants entitled to be remunerated and indemnified, as quantified by a Master, from assets whether held on trust or otherwise by GFG or GMI for the reasonable costs, charges and expenses of:
(a)       identifying or attempting to identify trust assets;
(b)conducting investigations into the records pertaining to the trust account by GFG and GMI;
(c)recovering or attempting to recover trust assets;
(d)realising or attempting to realise trust assets;
(e)protecting or attempting to protect trust assets; and
(f)distributing trust assets to the persons beneficially entitled to them?
6.Should the fees of counsel and instructing solicitors who appear on this matter be taxed and paid out of the assets owned by GFG and the funds held by GFG as trustee in priority to all other claims or at all, and the assets held by GMI?
7.Were the first applicants, in their capacity as voluntary administrators of GFG, lawfully entitled to pay the whole or any part and, if so, what part of the amount of $556,108.14 from the trust account between 19 February 1999 and 16 March 1999?

The Respondents

Pursuant to orders made by Owen J on 14 November 2000, the respondents to the application are as follows:

First Respondent -

The Treasurer of the State of Western Australia.

Second Respondents -

All persons identified in GFG's ledger cards as at 21 July 1999 as money market investors.

Third Respondents -

All persons listed on the schedule to the application of the second applicant dated 13 September 2000 as borrowers.

Fourth Respondents -

All persons listed on the schedule to the application of the second applicant dated 13 September 2000 as investors.

Fifth Respondents -

Alpha Super Co Pty Ltd, Walbrook Investments Pty Ltd and Thirlmere Consulting and Financial Management Services.

There was no appearance for the first, second and fifth respondents. A number of fourth respondents were separately represented either in person, by an agent or by legal counsel. It was brought to my attention in February 2002 that the first and second named applicants had a conflict of interest in that they, or a member of their firm, were at material times also the liquidators of a number of borrowers. New liquidators of the borrowers were appointed and appeared, by counsel, at an adjourned hearing on 14 March 2002.

The Trust Account and the Control Act

Subject to any statutory provision to the contrary, a trustee is not permitted to mix funds with its own or with other funds: Lupton v White (1803) 15 Ves 432; Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (2000) 171 ALR 568 at 579.
Section 48 of the Control Act requires a finance broker to maintain a trust account. Section 48 of the Control Act materially provides:
"(1)Every finance broker shall maintain at least one trust account, designated or evidenced as such, with a bank in the State and shall, as soon as practicable, pay to the credit of that account all moneys received by him for or on behalf of any person in respect of loans negotiated or arranged by the finance broker or in respect of interest on such loans collected by him.
(2)Moneys so paid into any such trust account shall not be available for the payment of the debt of any other creditor of the finance broker, or be liable to be attached or taken in execution under the order or process of any court at the instance of any such creditors.
(3)Loan moneys received by a finance broker in the course of negotiating or arranging a loan and moneys received by a finance broker in respect of interest on loans, shall not be withdrawn from his trust account except for the purpose of completing the loan or paying in accordance with subsection (4) the moneys in respect of interest on loans, or as otherwise authorized by this Act, or as otherwise authorized by the prior written consent of all the parties to the loan.
(4)A finance broker shall pay moneys withdrawn from a trust account to the person or persons lawfully entitled or authorised to receive them.
(5)A finance broker shall -
(a)keep full and accurate accounts of all money received or held by him on account of any other person and of all payments made by him of that money;
(b)before the end of the next business day after the day on which the money is received or paid enter in the accounts particulars of the amount so received or paid and the person from whom it was so received or to whom it was so paid;
(c)keep the accounts in such manner that they can be conveniently and properly audited; and
(d)correctly balance the accounts at the end of each month."
The term "trust accounts" is defined in s 47 as meaning accounts relating to moneys received or held by a finance broker for or on behalf of any other person in respect of loans negotiated or arranged by the finance broker. A "finance broker" is defined in s 4 as meaning a person who, as an agent, in the course of business negotiates or arranges loans of money for or on behalf of other persons.
Owen J in Mark Anthony Conlan (as Liquidator of Oakleigh Acquisitions Pty Ltd) and Ors v Registrar of Titles & Ors [2001] WASC 201 ("Conlan") held that s 48 of the Control Act authorises a finance broker to pay all trust moneys into one trust account but that the broker is under an obligation under s 48(5) to account separately for the moneys of individuals on whose behalf funds are held. I agree with Owen J. However, the Control Act does not authorise a broker to mix trust funds with its own funds.

The Law of Tracing - General Principles

Before addressing the specific questions, it is necessary to say something about the general legal principles that govern their resolution. The questions have been formulated by reference to the legal issues that arise in the law relating to tracing.
It seems to be generally accepted that tracing is a process not a right or remedy. It is a means of identifying property in the hands of a third party: Boscawen v Bajwa [1996] 1 WLR 328 per Millett LJ at 334; Foskett v McKeown [2000] 2 WLR 1299.
Sometimes a distinction is made between "following", where the property the subject of the claim has not changed in form or substance, and "tracing" where the original property has been altered by exchange or acquisition, the exchanged property referred to as the "traceable product". In the event a claimant's objective is to establish a proprietary right to the traceable product by virtue of title, legal or equitable, in the original property, the claimant must be able to trace its original property through its various forms to the traceable product. That being the process, it is necessary to have a clear understanding of the nature of the claimant's property interest and when and how it arose in order to assess whether the claimant can trace to the traceable product: Re Goldcorp Exchange Ltd [1994] 3 WLR 199 at 222.

Tracing rules exist at law and in equity. The rules differ. At law, a claimant can trace into but not out of a mixed fund, (Taylor v Plumer (1815) 3 M&S 562) unless perhaps the claimant can prove that part of its money was actually paid out of the fund: Lipkin Gorman (a firm) v Karpnale Ltd (1991) 2 AC 548. However, the equitable tracing rules allow a claimant to trace into and out of a mixed fund. The claimant has a charge or lien on so much of the mixed fund which remains (where the competition is between beneficiaries and a wrongdoer) and a charge or lien on property acquired with moneys traced from the fund: Boscawen v Bajwa (supra) at p 336. Further, it is probably still the case that the right to trace in equity (but not of course at law) requires that the property being traced has passed into or through the hands of a fiduciary: Re Diplock's Estate; Diplock v Wintle [1948] Ch 465 (CA) affd (1951) AC 251 (HL); cf Foskett v McKeown (supra) at 1324 per Lord Millett.
A mixed fund is one which contains funds from more than one source. It includes a bank account into which has been deposited funds belonging to a number of persons. In the case of funds standing to the credit of a bank account the relevant property is a chose in action, being a debt owed by the bank to the account holder. There is no difficulty in tracing property in the form of money or a negotiable instrument such as a cheque which is deposited into a bank account to its changed form of a chose in action against the bank: Foskett v McKeown (supra) at p 1323 per Lord Millett. However, it is convenient and more easily comprehensible to refer to the claimant's entitlement as being to the money in the bank account and I will refer to it in that manner.
Based on the GFG trust ledger accounts, the trust account contains money standing to the credit of GFG and other funds which GFG holds on trust for a variety of persons for whom it acted in its capacity as a finance broker. As the claimants claim equitable title to the funds, the equitable tracing rules apply. In order to trace in equity, a claimant must be able to establish that it held equitable title to the original property. Whether a claimant has equitable title to the property which is to be traced is to be answered according to the usual principles of property law: Re Goldcorp Exchange (supra) at p 227.
There are a number of general rules relating to tracing into a mixed fund. The rules are complex and not invariably applied. Further, it is necessary to distinguish the rules which apply to a mixing of trust funds with the trustee's own funds and the mixing of funds from different trusts, with or without the trustee's own funds. I will deal firstly with the rules relating to competing claims of beneficiaries and a defaulting trustee.
Firstly, where a trustee mixes its own money with trust money, makes a withdrawal and dissipates the money, the trustee is assumed to have had an honest intention and drawn out its own money first. The beneficiaries of the trust are entitled to an equitable charge or lien on the whole of the remaining unused fund for the amount of the trust money: Re Hallett's Estate (1880) 13 Ch D 696; Brady v Stapleton (1952) 88 CLR 322 at 337‑338.
However, the principle in Hallett's case will only be applied where it provides a more satisfactory remedy for a beneficiary against a defaulting trustee: Re Oatway [1903] 2 Ch 356. It was not applied in Re Oatway, where the money drawn out first was used to purchase shares and the balance of the trust fund was dissipated.
Secondly, subsequent deposits by a trustee of its own funds into a mixed fund are not presumed to be impressed with the trusts in favour of the beneficiaries: James Roscoe (Bolton) Ltd v Winder [1915] 1 Ch 62 at 69; Bishopsgate Investment Management Ltd (in liq) v Homan [1994] 3 WLR 1270. If the subsequent deposits are not impressed with the relevant trusts, the beneficiaries are only entitled to the lowest balance in the mixed fund between the date when the beneficiaries' money was deposited in the account and the date of the claim. This is known as "the lowest intermediate balance rule". The rule has also been applied in Australia: Re Laughton [1962] Tas SR 300; Re Joscelyne (1963) Tas SR 4; Whitehand v Jenkins, unreported; SCt of Vic (Ormiston J); 6 February 1987.
However, subsequent deposits by a trustee of its own funds into a mixed fund will be impressed with the trusts in favour of the beneficiaries if the trustee intended to make restitution to the trust by appropriating the funds to the replacement of the trust moneys: James Roscoe (Bolton) Ltd v Winder (supra) at 69; Taylor v London & County BankingCo [1901] 2 Ch 231; Re Grey (No 2) (1900) 26 VLR 529.
It is said that a court should not attribute to a defaulting trustee an intention to restore property to the beneficiaries merely by reason of the fact that the trustee has paid moneys into the account from which the trustee has, in breach of trust, withdrawn moneys because it would mean that the trustee, not the court, could settle beneficiaries' and unsecured creditors' claims inter se: Ford HAJ and Lee WA, "Principles of the Law of Trusts", 3rd ed, Law Book Company, Sydney, 1996, par 17276.
Where there is a mixture by the trustee of the trustee's own funds with funds from more than one trust, the rules which establish the beneficiaries' claims as against the trustee's funds are first applied and thereafter the claims of the beneficiaries of the trust funds inter se come into play.
Where a trustee mixes funds of different trusts and the amount in the mixed fund is inadequate to meet the beneficiaries' entitlements in full, the loss is usually allocated by applying one of three solutions or approaches. Those approaches are:
(i)in accordance with the rule in Clayton's Case, being "first in first out";
(ii)pursuant to the "North American" model whereby a withdrawal from the mixed fund is allocated in the same proportions as the different beneficiaries bear to each other at the moment before the withdrawal is made. That is, each debit to the fund is attributed to all existing claimants at the relevant time on a pro rata basis;
(iii)pari passu in accordance with a person's contributions or claims to the mixed fund.
The objectively determined intention of the claimants at the outset of the relevant scheme can determine the appropriate method of distributing a mixed fund which is inadequate to meet all valid claims: Barlow ClowesInternational Ltd (in liq) v Vaughan [1992] 4 All ER 22.
The rule in Clayton's Case provides with respect to, inter alia, a current account containing mixed funds, that in the absence of a contrary intention, expressed or implied, a court will presume the intention of the parties to be that drawings out of the trust fund are to be allocated between the depositors on the basis that withdrawals were made in the same order in which deposits were made, that is, according to the "first in first out" rule: Devaynes v Noble; Clayton's Case (1816) 1 Mer 572 as explained in Cory Brothers & Co Ltd v Owners of the Turkish Steamship Mecca (The Mecca) [1897] AC 286 at 290 and 296.
The North Americans have rejected the applicability of the rule in Clayton's Case to the resolution of competing entitlements of innocent beneficiaries to a mixed trust fund from which withdrawals have been made. They favour the North American model as detailed above on the basis that the rule in Clayton's Case is arbitrary, unfair and based on a fiction: Re Ontario Securities Commission and Greymac Credit Corp (1986) 55 OR (2d) 673.
The English Court of Appeal in Barlow Clowes International Ltd (per Dillon LJ at 33 per Woolf LJ at 39 and per Leggatt LJ at 44) felt constrained by authority to reject a submission that the rule in Clayton's Case should not apply to competing claims by innocent beneficiaries to a mixed fund in which there is a deficiency. However, the Court of Appeal in that case accepted a narrower submission that the rule in Clayton's Case would not be applied if it would be impractical or result in injustice between the persons entitled to the fund or would be contrary to the intention, expressed or implied, of the claimants.
In Barlow Clowes International Ltd, companies in liquidation had promoted and managed certain plans for investment in stock. However the funds were misapplied and at the time of the collapse the companies owed in excess of ₤115M to 11,000 investors. The amount available for distribution was far less than the amount of the claims. The Court found that the investors intended to participate in a collective investment scheme by which their money would be mixed together and invested through a common fund. The presumed intention of the investors as determined at the commencement of the scheme (not when it had fallen apart) was that the rule in Clayton's Case would not apply and that all of the assets available for distribution would be shared pari passu rateably in proportion to the amounts due to the investors. The assets available for distribution included moneys already invested, moneys awaiting investment and moneys diverted into other assets.
The rule in Clayton's Case has also been strongly criticised in Australia and has not been applied in recent times by any Australian Court to the distribution of a mixed trust fund: Re Shoreline Currencies (Australia) Pty Ltd (in liq), unreported; SCt of NSW (Kearney J); 14 October 1988 at 7 ‑ 8 (pari passu); Windsor Mortgage Nominees Pty Ltd v Cardwell (1979) CLC 40‑540 (pari passu); Hagan v Waterhouse (1992) 34 NSWLR 308 at 359 (pari passu); Australian Securities Commission v Melbourne Asset Management Nominees Pty Ltd (1994) 49 FCR 334 (pari passu); cf Hodges & Hurley v Kovacs Estate Agency Limited [1961] WAR 19 at 222 and Austin v Khaliffe [1966] 2 NSWLR 632.
An issue which arises in connection with the pari passu solution is whether the lowest intermediate balance rule applies. The Canadians have answered this question in the negative: Law Society of Upper Canada v Toronto - Dominion Bank (1998) 169 DLR (4th) 353. That was a case where a solicitor misappropriated moneys from his trust account at a bank. One day after the last misappropriation, a bank deposited moneys into the account. Shortly after the account was frozen. The account contained insufficient moneys to pay all the claimants. There had been many misappropriations over time but all had occurred before the bank deposited its moneys. The bank argued that the lowest intermediate balance rule should be applied.
The Ontario Court of Appeal rejected the application of the lowest intermediate balance rule on the basis that it was complex and expensive to apply as it required a consideration of each account transaction. Further it was said to be irrational and arbitrary because it threw the loss on claimants who chanced to make earlier contributions. The Court favoured what it described as the "pari passu ex post facto" solution which involves the rateable sharing of the moneys remaining in the account by all contributors without regard to the timing of their contribution. This appears to be the approach applied in Barlow Clowes (supra). It is apparent from Lord Woolf's reasons that the solution which found favour in that case was one which had regard to the investors' claims and the assets available without regard to their timing. He said (at p 36):
"The third solution (and the only other solution canvassed in argument) is the pari passu ex post facto solution. This involves establishing the total quantum of the assets available and sharing them on a proportionate basis among all the investors who could be said to have contributed to the acquisition of those assets, ignoring the dates on which they made their investment."
The Ontario Court of Appeal in Law Society of Canada (supra) rejected the notion that a person can only trace their own property with the consequence that once a beneficiary's money has left the fund because of misappropriations, it cannot be traced into subsequent additions to the fund that derive from the contributions of others, in the absence of some actual or presumed intention to replenish the fund.
The Canadian Court makes the point that although the mechanics of the lowest intermediate balance rule have never been fully explained the application of the rule in a multiple beneficiary situation bears striking similarity to the North American model rejected in Barlow Clowes as not a live contender because of its complexity and cost. It was said that no authority has ever applied the lowest intermediate balance rule in circumstances involving rival claims of trust beneficiaries.
However the lowest intermediate balance rule was approved in Re Goldcorp Exchange (supra) at p 222 and in Bishopsgate Investments (supra). In Re Goldcorp Exchange, a company sold unascertained gold bullion to purchasers for future delivery. The Court of Appeal held that those purchasers did not acquire title, in law or in equity, to the bullion or retain title to the purchase moneys. Accordingly they had no right to trace the bullion or the purchase moneys paid to the company. However, Goldcorp had acquired another company, Walker & Hall Ltd, whose customers were able to show that title to the bullion had passed to them. Those claimants asserted a general equitable charge over Goldcorp Exchange's assets on the basis of Lord Templeman's dicta in Space Investments Ltd v Canadian Imperial Bank of Commerce Trust Co (Bahamas) Ltd [1986] 1 WLR 1072. In that case the Court held that beneficiaries could not claim trust moneys lawfully deposited by a bank trustee with itself as banker in priority to other depositors and unsecured creditors. However, Lord Templeman considered the position which would arise if a bank trustee unlawfully borrowed trust moneys. He said (at p 1074):
"A bank in fact uses all deposit moneys for the general purposes of the bank. Whether a bank trustee lawfully receives deposits or wrongly treats trust money as on deposit from trusts, all the moneys are in fact dealt with an expended by the bank for the general purposes of the bank. In these circumstances it is impossible for the beneficiaries interested in trust money misappropriated from their trust to trace their money into any particular asset belonging to the trustee bank. But equity allows the beneficiaries … to trace the trust money to all the assets of the bank and to recover the trust money by the exercise of an equitable charge over all the assets of the bank."
The Walker & Hall bullion had been mixed with other bullion and there were withdrawals and additions to the stock of bullion without the intention of replacing the bullion of the Walker & Hall claimants. The Court said that in those circumstances the lowest intermediate balance rule applied. However the Walker & Hall claimants went further and sought an equitable lien on all the company's property which was refused on the ground it would be inequitable. The Privy Council left for another day the correctness of Lord Templeman's dicta in Space Investments.
Re Goldcorp Exchange supports the view that the theoretical underpinning of the law of equitable tracing is property law and not unjust enrichment. The plaintiff's property right to the traceable product is a response to and vindication of the plaintiff's rights in the original asset. However, this should not obscure the fact that a claimant who is entitled in equity to trace out of a mixed fund relies not on proving title to its specific property but on its equitable interest in the whole of the mixed fund pursuant to an equitable charge or lien: Boscawen v Bajwa (supra) at p 336.
Finally, a claimant's right to trace is lost (and thus the equitable title arising by virtue of the equitable lien is defeated) if the property reaches the hands of a bona fide purchaser for value without notice: Re Diplocks Estate (supra) at 524.

Question 1 - Whether the Trust Account Records Reflect the Intentions of GFG and GMI

The question is somewhat obliquely framed. I take it to refer to a number of separate but related issues concerning:
(a)the accuracy and completeness (that is, reliability) of the trust account records;
(b)whether the trust account records reflect GFG's and GMI's intentions relating to the appropriation of funds to and from the ledger accounts; and
(c)the legal validity of the appropriations and the entitlements of the claimants to the moneys as recorded in the trust ledger accounts.
Dealing firstly with reliability. The uncontradicted evidence of Mr Herbert is that:
(a)immediately after his appointment on 19 February 1999 he engaged the services of the accounting firm BKR Walker Wayland to reconcile the trust account and to assist him in evaluating the validity of amounts held in the trust account on behalf of borrowers, investors and GFG. The finding of that reconciliation was that the balance of the trust account was supported by the ledger cards maintained by GFG, and confirmed that the balance of funds in the trust account as at the date of his appointment agreed with the balance of money in the trust account and the bank statements as at that date;
(b)the balances on all trust ledger accounts were extracted by GFG at the end of each month and listed on a trial balance and the total of all balances reconciled with the trust account balance per the bank statements;
(c)during the course of carrying out his duties, Mr Herbert and his staff perused virtually all ledger cards comprising the trust ledger. During the perusal, the arithmetical accuracy of the trust ledger was checked. Although it was prepared manually, it was, in general, arithmetically accurate. That is with the exception of a few errors which could easily be corrected, it accurately recorded the transactions which occurred through the medium of the trust account;
(d)whilst there were many instances where unauthorised payments were made, they were, with few exceptions, accurately recorded and are easily identified;
(e)the trust ledgers had been available to GFG's investors for approximately two years and they had not contested that the ledger cards accurately record the transactions;
(f)based on a review of approximately 75 per cent of transactions on the ledger cards, and of the reconciliation of the ledger cards to the balance in the bank by BKR Walker Wayland, Mr Herbert is confident that the ledger cards record the transactions effected by GFG in the trust account - both authorised and unauthorised - with substantial accuracy;
(g)the available accounting records of GFG were sufficient for him to form a view that, with a few exceptions which are easily corrected, the transactions in relation to investors' and borrowers' money were recorded with substantial accuracy in the trust account ledgers.
There was one occasion when a cheque was drawn on the GFG trust account and made payable to the trust account. Mr Herbert explains the transaction in detail (Ex 4). I am satisfied that this single event explained as it is by Mr Herbert, does not derogate from Mr Herbert's conclusions.
Thus, the evidence establishes and I find, that GFG had and used an accounting system which enables the applicants to accurately "track" (using the word in a non‑technical sense) all the payments into and out of the trust ledger accounts being the Money Market Account, the Project Accounts and the GFG Accounts. The trust account records are in this sense, reliable.
By reason of the nature and reliability of GFG's accounting system, I find that, subject to one caveat, the trust account ledger records reflect GFG's intentions relating to the appropriation of funds to and from the ledger accounts. The caveat relates to GFG's intentions on those occasions when Project Accounts were overdrawn. I address this issue when answering Question 2.

However, that doctrine does not foreclose an in personam claim to surpluses based on, inter alia, subrogation or restitution for which a proprietary remedy may in particular circumstances be available. These matters were not addressed in any detail by any of the parties but in fact provide a basis for a claim to the surpluses arising from the sale of the security property.
Mr Herbert recommends that any surpluses arising from the sale of the security properties in relation to Category B projects be added to the pool for investors in Category B projects (ie those who carry the loss under the Third Alternative). Although not elaborated on by the applicants or any other party, I understand the reference to "surpluses" to be the net sale proceeds for the security property less the amount due and owing to the registered mortgagees determined by reference to the funds actually advanced by the holders of the registered security, rather than by reference to the total amounts received by or to the benefit of the borrower which would include unauthorised receipts to the relevant project.
Thus, the surplus potentially falls into two categories. Firstly, the amount being the difference between the amount received by or for the benefit of the borrower which is secured by the mortgage and the amount to which the mortgagees are entitled (having regard to the amount they advanced). In those circumstances, the surplus would arise from funds of other Category B investors. Those investors who have borne the loss could trace to that mortgage (and thus to the proceeds of sale) in respect of that surplus. Secondly, the surplus could also be the difference between the net sale price and the total amount secured by the mortgage. Casella Project 1255 appears to fall in this category. Prima facie that surplus belongs to the borrower. However, to the extent that a borrower had knowledge of or was a party to GFG's wrongful conduct (as principal or to the extent GFG was acting as the agent of the borrower) the persons who suffered a loss from the trust fund would have a propriety remedy to these funds under the principle in Barnes v Addy (1874) 9 LR Ch App 244 at 251-2. I am not satisfied on the evidence that GFG was acting as the borrowers agent in disbursing the trust funds. I make no determination on that matter. However, I am satisfied on the basis of Mr Margaria's statements (Ex 4, Annex JLH2) that GFG acted with the knowledge of a number of the Category B borrowers (Casella, Sadek, King and Johnson) in relation to the recorded transfers of funds used for unauthorised purposes. Accordingly, I agree with Mr Herbert's recommendation relating to the use of the surplus from the sale of Category B Project Account mortgages (save for the Hillsfield and Olympic groups in relation to the second type of surplus). Based on the principle in Barnes v Addy whether relying on the knowing receipt or knowing assistance limb, these funds, which include the funds in Project 1255 should be added to the pool for the relevant Category B borrowers. However, the surpluses should not be returned to the mortgagees of the Projects from which funds were wrongfully obtained except to the extent of their proven shortfall (loss) from the trust fund.
Whilst on the subject of surpluses I propose to deal with Casella Projects 1063 and 1345‑72. It is appropriate that moneys standing to the credit of each of the Project Accounts be paid into the Casella pool. Although all of the investors to Project 1063 have been paid in full, moneys had been transferred in from other Project Accounts. The money in Projects 1345‑72 is part of the proceeds or sale of an unencumbered unit. The evidence establishes that GFG, on Casella's instructions, applied funds belonging to the Casella group to meet the shortfall on other Project Accounts caused by the use of trust funds for unauthorised purposes. This was an integral part of the GFG/Casella approach to the funds in the Casella related Project Accounts as a whole. I am satisfied that it was intended by Casella that the funds be for the account and benefit of the investors, that is, to replenish the trust fund.
Accordingly, subject to the stated qualifications the answer to Question 3(c)(vi) is in the affirmative.

Question 3(c)(ix) – Reversal of Journal Entry

Mr Herbert proposes that a journal entry dated 14 August 1998 for $142,821.99 in the accounts of Australian Equities Corporation Pty Ltd ("AEC") Account Nos 1337 – 41 and Garon Pty Ltd Account Nos 1345 – 65 and 1367 ‑ 72 be reversed and substituted with a journal entry dated 14 August 1998 in the amount of $99,697.15. The facts concerning this matter are set out in Mr Herbert's affidavits, being Exhibit 4 par 13.4 and Exhibit 8 par 6. The uncontradicted facts are that:
(a)AEC purchased properties from Garon which involved the exchange of various properties plus the payment of cash;
(b)the contemporaneous documents from the settlement agent handling the purchase indicated that an amount of $142,821.99 was payable to the vendor, Garon, and the amount was to be paid in two payments, $43,124.84 payable to Garon and $99,697.15 payable for GFG;
(c)AEC's ledger card reveals that on 14 August 1998 a cheque was drawn in favour of Garon for $43,124.84 and then a journal was processed debiting AEC's account and crediting Garon's account with an amount of $142,821.99. However the journal entry should have been $99,697.15. Accordingly Garon was overpaid by $43,124.80;
(d)a trace of the $43,124.84 cheque payable to Garon showed that it was credited to Professional Settlement Services' account with the National Australia Bank Limited;
(e)the Trust ledger card for AEC shows a debit balance of $683.13 and the Trust ledger card for the relevant Garon account shows a credit balance of $29,583.14.
The reversal of the entry on 14 August 1998 and the addition of another journal entry dated 14 August 1998 in the amount of $99,697.15 would give rise to a debit balance of $13,541.70 in the Garon ledger. It is proposed that the debit balance be treated in the same manner as other overdrawn trust ledgers. Mr Herbert's proposal's are appropriate in the circumstances. Accordingly, the answer to Question 3(c)(ix) is in the affirmative.

Question 3(c)(x) – Mr Margaria's Related Entities

The uncontradicted evidence is that:
(a)the shares in Walbrook Investments Pty Ltd ("Walbrook") were at the material times held by GFG (one share), Mr John Margaria (one share) and Alpha Super Co Pty Ltd ("Alpha") (198 shares). Mr Margaria is the sole director of Walbrook;
(b)the shares in Alpha are held by Mr Margaria (one share) and Mrs Margaria (one share). Mr and Mrs Margaria are directors of Alpha;
(c)Mr and Mrs Margaria also traded under the name Thirlmere Consulting and Financial Management Services ("Thirlmere"). It appears Thirlmere supplied bookkeeping services to GFG.
Mr Margaria's related entities have the following investments with GFG:
(a)Alpha has an interest of $10,000 in a registered mortgage from Garon over a unit in Spearwood;
(b)Alpha has a Money Market Account in the GFG Trust Account with a credit balance of $174.19;
(c)Walbrook has a Money Market Account in the GFG Trust Account with a credit balance of $32.62;
(d)Thirlmere has a Money Market Account in the GFG Trust Account with a credit balance of $914.92.
I am not satisfied on the basis of the information in the affidavits filed in this matter that I am properly able to make any determination which would justify the court ordering the forfeiture of the relevant assets. It appears there is a separate action (CIV 2106 of 2000) in which mareva orders were sought in relation to Mr Margaria's assets. In the circumstances, the appropriate course is that the investments be held in trust pending the determination of the question whether Mr Margaria's conduct has been such that the claimants on GFG's trust account have a proprietary remedy in relation to those assets.

Question 3(d) – The Fourth Alternative

For the reasons given earlier, this question is answered in the negative.

Question 4 – GMI Mortgages

For the reasons given earlier, Question 4(a) is to be answered in the affirmative and Question 4(b) in the negative.

Question 5 – Liquidators' Costs

Mr Herbert (in Ex 4 sworn in September 2000) deposed that the administrators and liquidators fees and costs (including costs payable to their solicitors, Clayton Utz) were approximately $276,000. His initial recommendation was that the fees be recovered from a number of sources including GFG's non‑trust assets as well as from trust assets.
However, in a subsequent affidavit sworn on July 2001 (Ex 9), Mr Herbert advised, and it was confirmed by the applicants' counsel at the hearing, that the liquidator's fees and costs for the protection, preservation and administration of the trust account, being the costs referred to in Ex 4 had been paid by the Finance Brokers' Supervisory Board.
There was no evidence concerning the costs incurred by Mr Herbert in his capacity as supervisor of GFG. I speculate that that may be as a result of the decision of Owen J in Conlan that on a proper construction of the Control Act the powers of the supervisor are limited and do not extend to sorting out a trust account and assessing competing claims on it. However, it is unclear from Mr Herbert's March affidavit whether the outstanding costs which have not yet been paid by the Boards (totalling $28,524.09) were incurred in his capacity as supervisor or liquidator. However, the question refers solely to costs incurred by the liquidators and I answer it on that basis.
As to the position of the liquidators, they have an equitable lien over the trust assets (excluding of course the proceeds of sale of security property payable to the mortgagees) for costs which have been reasonably incurred in the care, preservation and realisation of the trust property: Re Universal Distributing Co Ltd (in liq) (1993) 48 CLR 171 at 174: Mark AnthonyConlan (as Liquidator of Oakleigh Acquisitions Pty Ltd) & Ors [2001] WASC 230 at par 12-15. That covers the matters in par (a) to (f) of Question 5. Accordingly, the question is answered in the affirmative.

Question 6 – Payment of Legal Advisors

This action raised issues of some novelty and complexity. In the circumstances it was reasonable for those groups of investors who elected to do so to be represented by legal counsel and solicitors. The Court has the power to award costs out of the trust funds: s 37 of the Supreme Court Act. Accordingly, I have concluded that the fees of counsel and instructing solicitors who appeared in this matter ought to be paid out of the funds held by GFG as trustee, firstly from any surplus in the GFG Credit accounts after the allocations referred to earlier, otherwise by a pro rata deduction from the payments made to all categories of the beneficiaries.

Question 7 – Interim Payments to Investors

Mr Herbert gave evidence (Ex 5, par 3‑6) that between 19 February 1999 and 16 March 1999 payments totalling $556,108.14 were made to investors. Mr Herbert was ordered to provide further details of the payments and did so (Ex 6, Annex JLH15). The evidence establishes that in the period 22 February 1999 to 23 August 1999 a total of $553,935.14 was paid from the trust account. The discrepancy with the earlier figure was satisfactorily explained. The payments from the trust account are categorised as follows:
(a)unpresented cheques processed by GFG's bankers. As stated previously, on Mr Herbert's appointment as voluntary administrator he cancelled the unpresented cheques, which were subsequently honoured by the Bank without authority;
(b)interest payment received from borrowers. This represents interest payments made to investors (who, according to the records of GFG, advanced the funds to the relevant borrower) from funds that were receipted into the trust account from borrowers specifically to make those interest payments;
(c)interest payments due. This represents payments that were made to investors (who, according to the records of GFG, advanced the funds to the relevant borrower) from the credit balance of the trust ledger account for the project in which they invested. In all cases, the credit balance of the respective ledger account partly represented funds held to make interest payments to the investors for the initial term of the loan;
(d)proceeds from the discharge of registered mortgages. This represents payments made to the registered mortgagees in satisfaction of their mortgage interest. The payments were made after GFG attended settlement on behalf of the registered mortgagees and collected the discharge proceeds from the borrower.
Pursuant to s 437A(1) of the Corporations Act, the administrator of a company while it is under administration may carry on the company's business and manage its property and affairs and may perform any function and exercise any power that the company or any of its officers could perform or exercise if the company were not under administration. Further, when performing a function, or exercising a power, as administrator of a company under administration, the administrator is taken to be acting as the company's agent: s 437B of the Corporations Act.
Messrs Herbert and Read were appointed liquidators of GFG on 20 April 1999. Notwithstanding the appointment, GFG remained the trustee of the assets held for the various beneficiaries, in the absence of an order under s 474(2) of the Corporations Act.
The unsecured creditors of GFG are not affected in any way by the payments out of the trust account. The trust funds are not available to the unsecured creditors. The question is whether the payments made by the first applicants on behalf of GFG were in breach of trust. I see no proper grounds on which to reach that conclusion in relation to the payments referred to in pars (b), (c) and (d) above. The moneys were paid to relevant beneficiaries for authorised purposes from a single trust account permitted by law. The fact that there is a shortfall in the trust account does not itself render the making of the payments a breach of trust. However, if it could be established that the applicants were at fault, they may be held accountable for any additional loss consequently carried by the remaining beneficiaries. Fault was not in issue in these proceedings. In any event, as a result of the outcome of this action, it appears (and this is by way of obiter) that no relevant loss will be suffered by the investors.
The payments in sub‑par (a) were made directly against Mr Herbert's instructions and he has reserved GFG's rights against the bank if any losses are suffered in relation thereto. Accordingly, the answer to Question 7 is in the negative in relation to the payments intentionally made by the applicants.

Other Matters

(i) Project 1018

Mr Stevenson appeared, with leave, for Margen Pty Ltd, an investor in Project 1018/1019, a Category B Project. The borrower was Selec Pty Ltd, a member of the Casella Group.
Mr Stevenson filed a written outline of submissions on behalf of Margen in the form of an unsworn affidavit. Mr Herbert deposes to the facts relating to this matter in Ex 8. It is common cause that the credit balance in the Project Account is $233,661.31 (plus accrued interest).
In his submissions, Mr Stevenson says that the borrower paid $250,000 into the Project Account on 30 November 1998 for the purpose of making monthly interest payments as well as for construction funds to complete the Works.
Mr Herbert deposes that the amount of $250,000 was a transfer of funds from Project 1324 where the borrower was Travilla Pty Ltd, another company in the Casella Group. The facts are as follows. During October – November 1998 GFG raised funds totalling $600,000 from various lenders against the security of a property at Calca Peninsular, Streaky Bay, South Australia which was Project 1324. The Proposal Letter to potential investors in Project 1324 stated the purpose of the facility as:
"Funds have been requested to repay into company loans, which assisted with the purchase of the security property in a trade deal where 10 commercial factory warehouse units were traded for $1,350,000 in exchange for the Streaky Bay property at $1,200,000. The transaction settled in August when the National Australia Bank was paid out and the freehold certificate of the title is now available for the re‑finance, the subject of this proposal. The proceeds of which will be used to make interest payments on existing loans."
Of the funds raised for Project 1324, the sum of $518,640 was transferred on 13 November 1998 to a trust ledger card marked "Casella Group Working Capital Account ("Working Account"). On the same day, $250,000 was transferred from the Working Account to Project 1018/1019 and was recorded as "Loan to Selec 1018/1019".
Mr Herbert provides a summary of the trust ledger for Project 1018/1019 as follows:

$
Mortgagees' funds raised	650,000
Credit money market interest	20,158
Receipts from the Borrower	6,979
Loan refinance (payout to Commonwealth Bank of Australia Ltd)	(340,000)
Stamp duty & legal costs	(3,277)
GFG's brokerage and fees	(39,738)
Interest paid to Mortgagees	(288,414)
Balance (excluding transfers of funds between projects)	5,708
Inward transfers of funds (inclusive of the $250,000 referred to in cl 2.3) 597,953 Less outward transfers (370,000
Net transfers	227,953
Balance of ledger	233,661

The Proposal Letter to investors in Project 1018 stated that a loan of $600,000 was required to finance the construction of a medical centre and security was to be a first mortgage over a proposed new strata title unit. Investors were informed by the Proposal Letter that the market value of the unit was considered to be $995,000 and that twelve months interest and the construction funds would be held in trust by GFG with funds being released on a progressive draw down basis as the work was completed and inspected by GFG. Mr Stevenson's submission is that the advance to Travilla was available to Mr Casella to do with as he wished.
I agree with Mr Herbert that the appropriate characterisation on the facts is that the funds raised against the Streaky Bay property were for general interest payments of the various Casella Group loans through GFG. Further, the records show that the funds from Project 1324 were on loan to Project 1018/1019. In the circumstances, the funds in the credit of Project 1018/1019 should be pooled with all other funds in the Casella Group.

(ii) Projects 1163 and 1238 - Ryder

Mr Herbert in his affidavit sworn on 12 September 2000 (Ex 4), deals with matters relating to Project 1163 concerning a dispute between a number of people, including Mrs P G Ryder, to moneys standing to the credit of a Money Market Account.
On 12 December 2001 Owen J ordered in relation to the dispute that:
"Until further order the funds on trust in the accounts styled Mr and Mrs Fletcher Money Market account and Mrs Ryder Money Market Account be held on trust pending determination of competing claims by Mr and Mrs Connolly, Mr and Mrs Mellor, Mrs Pass and Mr Pilpel."
On 20 March 2001 Owen J ordered, inter alia, that this matter not be determined until after the determination of the questions set out earlier in these reasons.
Mr Ryder, who appeared at the hearing, filed an affidavit sworn on 11 March 2001 concerning this matter. Mr Herbert foreshadowed (in Ex 8) that he proposes to file a further affidavit in response to Mr Ryder's affidavit for the purposes of the deferred hearing. Mr Ryder was informed at the hearing that the matter would be heard and determined at a later date in accordance with Owen J's orders.

(iii) Project 1378 – Newrose Holdings Pty Ltd

Project 1378 in which the borrower is Newrose Holdings is a Category B Project Account. Newrose Holdings is a part of the Sadek Group.
It is submitted on behalf of the investors that Project 1378 should be placed in Category A because there has been no unauthorised transfers into the Project Account. There was a small ($5,000) unauthorised transfer out. The trust balance in Project Account 1378 as at 19 February 1999 was $102,445. It is said that the trust fund should be paid to the investors pursuant to the Second Alternative or alternatively pursuant to the Third Alternative for Category A projects.
The investors relied on an affidavit sworn by Mr Brian Burton on 28 June 2001 in support of their claim. By a mortgage dated 27 August 1988 Newrose Holdings mortgaged land in a number of certificates of title to secure the principal sum of $3,750,000. The term of the mortgage was 12 months, expiring on 14 August 1999 at which time the principal became due and owing. This was not a Works mortgage. It appears Newrose Holdings defaulted on the mortgage and has failed to repay the principal sum. The investors have obtained judgment for the moneys owing under the personal covenants and an order for possession of the land. The judgment debt has not been satisfied and possession of the land was subsequently taken by the investors. The land has been valued at significantly less than the judgment debt.
The Project Account establishes that there has been no transfer of moneys into the Project Account and that the funds in that account can be tracked to the investors. The rationale for grouping Newrose Holdings in the Sadek Group does not fully apply because there has been no mixing of funds belonging to other investors.
Mr Herbert also reviewed all projects in Category B and identified eight projects (including Project 1378) in which there had been no unauthorised payments into the project account. Of the eight project accounts, three (including Project 1378) would benefit from reclassification to Category A, whereas the other projects would benefit from remaining classified as Category B due to large amounts of funds transferred or paid out without authority from the respective investors.
In the circumstances, I see no reason why the investors in the three projects which suffered as a result of having transfers out of their Project Accounts should be prejudiced as a result of inclusion in Category B. Those investors should have the right to elect to be treated in the same way as Category A project investors. However, in other respects the projects should be treated as Category B. In particular, any surpluses on sale of the security property should be added to the pool for Category B projects.

Power to Make Orders

I had some initial reservations concerning the power of the Court to give binding directions affecting all relevant parties pursuant to s 89 and s 92 of the Trustees Act. The reservations stemmed from concern as to whether the applicants' recommendations effected a variation to any of the relevant trusts. After due consideration, I have concluded that they do not. I am faced with the task of deciding how to allocate losses arising out of a trust fund in which there is a shortfall. That process does not result in a variation to beneficiaries' rights. No party represented at the hearing submitted that the Court did not have the power to make the directions.

Conclusions

In general terms I answer the questions in the following way:
1.A qualified yes
2.No determinative effect
3(a)No
3(b)No
3(c)(i)Yes
3(c)(ii)A qualified yes
3(c)(iii)Yes
3(c)(iv)Yes
3(c)(v)Yes
3(c)(vi)A qualified yes
3(c)(ix)Yes
3(c)(x)No
3(d)No
4(a)Yes
4(b)No
5Yes, in relation to the first and second named first applicants
6Yes
7Yes, in relation to the payments authorised by them.
There were a number of additional matters on which the first applicants made recommendations not expressly encompassed in the questions. In the circumstances of this case the appropriate course is that the proceedings be stood over to a date to be fixed for the purpose of making directions which give effect to these reasons. The parties are to provide at least three days before the adjourned hearing an agreed minute of the directions to be made which give effect to these reasons. If agreement has not been reached, the first applicants are to file a minute of proposed directions for which they will contend and identify in the minute of the proposed directions to which any party objects.

Schedule A

Name	Counsel	Solicitor
Garon Pty Ltd	Mr D K Cooper	Price Sierakowski
Gracewood Nominees Pty Ltd	Mr D K Cooper	Price Sierakowski
Edgedale Pty Ltd	Mr D K Cooper	Price Sierakowski
Selec Pty Ltd	Mr D K Cooper	Price Sierakowski
Terrace Road Pty Ltd	Mr D K Cooper	Price Sierakowski
Australasia Property Link Pty Ltd	Mr D K Cooper	Price Sierakowski

Schedule B

Name	Counsel	Solicitor
Loreto Lewis	Mr D H Solomon	Solomon Brothers
Colin Lant	Mr D H Solomon	Solomon Brothers
Maureen Lant	Mr D H Solomon	Solomon Brothers
Kim Joyce Wood	Mr D H Solomon	Solomon Brothers
June Katherine Barbara Clark	Mr D H Solomon	Solomon Brothers
Herbert Alan Chandler	Mr D H Solomon	Solomon Brothers
Harold Vivian Moore Stewart	Mr D H Solomon	Solomon Brothers
Helen Elizabeth Stewart	Mr D H Solomon	Solomon Brothers
Walter Thomas Ramage	Mr D H Solomon	Solomon Brothers
John Melville Newman	Mr D H Solomon	Solomon Brothers
Mary Newman	Mr D H Solomon	Solomon Brothers
Woodward Holdings Pty Ltd	Mr D H Solomon	Solomon Brothers
Micathaul Holdings Pty Ltd	Mr D H Solomon	Solomon Brothers
Carl Erik Lens	Mr D H Solomon	Solomon Brothers
Dorothy Burn	Mr D H Solomon	Solomon Brothers
Ronald John Baulch	Mr D H Solomon	Solomon Brothers
Margaret Carleen Baulch	Mr D H Solomon	Solomon Brothers
Kenneth Herbert Foster	Mr D H Solomon	Solomon Brothers
Mary Foster	Mr D H Solomon	Solomon Brothers
Danilo Natale Moscarda	Mr D H Solomon	Solomon Brothers
Kent James Albert Mullner	Mr D H Solomon	Solomon Brothers
Ruth Gwendoline Mullner	Mr D H Solomon	Solomon Brothers
Wilhelm Lohmeyer	Mr D H Solomon	Solomon Brothers
Hisae Lohmeyer	Mr D H Solomon	Solomon Brothers
Suzanne Zarach	Mr D H Solomon	Solomon Brothers
Jabara Pty Ltd	Mr D H Solomon	Solomon Brothers
Leonard Heweston Mellor	Mr D H Solomon	Solomon Brothers
Erica Mellor	Mr D H Solomon	Solomon Brothers
Lewis William Hall	Mr D H Solomon	Solomon Brothers
Hamersley Furnishings Pty Ltd	Mr D H Solomon	Solomon Brothers
John Dutton	Ms C A Bahemia	Hammond Worthington
Kerry Dutton	Ms C A Bahemia	Hammond Worthington
Herbert Chandler	Ms C A Bahemia	Hammond Worthington
Terrence Young	Ms C A Bahemia	Hammond Worthington
Leanne Young	Ms C A Bahemia	Hammond Worthington
Donald Young	Ms C A Bahemia	Hammond Worthington
Kenneth Peachey	Ms C A Bahemia	Hammond Worthington
Evelyn Peachey	Ms C A Bahemia	Hammond Worthington
Willow Creek Strawberry Pty Ltd	Ms C A Bahemia	Hammond Worthington
Estate of Kathleen Mary Pritchard	Ms C A Bahemia	Hammond Worthington
S Albert Fletcher	Ms C A Bahemia	Hammond Worthington
Alma Fletcher	Ms C A Bahemia	Hammond Worthington
George West	Ms C A Bahemia	Hammond Worthington
Cheryl West	Ms C A Bahemia	Hammond Worthington
Ronald Harding	Ms C A Bahemia	Hammond Worthington
Shirley Harding	Ms C A Bahemia	Hammond Worthington
Dudley Honey	Ms C A Bahemia	Hammond Worthington
Ralph Potts	Ms C A Bahemia	Hammond Worthington
Betty Potts	Ms C A Bahemia	Hammond Worthington
Robert Hallsworth	Ms C A Bahemia	Hammond Worthington
Leonard Mellor	Ms C A Bahemia	Hammond Worthington
Erica Mellor	Ms C A Bahemia	Hammond Worthington
Leslie Hewitt	Ms C A Bahemia	Hammond Worthington
Geoffrey Pilpel	Ms C A Bahemia	Hammond Worthington
Robert Barker	Ms C A Bahemia	Hammond Worthington
Colin Weeks	Ms C A Bahemia	Hammond Worthington
Ian Kaye-Eddie	Ms C A Bahemia	Hammond Worthington
Kenneth Ford	Ms C A Bahemia	Hammond Worthington
Harold Potts	Ms C A Bahemia	Hammond Worthington
David Honey	Ms C A Bahemia	Hammond Worthington
Camberwell Holdings Pty Ltd	Ms C A Bahemia	Hammond Worthington
Rosmead Pty Ltd	Ms C A Bahemia	Hammond Worthington
William Price	Ms C A Bahemia	Hammond Worthington
Susan Price	Ms C A Bahemia	Hammond Worthington
Joan Duffin	Ms C A Bahemia	Hammond Worthington
Wimbush & Sons Pty Ltd	Ms C A Bahemia	Hammond Worthington
Norah Patricia McDonald	Ms C A Bahemia	Hammond Worthington
Forbes Nominees Pty Ltd	Ms C A Bahemia	Hammond Worthington
Raymond Gilbert Ford	Ms C A Bahemia	Hammond Worthington
Jennifer Phyllis Waddington	Ms C A Bahemia	Hammond Worthington
Graham Edward Ford	Ms C A Bahemia	Hammond Worthington
Lynette Margaret Ford	Ms C A Bahemia	Hammond Worthington
Raymond Ford	Ms C A Bahemia	Hammond Worthington
Diana Dixon	Ms C A Bahemia	Hammond Worthington
Donald Robinson	Ms C A Bahemia	Hammond Worthington
Douglas Craigie	Ms C A Bahemia	Hammond Worthington
Mutual Homes Pty Ltd	Ms C A Bahemia	Hammond Worthington
Russell Edwin Masters	Ms C A Bahemia	Hammond Worthington
Jeanette Rachel Masters	Ms C A Bahemia	Hammond Worthington
Viana Motroni	Ms C A Bahemia	Hammond Worthington
Tommaso Delbene	Ms C A Bahemia	Hammond Worthington
Nadeide Delbene	Ms C A Bahemia	Hammond Worthington
Elizabeth Anne Middlemas	Ms C A Bahemia	Hammond Worthington
Patricia Hannah Hewett	Ms C A Bahemia	Hammond Worthington
Joan Patricia Ingrilli	Ms C A Bahemia	Hammond Worthington
John Pocklington	Ms C A Bahemia	Hammond Worthington
Joannes Wilhelmus Kristel	Ms C A Bahemia	Hammond Worthington
Petronella Wilhelmina Kristel	Ms C A Bahemia	Hammond Worthington
Faytoon Pty Ltd	Ms C A Bahemia	Hammond Worthington
Robert Carr	Ms C A Bahemia	Hammond Worthington
Janene Guy	Ms C A Bahemia	Hammond Worthington
Harold Larke	Ms C A Bahemia	Hammond Worthington
Shirley Larke	Ms C A Bahemia	Hammond Worthington
Lorraine Helliar	Ms C A Bahemia	Hammond Worthington
Rosmead Pty Ltd	Ms C A Bahemia	Hammond Worthington
Benice Louth	Ms C A Bahemia	Hammond Worthington
Millcrest Pty Ltd	Ms C A Bahemia	Hammond Worthington
Leslie Thompson	Ms C A Bahemia	Hammond Worthington
Ethel Thompson	Ms C A Bahemia	Hammond Worthington
Hallsworth-Kabouw	Ms C A Bahemia	Hammond Worthington
Ethel Hulbert	Ms C A Bahemia	Hammond Worthington
John Hulbert	Ms C A Bahemia	Hammond Worthington
Alex Moulton	Ms C A Bahemia	Hammond Worthington
Anne Hart	Ms C A Bahemia	Hammond Worthington
Leslie John Hart	Ms C A Bahemia	Hammond Worthington
Amies Holdings Pty Ltd	Dr J Hockley	John W Byrne
R J & P C Burton	Dr J Hockley	John W Byrne
S G Chester	Dr J Hockley	John W Byrne
D F & A D Christie	Dr J Hockley	John W Byrne
D F & L M Christie	Dr J Hockley	John W Byrne
A R & J E Erith	Dr J Hockley	John W Byrne
E I Fairley	Dr J Hockley	John W Byrne
S J Gradussov (formerly S J Green)	Dr J Hockley	John W Byrne
Gwenrae Pty Ltd	Dr J Hockley	John W Byrne
S J Harridge	Dr J Hockley	John W Byrne
A E Hewitt	Dr J Hockley	John W Byrne
Jabara Pty Ltd	Dr J Hockley	John W Byrne
S E Johnson	Dr J Hockley	John W Byrne
M & V J Kelly	Dr J Hockley	John W Byrne
A F H & A R McKerracher	Dr J Hockley	John W Byrne
Selwood Holdings Pty Ltd	Dr J Hockley	John W Byrne
A H Allen atf Lee Becocci	Dr J Hockley	John W Byrne
Lorna Baber	Dr J Hockley	John W Byrne
Jennifer Browne	Dr J Hockley	John W Byrne
Douglas & Joyce Craigie	Dr J Hockley	John W Byrne
Arturo Della Maddalena	Dr J Hockley	John W Byrne
M E Dickinson	Dr J Hockley	John W Byrne
Denmoore Holdings Pty Ltd	Dr J Hockley	John W Byrne
Diana Dixon	Dr J Hockley	John W Byrne
B J & M M Edwards	Dr J Hockley	John W Byrne
Michael Edwards	Dr J Hockley	John W Byrne
D A Ferguson	Dr J Hockley	John W Byrne
Raymond Ford	Dr J Hockley	John W Byrne
Jennifer Waddington	Dr J Hockley	John W Byrne
Rosmead Pty Ltd	Dr J Hockley	John W Byrne
R C T & B J Hill	Dr J Hockley	John W Byrne
N T Horn	Dr J Hockley	John W Byrne
Jabara Pty Ltd atf Robert Dawson Family Trust	Dr J Hockley	John W Byrne
A J Jeffery	Dr J Hockley	John W Byrne
Joshrich Pty Ltd	Dr J Hockley	John W Byrne
N E & E F King	Dr J Hockley	John W Byrne
Russell Masters	Dr J Hockley	John W Byrne
Jeanette Masters	Dr J Hockley	John W Byrne
G M & G J McRae atf McRae Family Trust	Dr J Hockley	John W Byrne
Robert Meinck	Dr J Hockley	John W Byrne
Donald Murray	Dr J Hockley	John W Byrne
Irene Murray	Dr J Hockley	John W Byrne
John Otway	Dr J Hockley	John W Byrne
John Parker	Dr J Hockley	John W Byrne
Kenneth Peachy	Dr J Hockley	John W Byrne
Evelyn Peachy	Dr J Hockley	John W Byrne
Estate of Mrs Rose Pilpel	Dr J Hockley	John W Byrne
K & J Price Pty Ltd	Dr J Hockley	John W Byrne
V M Saffer	Dr J Hockley	John W Byrne
G B & J G Shom	Dr J Hockley	John W Byrne
D C & E L Slater	Dr J Hockley	John W Byrne
M Telder atf Linda Telder	Dr J Hockley	John W Byrne
C G Thomson	Dr J Hockley	John W Byrne
A T & B D Van-de-logt	Dr J Hockley	John W Byrne
H M & M J Ward	Dr J Hockley	John W Byrne
Wimbush & Sons Pty Ltd	Dr J Hockley	John W Byrne
Mark Zieren	Dr J Hockley	John W Byrne
Fintein Pty Ltd	Dr J Hockley	Muries Lawyers
Enkelman Pty Ltd	Dr J Hockley	Muries Lawyers
Joshrich Pty Ltd	Dr J Hockley	Muries Lawyers
Shankland Nominees Pty Ltd	Dr J Hockley	Muries Lawyers
Ocean Garden (Inc)	Dr J Hockley	Muries Lawyers
Albert Lawrence Arcus	Dr J Hockley	Muries Lawyers
Vivienne Constance Arcus	Dr J Hockley	Muries Lawyers
Joyce Miriam Burton	Dr J Hockley	Muries Lawyers
Philippa Margaret Walsh	Dr J Hockley	Muries Lawyers
Richard Douglas Blythe	Dr J Hockley	Muries Lawyers
Sylvia Joan Blythe	Dr J Hockley	Muries Lawyers
Donald Robert Bonney	Dr J Hockley	Muries Lawyers
Joyce Evelyn Bonney	Dr J Hockley	Muries Lawyers
Alfred Ernest Ryder	Dr J Hockley	Muries Lawyers
John Kenneth Walsh	Dr J Hockley	Muries Lawyers
Margaret Josephine Walsh	Dr J Hockley	Muries Lawyers
Ross Edward Yeats	Dr J Hockley	Muries Lawyers
Lorna May Yeats	Dr J Hockley	Muries Lawyers
John Herbert Moncrieff Fisher	Dr J Hockley	Muries Lawyers
Jennifer Blake Fisher	Dr J Hockley	Muries Lawyers
Donald George Bell	Dr J Hockley	Muries Lawyers
Patricia Lorrain Bell	Dr J Hockley	Muries Lawyers
Gary Allan Howie	Dr J Hockley	Muries Lawyers
Phillip James Howie	Dr J Hockley	Muries Lawyers
Colin Eastwood Knight	Dr J Hockley	Muries Lawyers
Nola Carma Knight	Dr J Hockley	Muries Lawyers
Charles Louis Bladen	Dr J Hockley	Muries Lawyers
Jean Bladen	Dr J Hockley	Muries Lawyers
Keith Harold Larke	Dr J Hockley	Muries Lawyers
Shirley Alexandra Larke	Dr J Hockley	Muries Lawyers
Vernon William Deague	Dr J Hockley	Muries Lawyers
Kay Marie Deague	Dr J Hockley	Muries Lawyers
Nancy Michelle Vernaleo	Dr J Hockley	Muries Lawyers
Bernard Arthur McFall	Dr J Hockley	Muries Lawyers
Dolores Joan McFall	Dr J Hockley	Muries Lawyers
Lance Brian Prescott McDonald	Dr J Hockley	Muries Lawyers
Kenneth Neil Selby	Dr J Hockley	Muries Lawyers
Mary Elizabeth Selby	Dr J Hockley	Muries Lawyers
Donald Carl Slater	Dr J Hockley	Muries Lawyers
Elaine Lily Slater	Dr J Hockley	Muries Lawyers
Kenneth Charles Collins	Dr J Hockley	Muries Lawyers
Irene Enid Collins	Dr J Hockley	Muries Lawyers
Jennifer Dawn Atherton	Dr J Hockley	Muries Lawyers
Margen Pty Ltd	Mr M Stevenson
Denis Keith Jarvis	Mr D Jarvis
Phyllis Leone Jarvis	Mr D Jarvis
Kenneth Gordon Irwin	Mr D Jarvis
John William Wylie Dutton	Mr D Jarvis
Kerry Evelyn Dutton	Mr D Jarvis
Norma Pearse	Mr D Jarvis
Dino Edward Pozzi	Mr D Jarvis
Colleen Pozzi	Mr D Jarvis
Neville Horn	Mrs A Horn
Alexandra Horn	Mrs A Horn
Amlyn Pty Ltd atf The Reichhold Superannuation Fund	Mr H B Reichhold
Phillippa Ryder and Alfred Ryder as trustee for the Ryder Superannuation Fund	Mr A Ryder

Schedule C

NAME: Australasian Property Link Pty Ltd  FILE No: 1386
SECURITY: Lot 672 McInnes Way Sanctuary Waters Canning Vale    LOAN: $315,000
Term: 1 year   Int Rate: 4.25%         Payts Due: 14/1/99     MonthlyPayAmounts $2,520
Settled @ date   /    /    Expires 14/1/00  1st Penalty $ _________
ContactPhone              2nd Penalty$ __________

Date	Details	Chq No	Debit	Credit	Balance
17/12/98	*J W W & K E Dutton	R2459	100,000
21/12/98	*Norma Pearse	R2832	65,000	165,000
8/1/99	*D K Jarvis Pension Fund	R2471	100,000
4/1/99	H W	011742	549.00
4/1/99	S/duty on Mtge Comm State Tax	011743	1212.50
4/1/99	ANZ Bank	011744	96,000.00
13/1/99	Val fee Ron O'Connor	011784	450.00
14/1/99	Interest payments	BN962	1232.05
GFG collection fee	46.62
8/1/99	Exchange fee	Jnl 20	6,300.00
8/1/99	FID/BAD	Jnl 20	189.00
8/1/99	Inspection fee	Jnl 20	110.00
8/1/99	Settlement fee	Jnl 20	60.00
8/1/99	Sundries	Jnl 20	40.00	158,810.83
29/1/99	*D & C Pozzi	R2555	35,000	193,810.83
31/1/99	M/Mint Jan "99	224.69	194,035.52
12/2/99	Interest payments	81074	2,177.60
GFG Collection fee	82.40	191,775.52
17/2/99	*K G Irwin	R2480	15,000	206,775.52

*Investors

ASSET	ESTIMATED REALISABLE VALUE ($000)
Cash at bank	11
Furniture and fittings	12
Tax refund	80
Subtotal	103
Secured Loans	55
TOTAL	158

First Respondent -	The Treasurer of the State of Western Australia.
Second Respondents -	All persons identified in GFG's ledger cards as at 21 July 1999 as money market investors.
Third Respondents -	All persons listed on the schedule to the application of the second applicant dated 13 September 2000 as borrowers.
Fourth Respondents -	All persons listed on the schedule to the application of the second applicant dated 13 September 2000 as investors.
Fifth Respondents -	Alpha Super Co Pty Ltd, Walbrook Investments Pty Ltd and Thirlmere Consulting and Financial Management Services.