Stamford Aus-Trade and Press Pty Ltd v Melbourne Orthopaedic Group Pty Ltd
[2014] VSC 324
•24 July 2014
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
BETWEEN
S CI 2012 4855
| STAMFORD AUS-TRADE & PRESS PTY LTD (ACN 089 202 853) | Plaintiff |
| - and - | |
| ALOYSIUS DAVID PTY LTD (ACN 085 471 236) | First Defendant |
| and | |
| MELBOURNE ORTHOPAEDIC GROUP PTY LTD (ACN 005 057 269) | Second Defendant |
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JUDGE: | DALY AsJ | |
WHERE HELD: | Melbourne | |
DATES OF HEARING: | 30 May, 31 May, 29 July, 30 July, 22 August, further written submissions on 8 August, 10 and 13 September 2013 | |
DATE OF JUDGMENT: | 24 July 2014 | |
CASE MAY BE CITED AS: | Stamford Aus-Trade & Press Pty Ltd v Melbourne Orthopaedic Group Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2014] VSC 324 | Revised 30 July 2014 |
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TRUSTS –Beneficial ownership of monies paid into bank account –Whether necessary for funds advanced to be by way of loan to establish Quistclose trust –Whether demonstration of actual or presumed intention to create trust sufficient or whether additionally necessary to establish that funds paid for purpose as pleaded –Whether presumption of resulting trust applicable –Extent to which evidence of a possible improper motive for the establishment of a trust affects the grant of equitable relief
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Hoyne for Stamford Aus‑Trade & Press Pty Ltd | Lennon Mazzeo |
| For the First Defendant | No appearance | |
| For the Second Defendant | Mr M R Pearce SC with Mr A A Segal for Melbourne Orthopaedic Group | McKean + Park |
HER HONOUR:
The two protagonists in this dispute are Stamford Aus-Trade and Press Pty Ltd (“Stamford”) and Melbourne Orthopaedic Group Pty Ltd (“MOG”). Stamford is the substantially dormant Australian subsidiary of the Stamford Group of companies (“Stamford Group”). The Stamford Group is based in Singapore, and also has operations in India, Sri Lanka and the United Kingdom in the fields of printing and publishing, logistics, trading, consultancy and technology, and multimedia.[1] The ultimate holding company, Stamford Press Pty Ltd, is owned by Mr Ramanathan Theyvendran, also known as “Dr Denan”, who has been active in commercial and community affairs in Singapore and elsewhere for many decades.[2]
[1]See paragraphs 3 and 4 of the affidavit of Ramanathan Theyvendran sworn 30 July 2012.
[2]I refer to Mr Theyvendran throughout this judgment as “Dr Denan”; not out of any disrespect, but for ease of reading.
MOG is a group of eleven orthopaedic surgeons sharing consulting suites in The Avenue, Windsor, providing a comprehensive sports injury and orthopaedic service.[3] In addition to the surgeons, who are the directors of MOG, MOG employs 24 staff, including administrative and other support staff. MOG also provides accommodation and administrative support to physiotherapy practitioners.
[3]See exhibit “PDM -2” to the affidavit of Peter David Morris sworn on 30 March 2012.
The common link between Stamford and MOG is Mr Aloysius David, the former practice manager of MOG, and a long term associate of Dr Denan. Mr David was the practice manager of MOG from 6 November 2000 until 14 February 2012, when his employment was terminated after MOG determined to appoint a Chief Executive Officer, and the position of practice manager became redundant. In his role as practice manager, Mr David was the most senior administrative staff member of MOG, and was solely responsible for the financial and administrative management of the practice on a day to day basis, including the banking of patient receipts.
Mr David was born and raised in Singapore before migrating to Australia in the late 1980s or early 1990s.[4] Dr Denan refers to having known Mr David for some 35 years, that is, since the late 1970s. They were both involved in the Singapore co-operative movement, and Mr David was involved in the establishment of new co-operative businesses, including a security business, a computer school, a travel business, a thrift loan business, and aged care and child care facilities. Mr David was also the assistant registrar of the Co-operative Societies within the government of Singapore, and involved in the enactment of the Singaporean Co-operative Act in 1987. During this time, Dr Denan was honorary secretary of the Singapore Mercantile Co‑operative Thrift and Loan Society Ltd. Dr Denan and Mr David had numerous dealings on these matters, and became friends. They kept in touch after Mr David moved to Australia, meeting up from time to time when Mr David visited Singapore.
[4]A property search shows that he and his wife purchased their residence in Wantirna South in 1991.
While Stamford was incorporated in 1999, and operated three bank accounts with the United Overseas Bank (“UOB”) in Australia since that time, Dr Denan’s commercial interests in Australia dated back to 1992, when he invested in an Australian company, Niland Corporation Pty Ltd, which was involved in the redevelopment and operation of a medical centre in the Sydney suburb of Surry Hills. The business relationship between Dr Denan and the resident shareholder/director of Niland Corporation soured, and in 2004 the parties entered into a deed of release in 2004, providing, in consideration for Dr Denan transferring his shares in Niland Corporation to his former business partner, for Dr Denan to be paid the sum of $650,000 over a five year period. Between 2007 and 2008 $300,000 was paid into one of the UOB bank accounts. The remaining balance of $350,000 remains unpaid, and Dr Denan has instructed Sydney solicitors to pursue this debt. Other sources of funds for the UOB bank accounts include funds paid into them by a former director of Stamford, Mr Ruthamoorthy Sabapathy, and from Australian based trade creditors of other companies within the Stamford Group, including, among others, R & R Publications Pty Ltd (“R & R Publications”).
In or about January 2012 Dr Denan decided to close down the UOB accounts, which at that time held funds totalling $553,836.19. On 14 January 2012 Dr Denan sent a fax from his office in Singapore to UOB giving instructions for the transfer of $53,836.19 to a National Australia Bank (“NAB”) account in Dr Denan’s name with a branch in Mascot, New South Wales. On 26 January 2012 he sent a further fax giving instructions for the transfer of $500,000 to a NAB account in the name of Aloysius David Pty Ltd, a company controlled by Mr David (“company”). This account (“company bank account”) was established on or about 5 January 2012. On 31 January 2012, Dr Denan received confirmation from UOB that these transfers had been effected.
As noted above, Mr David left the employment of MOG on 14 February 2012. On 22 March 2012, Mr Peter Morris of PPB Advisory (“PPBA”) a chartered accountant and an experienced fraud investigator, was engaged by MOG, on the instructions of Ms Lisa Wheeler, the new Chief Executive Officer of MOG, to conduct an investigation into financial irregularities at MOG thought to involve Mr David, primarily involving his failure to deposit cash receipts of some hundreds of thousands of dollars into MOG’s bank accounts. Mr Morris prepared a report, which was tendered to this Court in an affidavit sworn by Mr Morris in support of an ex-parte application to freeze the assets of Mr David on 30 March 2012.
A freezing order with respect to Mr David’s assets was made by Dixon J on 30 March 2012. On the following day, Mr Morris interviewed Mr David in the company of Mr Xavier David, Mr David’s brother. Mr David made certain admissions during this interview, and referred to the funds held in the company bank account as the proceeds of a repayment of a loan advanced by him to an old friend in Singapore.
On 3 April 2012 Mr David swore an affidavit in accordance with the terms of the freezing orders, deposing as to the nature and value of assets in his name, which comprised a half share of his home at Wantirna South, funds in bank accounts, Telstra shares, a modest superannuation portfolio, and a Mercedes-Benz sedan. No reference was made to the funds in the company bank account.
On 4 April 2012 MOG returned to Court and obtained a variation to the freezing order extending the application of the freezing order to assets of the company (“4 April freezing orders”). On 10 April 2012 Mr David swore a further affidavit which exhibited copies of bank statements in relation to the bank accounts referred to in his first affidavit, along with a bank statement for the company bank account. At paragraph 3 of this affidavit, Mr David deposed as follows:
The amount of $503,035.41 currently in this account was deposited therein by Stamford Aus-Trade and Press Pty Ltd ($500,000) and is held in trust for that company by Aloysius David Pty Ltd. The further sum of approximately $3,000 in that account is accrued interest belonging to Stamford Aus-Trade and Press Pty Ltd.
MOG’s application to the Court for a freezing order was made in proceeding No S CI 2012 0164 (“initial proceeding”). A statement of claim in the initial proceeding was filed on 30 March 2012, alleging, in summary that Mr David had breached the duties owed by him to MOG by converting the sum of $454,402.31 for his own use. MOG entered judgment against Mr David in default of an appearance for the sum of $454,402.31 on 13 April 2012.
On 17 May 2012 solicitors acting on behalf of Stamford, Lennon Mazzeo, wrote to Macpherson + Kelley, the solicitors then acting for MOG, signalling that Stamford would be seeking a variation to the freezing order to seek the release of the funds in the company bank account on the basis that those funds were held by the company on trust for Stamford.
Over the course of the following months, there was correspondence between Lennon Mazzeo and Macpherson + Kelley regarding Stamford’s claim to the funds in the company bank account. In particular, on 25 May 2012, Lennon Mazzeo sent a detailed letter to Macpherson + Kelley setting out their instructions and providing documents in relation to the source of the funds deposited into the company bank account. Stamford’s claim to the funds was rejected by MOG, and on 6 August 2012 Stamford made an application to the Court seeking leave to intervene in the initial proceeding and to vary the freezing order. Prior to that time, on 5 July 2012, a sequestration order was made against Mr David, and Mr Kenneth Lamb was appointed as his trustee in bankruptcy (“trustee”).
Stamford’s application was returnable on 21 August 2012. Beach J made orders granting leave to Stamford to intervene in the proceeding, and varied the freezing order to enable the trustee to deal with certain assets formerly held by Mr David. According to counsel for Stamford, in his remarks during the course of the application, Beach J indicated that it would be desirable for Stamford to issue a fresh proceeding in order to pursue its claim for the funds in the company bank account. Also, during the course of this hearing counsel on behalf of Stamford submitted that there was no further need for the freezing order now that Mr David was bankrupt, and therefore no longer in control of the assets subject to the freezing order, including the funds in the company bank account. Nonetheless, the freezing order remained in place, and was in fact further varied by Beach J on 11 October 2012, again to facilitate dealings with Mr David’s assets by the trustee. The question of whether the freezing order ought to have remained in place, and whether the court was in fact functus officio in the initial proceeding by reason of the entry of judgment against Mr David in April 2013 was the subject of an application prior to the commencement of trial of the recovery proceeding in May 2013, when I made orders vacating the freezing orders, and reserved the question of the costs of Stamford’s summons in the initial proceeding pending the outcome of the recovery proceeding.
On 24 August 2012 Stamford commenced proceeding no S CI 2012 04855 (“recovery proceeding”), with the company as the defendant. MOG applied to be joined to the recovery proceeding as a defendant, and orders were made to that effect by consent on 16 May 2013. Prior to this time the trustee, first in his affidavit of documents in the initial proceeding sworn on 31 August 2012, and secondly in a letter to the solicitors for Stamford and MOG dated 16 October 2012, had indicated that he did not intend to participate in either proceeding. The trustee’s position was confirmed again by an affidavit sworn by the trustee in the recovery proceeding on 16 May 2013. That left MOG as the sole contradictor to Stamford’s claim to the funds in the company bank account.
MOG’s role as contradictor in the recovery proceeding is no doubt motivated by its position as the main significant creditor of Mr David’s bankrupt estate. MOG has a judgment in its favour of $454,402.31 against Mr David, plus an unquantified claim for interest and costs in the initial proceeding. There is no evidence regarding the extent to which that judgment has been satisfied from the amounts recovered by the trustee to date, but one can assume from the statement of assets deposed to by Mr David on 3 April 2012, and MOG’s vigorous defence of Stamford’s claims in the recovery proceeding that a substantial part of the judgment sum remains unsatisfied.[5] By reason of Mr David’s bankruptcy, the shares in the company have vested in the trustee, and the trustee’s control of the company was formalised by his appointment as a director on 27 March 2013. In the event that Stamford is unable to make good its claim that the funds in the company bank account are held on trust for it, in the absence of any other claims to the funds, the funds will ultimately revert to the bankrupt estate of Mr David for the benefit of its creditors, and in particular, MOG.
[5]It has been suggested by senior counsel for MOG that the amounts said to have been misappropriated from MOG by Mr David significantly exceed the judgment sum, but there is no evidence of any further claims having been made by MOG against Mr David.
In its originating motion in the recovery proceeding filed on 24 August 2012, Stamford made the following claims, in summary, as follows:
(a)on or about 30 January 2012 Stamford transferred the sum of $500,000 to the company (“transfer”);
(b)the terms of the transfer were that the funds transferred (plus any interest accruing on those funds) were to be held on trust for Stamford; and
(c)in the alternative, if the transfer was a loan from Stamford to the company (which was denied);
(i)such loan was for the exclusive purpose of being used to locate a suitable company or business in which Stamford and/or the company could invest;
(ii)it was the intention of the parties that if the purpose of the loan could not be achieved then the funds would be held by the company on trust for Stamford; and
(iii)the purpose referred to in paragraph (c)(i) above was rendered unachievable by reason of the freezing orders and/or the bankruptcy of Mr David.
The trial of the recovery proceeding commenced on 30 May 2013, but was adjourned to 29 July 2013 by reason of the failure of MOG to disclose a document prior to seeking to deploy it in its cross-examination of Dr Denan. On 31 May 2013, I made orders that the parties file and serve points of claim and points of defence prior to the resumed trial, in the hope that the issues in the recovery proceeding might be better defined in the absence of formal pleadings.
The points of claim filed by Stamford on 7 June 2013 substantially repeated the claims set out in its originating motion, and under the heading “Particulars” referred to the affidavit of Dr Denan sworn on 30 July 2012. The points of claim also included the following claim:
Alternatively … the Transfer was a loan to the company repayable on demand.
Particulars
The terms of the loan are implied in order to give business efficacy to the transaction and by law.
[Stamford Australia] has made, or, alternatively, by these points of claim, does make a demand for repayment of the Funds plus any interest earned on such Funds.
[The company] had not repaid the Funds and the interest, or any part of them, to [Stamford Australia].
In its points of defence filed on 17 June 2013, MOG admitted that Stamford transferred the sum of $500,000 to the company bank account on or about 30 January 2012. However, MOG denied that the funds in the company bank account were held on trust for Stamford, or were loaned by Stamford to the company, but rather, claimed that the funds were beneficially owned by Mr David or the company.
Further, on 21 June 2013 in response to a request for further particulars of its points of defence, regarding its statement that the beneficial ownership of the funds belonged to either Mr David or the company, MOG stated as follows:
[MOG] relies upon an admission by Mr David made in a conversation between Mr David, his brother Mr Xavier David, Mr Peter Morris and Ms Angela Clancy of PPBA on 31 March 2012 at the offices of PPBA that the funds belonged to him and that the funds were the repayment of monies which had been owed to him by Dr Denan in respect of the sale of Mr David’s house; or
alternatively, the funds belonged to the company because no other person has established a beneficial entitlement to them.
In summary, the case advanced by Stamford in its points of claim that it is beneficially entitled to the funds, by reason of an express trust, or, alternatively by reason of a Quistclose Trust, that is, where funds are loaned to an entity for a specific purpose, and for extraneous reasons the purpose of the loan cannot be given effect, then in certain circumstances the funds are impressed with a trust in favour of the lender.[6] MOG’s response to Stamford’s claim was twofold: first, that Stamford had not established that the funds were transferred to the company to be held in trust for it, rather than by way of the repayment of a loan made by Mr David to Dr Denan; and secondly, even if the funds were paid to the company to be held on trust for Stamford, Stamford had not established, on the balance of probabilities, that the terms of the trust were those pleaded and particularised by it in its points of claim: that is, that the funds were held in trust by the company pending Stamford’s use of the funds to invest in new business ventures.
[6]Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 (“Quistclose case”).
Stamford accepts that it bears the onus of proof to establish that the funds in the company bank account are held on trust for it. However, it does not accept the contentions advanced on behalf of MOG, that in order to establish that it is beneficially entitled to the funds by reason of a trust in its favour, it must establish with some degree of precision, that the purpose for which the trust was created was the purpose specified in Stamford’s points of claim. The latter submission was made on behalf of Stamford without conceding that the evidence led on its behalf fell short of establishing the purpose contended for in its points of claim: that is, for the company to hold the funds pending the identification of suitable investment opportunities for Stamford to pursue.
Ultimately, the determination of this proceeding depends upon the proper characterisation of the transfer, there being no dispute that the funds were paid into the company bank account by Stamford, sourced from the funds held in various accounts held by Stamford with the UOB.
The transfer could have been made:
(a) as a gift;
(b) as a loan;
(c) to the company to hold on trust for Stamford, for one or more purposes; or(d)as a repayment of a loan made by the company or Mr David to either Stamford or Dr Denan.
In my view, neither (a) or (b) are at all tenable on the evidence. There was absolutely no evidence to suggest that the transfer was by way of a gift. Senior counsel for MOG did not put to either Dr Denan or Mr David that the funds were transferred by way of gift. While Dr Denan and Mr David were longstanding friends, it is apparent that their contact over the years since Mr David has lived in Australia has been intermittent. There was nothing in their relationship to provide a reason why such a substantial gift would be made. And, as noted by counsel for Stamford, it would be very much in Mr David’s interests that he claim a beneficial entitlement to the funds. After all, having funds of that magnitude available to repay MOG would be of significant financial and personal benefit to him.
Similarly, there was no evidence, notwithstanding the alternative claim in Stamford’s points of claim, that the transfer was by way of a loan from Stamford to the company or Mr David. Again, that proposition was not put to either Dr Denan or Mr David.
The real competing scenarios in this matter, based upon the evidence before the Court, are whether the funds were transferred to the company to be held on trust for Stamford, or whether they were a repayment of a loan made by Mr David to Dr Denan many years before. If the latter proposition is rejected, then a further question arises, that is, if the funds were transferred by Stamford to the company to be held on trust for it, is it necessary for Stamford to establish, on the balance of probabilities, the purpose for which the funds were held on trust, and must that purpose be the purpose specified in Stamford’s points of claim? This is the position contended for by MOG. If so, has Stamford demonstrated, on the evidence, that the transfer was in fact for those purposes? If it has, then no difficulty arises. If it has not been able to do so, would Stamford’s failure to establish the precise, or at least reasonably precise purpose of the trust defeat Stamford’s prima facie beneficial interest in the funds? In that scenario, what role does the presumption of a resulting trust have to play in the determination of Stamford’s claim?
The factual case advanced on behalf of Stamford can be summarised as follows:
(a)by 2012, at the latest, Stamford’s business activities, which were primarily concentrated in Sydney, had wound down;
(b)by that time, Stamford held over half a million in cash in the UOB bank accounts;
(c)Dr Denan had decided that any future Australian investments were to be located in Melbourne. He and Mr David had been friends and business associates for many decades, and in 2008, at Mr David’s suggestion Mr David’s brother, Xavier David, was appointed as a director of Stamford;
(d)despite Xavier David being a director of Stamford, when Dr Denan wished to close his UOB accounts and open a single bank account, he sought Mr David’s advice, and agreed to deposit the proceeds in the company accounts, as he trusted Mr David;
(e)the deposit of the funds in an “at call” account was to enable flexibility to enable the investments of funds in possible business ventures. While there was a possibility that Stamford might make an equity investment in R&R Publications, there was also a possibility that other opportunities might be pursued; and
(f)the purpose of the trust was frustrated by the freezing orders made by the 4 April freezing orders, which extended the freezing order over the assets of Mr David to the funds in the company bank account. Shortly after that time, Dr Denan became aware of the 4 April freezing orders, and since then has taken steps to endeavour to satisfy both the trustee and MOG’s solicitors of Stamford’s beneficial interest in the funds in the company bank account.
MOG submitted that Stamford has not discharged its onus of establishing that the funds in the company bank account were held on trust for it for the purposes of investing in business ventures. Indeed, counsel on behalf of MOG put to Dr Denan that the real position was that in a discussion Dr Denan had with Mr David shortly after the 4 April freezing orders were made, they “hatched a plan” to try and put the $500,000 Stamford had transferred to the company bank account out of the reach of Mr David’s creditors, with that plan involving Dr Denan saying that he had provided the funds to Mr David for the purposes of Stamford investing in a business venture.
MOG’s contention that the funds in the company bank account were not beneficially owned by Stamford was based upon two key pieces of evidence. On 31 March 2012, Mr Morris of PPBA interviewed Mr David, in the company of his brother Xavier David, in relation to the alleged misappropriation of funds by Mr David from MOG. Mr Morris was questioning Mr David about his asset position.[7] Mr David volunteered as follows:
[7]The accuracy of the transcript of the interview (exhibit 6) was verified by Mr David at trial.
AD:And a friend of mine from Singapore has put in $500,000 as a holding account in NAB SL. He did it in first of February.
PM:First of Feb there’s $500,000 gone into a NAB account in whose name?
AD: In my Pty Ltd company name.
PM: OK, so that’s Aloysius David Pty Ltd?
AD:Yep. I put it in the account because it was, we go a long way back in Singapore anyway, he’s in the printing business that I was involved with security company and all that, and this is money that he actually owed me when I was in the early days, those days, and I sold my house and he has invested some in Australia, some in Sydney, and …
PM:So he’s repaying that money to you. So that $500,000 in the Aloysius David Pty Ltd is yours.
AD: Yes. It’s in Pty Ltd to pay less tax, that’s all.
PM:OK, I understand. And that money is return from investment from some time ago …
AD: Long time ago.
PM: OK, and that’s in a NAB account. Right. OK.
AD:Because you see, I’m keeping that separate from all that, because I can use it to pay off line of credit debts.
PM: I understand.
AD: It’s all for different purposes.
Based upon the above interview, MOG was entitled to assume that the funds in the company bank account belonged to either Mr David or the company, and that these funds would be ultimately available to Mr David’s creditors. Also, there was a further piece of evidence which emerged much later, in fact, only a month prior to the commencement of the trial of the recovery proceeding in May 2013. MOG staff recovered from its email system a chain of emails regarding the opening of the company bank account. The first email in the chain was from Mr Chris Demaria of SY Group, who was Mr David’s accountant. This email (“5 January email chain”) was sent to Mr David’s MOG email address on 5 January 2012, and commenced as follows:
Considering the urgency of your request I recommend we open a bank account in the company’s name, Aloysius David Pty Ltd.
The next email in the 5 January email chain was sent by a NAB officer to Mr David approximately half an hour later, confirming Mr David’s instructions to open a new Business Cash Manager account in the name of the company, and providing the BSB and account number for the company bank account. The next email in the chain forwarded the two emails referred to above to Dr Denan with the following message:
Hi Denan.
As discussed, please note bank details for the return of my monies.
Regards
AA David.
The final email in the 5 January email chain was sent from Dr Denan’s email account, which has the designation “MD” some hours after Mr David sent his email, and contained the following message:
O.K. – Thanks.
Dr Denan.
MOG relied heavily upon these two pieces of evidence to support its contention that the funds in the company bank account were beneficially owned by Mr David, and therefore were available to Mr David’s trustee to distribute to Mr David’s creditors. This evidence also lends weight to MOG’s contention that the claim by Stamford to the funds was part of a plan concocted by Dr Denan and Mr David to shield a substantial asset of Mr David from his creditors.
The statement made by Mr David in his interview with Mr Morris (“interview disclosure”) was made on 31 March 2012, and was no doubt the reason why MOG returned to Court on 4 April 2014 to extend the reach of the initial freezing orders to the assets of the company. However, as noted above, the 5 January email chain did not come to light until the commencement of the trial, when senior counsel for MOG sought to cross-examine Dr Denan on its contents.
The disclosure of the existence of the 5 January email chain led to the adjournment of the trial, and the filing of further affidavits by Mr David, and Dr Denan’s long time personal assistant, Mary Tan. Both Mr David and Ms Tan were cross-examined upon the resumption of the hearing in July 2013. The costs consequences of the late disclosure of the 5 January email chain are to be dealt with on another day, but for current purposes, I can indicate that while MOG may have breached its discovery obligations and/or its disclosure obligations under s 26 of the Civil Procedure Act 2010 (Vic), it seems to me quite remarkable that the 5 January email chain was not discovered by Stamford. While at this time there is insufficient evidence before me to enable me to make a finding that Stamford deliberately concealed the 5 January email chain, its failure to discover the document suggests that the searches conducted by Stamford of its company records and that of its related companies in order to make discovery were cursory at best.
Stamford’s response to the interview disclosure and the 5 January email chain can be summarised as follows: Mr David made the interview disclosure in circumstances where he was under great pressure and stress as a result of his misappropriations from MOG having been discovered. He was anxious to “settle” the matter with MOG, and thought that if he told Mr Morris that the funds in the MOG account were his, then that would reassure MOG that he would have funds to repay the sums misappropriated by him. As for the 5 January email chain, Mr David’s reference to the “return of my monies” was a mistake on Mr David’s part. Dr Denan was not aware of the email, as it was read and replied to by Ms Tan, consistently with their arrangements with respect to email monitoring and management.
Stamford’s task in the proceeding was to prove, on the balance of probabilities, that notwithstanding the interview disclosure, the 5 January email chain, and MOG’s moderately successful attacks on the credit of the witnesses called on behalf of Stamford, the company held the funds in the company bank account on trust for Stamford. In order to do that, Stamford must not only establish its claim that it is the beneficial owner of the funds, but practically speaking, it must also satisfy the Court that there is a rational basis for finding that the statements made by Mr David in the interview disclosure and the 5 January email chain were wrong, but are capable of explanation.
Stamford relied upon the evidence of Dr Denan, Mr David, and Mary Tan in support of its claim to the funds in the company bank account. Dr Denan swore two affidavits, on 30 July 2012 and 29 May 2013. The latter affidavit made some minor corrections to the first affidavit, and added some additional bank statements and amended accounts for Stamford. Little turned upon that evidence. Stamford also relied upon an affidavit of Mary Tan Jer Tin (“Mary Tan”) sworn on 19 July 2013; and two affidavits of Mr David sworn on 10 April 2012 and 23 July 2013.
Each of Dr Denan, Ms Tan, and Mr David were cross-examined on their affidavits. MOG did not call any evidence at the trial.
In his first affidavit, Dr Denan deposed to the following matters:
(a)his extensive experience in the commercial sector and not for profit sector, and the structure and activities of the Stamford Group;
(b)his involvement with Mr David. He has known Mr David for more than 35 years, primarily through their common involvement in the Singapore co-operative movement, and they have maintained contact with Mr David since Mr David moved to Melbourne;
(c)the bank accounts held by Stamford with the UOB in Australia, and the primary sources of the funds in the UOB accounts. Of the $553,816.19 in the UOB accounts as to January 2012, $300,000 was made up of payments made to Stamford in 2007 and 2008 paid to it by a former business partner in Sydney. Other sources of the funds in the UOB accounts were payments by trade creditors of Stamford and other companies within the Stamford Group, and a deposit of $90,000 by a former shareholder in 1999. The UOB accounts were fixed term deposits which were rolled over at the end of each term;
(d)a former director of Stamford resigned as a director in 2008. Dr Denan initially asked Mr David if he was interested in joining the board of Stamford. Mr David declined, as he was busy with his employment with MOG, but suggested his brother, Xavier David be appointed as he had his own business and would have more time available to assist Stamford;
(e)Dr Denan agreed with Mr David’s suggestion, and Xavier David joined the board of Stamford. However, it was not active, as Stamford was not trading;
(f)while Stamford was not trading, Dr Denan was looking out for new business ventures in Australia, and particularly in Melbourne. He was looking for businesses which fitted the Stamford Group model, that is, businesses which were in distress but had potential which could be bought cheaply and turned around;
(g)a company that Stamford’s Singapore parent had ongoing dealings with, R&R Publications, was based in Melbourne. He became a director of that company with a view to the Stamford Group taking an interest in the company that controlled the publishing business. However, this did not eventuate as R&R Publications had cash flow problems, and its controlling entity went into liquidation in April 2012;
(h)he gave evidence as to why he wanted to transfer funds from the UOB accounts to an account based in Melbourne, his discussions with Mr David in that regard, and the steps he took to transfer the funds to the company bank account; and
(i)prior to the 4 April freezing order, he had no knowledge of any misappropriation of funds by Mr David from MOG. Once he became aware of the freezing order, he spoke with Mr David and it became clear to him that the proposed venture to purchase a business could not proceed.
Dr Denan exhibited a substantial number of documents to his affidavit, including a detailed curriculum vitae detailing his current and previous appointments and activities in the commercial and non‑profit sphere. The following extract from his curriculum vitae regarding his current appointments and activities demonstrates his busy schedule, noting that he is now in his seventies:
Dr. R. Theyvendran, PBM – better known as Denan is the Chairman and owner of the Stamford Press Group of Companies which was selected as one of the top 50 Enterprise Companies in 1996 – and again, in 2000.
He owns and manages Stamford Press Group, which has a total workforce of 150 employees with an annual sales turnover of more than 20 million dollars. He has business ventures in England, Australia, India and Sri Lanka.
Denan is also the Management Consultant of Aequitas Management Consultants Pty Ltd, specialising in personal recruitment, human resources development and industrial matters.
Denan is currently the Secretary-General of the Management Development Institute of Singapore (MDIS), one of Singapore’s premier Management Training Institutions.
Among his other public roles, he is a Trustee of Print & Media Association of Singapore – the national body of the printing, media & publishing industry.
He is the Chairman of the 40,000-member-strong Telecoms Credit Co‑operative (TCC) with assets totalling nearly S$75 million.
Denan was appointed 2nd Deputy Chairman of Singapore National Co‑operative Federation (SNCF) in 2008.
Denan is the President of the Tamils Representative Council (TRC) which comprises 34 cultural and social organisations.
Denan is the Immediate Past Chairman and current Board Member of the TRC Multi-Purpose Co-operative Society, the financial arm of TRC since 2003.
Denan was appointed Project Chairman of a 6-Million-Dollar Ceylon Road Temple Rebuilding Project in June 1997.
In 1998, Denan was elected President of the Singapore Ceylon Tamils’ Association (SCTA) and continues to be the President to date.
Denan is again the President of the Ceylon Sports Club from 2010. Earlier, he was the President of the Club from 1994 to 1996 – and subsequently – the Immediate Past President and Advisor from 1997 to 2003. He was also President from 2004 to 2008 before introducing successor rules. He then handed the office of Presidency to his Vice-President.
Denan is the Chairman of Secure Guard Security Services Co-operative Ltd since 2005.
On 22nd October 2009, Denan was conferred as Advisor to SASCO after many years as an informal advisor to the organisation SASCO is a service provider for the aged and children.
Denan is also the advisor of Sembawang Tamils Association, an affiliate organisation of TRC that was founded in 1947 which presently runs two childcare centres in Singapore with more than 100 children.
Dr Denan’s curriculum vitae also shows that he has received a number of awards recognising his contributions and achievements, including honorary doctorates from the University of Bradford in the UK, and from Oklahoma City University in the USA, the Public Service Medal at the 1998 Singapore National Day Award, and in 2011, a commemorative medal from the government of Uzbekistan titled “20 Years of Independence of the Republic of Uzbekistan” for his contribution to the development of the higher education sector in Uzbekistan.
Other documents exhibited to Dr Denan’s affidavit include an ASIC extract for Stamford, a diagram showing the organisational structure of the Stamford Group, financial accounts for Stamford for 2010 and 2011, historical bank statements for the UOB accounts, documents evidencing his dealings and settlement with his former business partner in Sydney referred to in paragraph 5 of these reasons, copies of faxes sent by him to the UOB on 14 January 2012 and 26 January 2012 in respect of the closure of the UOB accounts and the transfer of the funds in those accounts to the company bank account, and copies of correspondence between his solicitors and MOG’s solicitors regarding Stamford’s claim to the funds in the company bank account.
Dr Denan’s evidence regarding the circumstances in which the transfer of the funds in the UOB to the company bank account in January 2012 is of course critical. The relevant sections of his affidavit are reproduced in full below:
In 2008, a former director, Mr Sabapathy had resigned as a director of Stamford Australia and I asked Mr David if he would be interested in going on to the board of Stamford Australia but, he was then employed by the plaintiff, and suggested his brother, Xavier David, who had his own business and who could devote more time to assisting me. As a result, I appointed Xavier David to the board and he remains a director of the Plaintiff. Nonetheless, the board had little to do as Stamford Australia was not trading.
Nonetheless, I was looking to new business ventures that the Stamford Group could invest in within Australia and, in particular, in Melbourne. I was looking for any business that fitted into our model – that is, a business that was in distress but which had potential and which we could buy cheaply and then turn around. However, we were primarily interested in businesses in the publishing area or involved in trading. (For example, one entity that we considered was a company that manufactured towels.)
One of the companies that Stamford Australia had dealt with, R & R Publications (which is a company that publishes book (sic), including cooking books) was based in Melbourne. It owed money to the companies in the Stamford Group. At one point I became a director of that company with the intention that, ultimately, the Stamford Group would take an interest in the company behind that business, Far Valley Publishing Pty Ltd. R & R Publications was one company that I believed Stamford Australia may be able to invest in as it seemed to fit our business model.
I wanted to move the moneys in the United Overseas Bank accounts out of those accounts. Those accounts were based in Sydney and, with Mr Sabapathy’s retirement from the business, I no longer had any links to Sydney and I was looking at Melbourne as being the place where I would undertake the investment. Further, with at least some of the monies being in fixed term deposits, it needed someone to look after the money in those accounts (for example, to ensure that the fixed term deposits were rolled over or withdrawn as required) and it meant that it was difficult to get access to the money quickly (which may have been required).
I visited Melbourne between 8 January 2012 and 11 January 2012. I met with Mr David and we discussed my intentions and I said that I would like him involved in any new business that Stamford Australia undertook and I would like him to investigate such business. (Whenever I invest in an overseas jurisdiction I have a resident whom I trust in control of the operations). I told Mr David and R & R Publications was a possibility. I also told him that I had set aside $500,000 to fund this and that I wanted to transfer that money into his bank account and that he should leave it there until I told him what to do with it. Mr David knew the business managers of the National Australia Bank and he could arrange an interest bearing cash maximiser account with monies available on call.
I trusted Mr David completely. We had had a long relationship and I saw him as a competent and honest person.
Mr David said that he was happy to help.
We did not get as far as discussing what, if anything, he might be paid but I anticipated him becoming a minority shareholder (perhaps 20% as that it (sic) what I usually do in these circumstances) in any new business we may have purchased in return for his efforts.
I did not want the money repatriated to Singapore because I would then have been subject to currency fluctuations and it would also have made it more difficult to transfer the money quickly if that was required. It was easier for the money to remain in Australia and I wanted the money to be easily and quickly available. In my view, the easiest and best way was for the money to be transferred into Mr David’s at call account.
After my discussion with Mr David I moved to close down the United Overseas Bank accounts of Stamford Australia completely. By fax dated 14 January 2012 I directed the United Overseas Bank to send $53,836.19 into my National Australia Bank account and by fax dated 26 January 2012 I directed the United Overseas Bank to transfer $500,000 into Mr David’s National Australia Bank account and the remainder into my bank account. (The remainder was to be used to pay lawyers). … I note that the bank account details that I provided to the United Overseas Bank were for the bank account of Aloysius David Pty Ltd, Mr David’s company.
On 31 January 2012 the United Overseas Bank confirmed by email that the amounts have been paid as directed.
The $500,000 that was deposited into the account of Aloysius David Pty Ltd remained money that belonged to Stamford Australia. The Defendant – and Aloysius David Pty Ltd – was not permitted to do, and would not have, done anything with this money unless I permitted it. Further, he (and it) was required to do whatever I told him to do with the money.
The prospective arrangement with R & R Publications did not eventuate because R & R Publications has serious cash flow problems and were not paying the debts they owed to the Stamford Group companies. (Ultimately, in April 2012 Far Valley Publishing Pty Ltd went into liquidation. I understand that the business of R & R Publications has been taken over by another company).
Dr Denan was subjected to extensive cross-examination by senior counsel for MOG. The following issues were traversed in cross-examination over a number of days:
(a) his discussions with Mr David at around the time that the 4 April freezing orders were made;
(b) his relationship with Mr David and the circumstances in which Stamford transferred $500,000.00 to an account controlled by Mr David without any formal documentation;
(c) his dealings with and plans with respect to R & R Publications;
(d) his visits to Sydney and Melbourne in January 2012;
(e) his habits with respect to reading of emails and replying to emails; and
(f) conduct said to be consistent with MOG’s position that Stamford’s claim to the funds in the company bank account was a concoction to shield Mr David’s assets from creditors.
In relation to his discussions with Mr David about the 4 April freezing orders and their aftermath, while Dr Denan could not recall the actual date, he did speak to Mr David by telephone about the 4 April freezing orders sometime in April 2012.
When asked about his relationship with and views regarding Mr David, he gave evidence that all along he believed Mr David to be a competent and honest person, and that he trusted him completely. However, when asked about the basis upon which he knew he could trust Mr David, and the purposes for which the funds were transferred to the company bank account, apart from repeating that they were for business purposes at the direction of Xavier David, his answers were somewhat vague and non-responsive. By way of example:
You knew when you transferred that money that it would be under the sole control of Mr Aloysius David, didn’t you?---I didn’t know at that time, because I was basing on trust.
Did you know that Mr Aloysius David was the sole shareholder and the sole director of the company to whom you transferred that money?--- I knew it was being transferred to this account and he would have done – if the brother said to transfer this money out, and I believed that he would have done it as well.
On 4 April you then had a conversation with Mr Aloysius David in which you told him, I put to you, that he no longer had any authority to deal with that money?---I disagree.
What did you say to him?---I said to him that if I have – if I wanted the money to be transferred out to any venture, which his brother – brother was talking to me about, he would – he would automatically do it.
Dr Denan was also asked whether he believed Mr David held the same level of trust and confidence in him that Dr Denan had in Mr David, Dr Denan responded:
… I cannot really answer for him, because when he comes to Singapore he calls upon me and we just have a meeting once or twice.
I am not asking you to answer for him, I am asking you to answer on the basis of your experience and dealings with him, did he repose in you the same trust and confidence that you reposed in him”---I really wouldn’t know Your Honour, because he has never given me any money or anything.
Dr Denan was asked a number of questions about his dealings with and plans for R & R Publications, which was the only Australian business venture specifically referred to as a possible investment opportunity in his affidavit.
Dr Denan gave evidence that R & R Publications was managed by a father and son, the Carrolls, and that its specialty was publishing cook books. The Stamford Group’s printing business in Singapore (“Stamford Press”) printed books for R & R Publications, and by 2008, a large trade debt was owed by R & R Publications to Stamford Press. In 2008, the Stamford Group and R & R Publications entered into negotiations regarding how to clear the outstanding debt. R & R Publications invited Stamford Press to loan to it the sum of $200,000 and to take a 25% equity stake in that company. This proposal was not accepted by Stamford Press, but Stamford Press did loan R & R Publications the sum of $200,000, and Dr Denan became a director of R & R Publications in February 2008 (there seemed to be an issue as to whether Dr Denan consented to becoming a director at that time, but I cannot see how much turns on this, except perhaps as to credit). The purpose of Dr Denan becoming a director of R & R Publications was apparently to bolster R & R Publications’ credibility with its bankers.
Dr Denan gave evidence that by May 2010, R & R Publications still owed Stamford Press substantial sums of money. Once again, R & R Publications invited Stamford Press to take an equity position in R & R Publications, but Dr Denan’s position was that Stamford Press would not consider making an equity investment unless and until it brought its trading account into order, and that position was maintained thereafter. R & R Publications continued to be in arrears, and in September 2011 a formal agreement was reached between Stamford Australia and R & R Publications with respect to payment plan for reduction of an outstanding debt of $600,000. However, by early 2012, R & R Publications had not complied with the terms of settlement, and it went into liquidation in April 2012. Dr Denan gave evidence that in early 2012 discussions continued between Stamford Press and R & R Publications about reducing the outstanding debts, including “buying over the accounts”, but that there were no discussions in the period January – April 2012 about Stamford Press or any other company in the Stamford Group making an equity investment in R & R Publications.
It was apparent from various parts of his evidence that despite being a director of R & R Publications, most of the day to day dealings between Stamford Press and R & R Publications were through the Stamford Group’s senior staff, with only limited personal involvement by Dr Denan. Dr Denan gave evidence that he recalled that when he met with Xavier David, and possibly also Mr David just before Mr David’s daughter’s wedding in January 2012, he told them that he was still considering certain options with respect to R & R Publications. While he was concerned about the outstanding debt, he also thought R & R Publications was a good company with good customers around the world, and there might be opportunities there. He gave evidence that he would not necessarily have discussed these options with the directors of R & R Publications. He conceded that, when R & R Publications went into liquidation in April 2012, he took no steps to purchase any of its assets from the liquidator.
Dr Denan was questioned about his views regarding the owners of R & R Publications. The transcript reveals the following exchanges:
Mr Theyvendran, yesterday you made some very critical comments about the people at R&R, do you remember that?---Yes.
You described them on one occasion, at transcript page 116 lines 12-13, you said this: “They did a bunch of tricks, it was all confusing, a bunch of tricks.” At 19-20 on that page you said: “They did a bunch of tricks with us just to avoid payment.” At 118 of the transcript, lines 27-28 you said: “They are liars”, and at 133 of the transcript you said of Mr David Sharrock, who was the boss at R&R, that he was a dishonourable person and later at transcript 125 you said they told you a pack of lies. This was because at the beginning of 2012 they owed you $600,000 and they had repeatedly failed to repay that debt to you?---No, when I passed that statement it was on reflection of all the things they said to me and all the promises they made. Even we went as low as even $5,000, it’s a cumulative effect which made me pass judgment eventually on them.
You had passed that judgment on them by early 2012, hadn’t you?---I had it in mind but because we were still hoping to get the money I never expressed it.[8]
[8]T244, 9-31; T245; T246; T247, 1-11.
Dr Denan was asked a number of questions in cross-examination regarding his visit to Australia in January 2012. In his affidavit, he deposed that he visited Melbourne between 8 and 11 January 2012. Dr Denan was provided with an itinerary which confirmed that he spent the nights of 8 January and 9 January 2012 in Melbourne. He gave evidence that he attended Mr David’s daughter’s wedding, but he did not discuss the transfer of the funds to the company bank account with Mr David at that time. He did meet with Xavier David, and Mr David may have been in attendance on that occasion, and he recalled discussing with them the possibility of resolving the outstanding debt issues with R & R Publications by “buying up” its customers. He gave evidence that he had arranged meetings in Sydney in order to pursue the outstanding debt owed to him by his former business partner.
Dr Denan gave evidence about the timing of his instructions to UOB to transfer the funds to the company bank account. He agreed that on 26 January 2012 he gave instructions to UOB to transfer $500,000 to the company bank account: he could not do much beforehand because certain term deposits did not mature until 24 January 2012. However, as the transcript reveals:
You transferred the money on the 31st?---Yes.
You formed the intention of doing that at an earlier time in January, hadn't you?---Informed David
No, you had formed, in your mind, the intention of doing that much earlier than 31 January, hadn't you?---Okay, my idea was, there was no business any more in Sydney, therefore I wanted to transfer 500,000 to start a new venture in Melbourne, if there was a possibility and I was hoping with R & R, and the balance was to put into another Sydney account for payment of legal fees.
HER HONOUR: I think the question that is being asked is when did you decide to transfer 500,000 - the transfer took place on 31 January?---Yes.
But you must have made the decision to do so at some earlier time, when did you make that decision?---I was contemplating what to do with the account in Sydney, and it took me some time, because I have - the doctors have said they don't want to continue, there was no business there in Sydney and I had no other friend to depend on, so I transferred it to the Melbourne account.
When did you decide to do that?---This was over a period of time, I think even six or seven months, because the money was idle.
Did you form the intention to transfer that money on 5 January?---I cannot recall really.[9]
[9]T40, 23-31, T41, 1-16.
Dr Denan maintained his position that despite the advent of internet banking, he wanted to have Stamford’s Australian funds held in a bank account in Melbourne, so there would be someone to “look after” the funds, as evidenced by the following exchange:
Why didn't you put the money in a bank account in Sydney?---Why did I?
Why did you not put your $500,000?---Because I had no one left, right, the director which was watching this account retired.
You had Mr Xavier David?---Xavier David was in Melbourne.
Explain to the court what prevented Mr Xavier David in Melbourne from operating an account at the National Australia Bank or the United Overseas Bank based in Sydney. Explain to the court what prevented him from doing that?---Okay. First it never struck me that I should operate from Melbourne a Sydney account. It never struck me at the time. I was going to concentrate on a business in Melbourne and therefore I decide that all the money is to be transferred here and the only personal account was for legal expenses in Sydney and nothing else.
So you had your heart set on an account in Melbourne? ---I beg your pardon?
You had your heart set on an account in Melbourne because you were looking at making an investment in Melbourne?---Yes, yes.
You were not aware that somebody in Melbourne can operate an account in Sydney?---The idea never struck me.
Let me ask you again; why didn't you then open an account in Melbourne?‑‑‑On my own?
Yes?---No, I wanted someone to watch over the account and the best person I knew at the time was A David.
What about Xavier David?---Xavier David is brother, I also know his brother.
Yes, and he was the director of your local subsidiary?---Yes.
He was the director of Stamford Aus-Trade Pty Ltd, wasn't he? ---Yes.
And a 20 per cent investor?---At that point of time the person I trusted more was A David.
You trusted him so much that you just paid $500,000 into his private company's account?---Yes because I never knew that he would do all this.
You got no documentation to deal with the arrangement between you and him?---As I told you, I trusted him and he placed - he told me the best - the money they transferred into this trust fund, not even his personal account, right, and that's the reason I didn't know that there was such an account in existence in the first place, and he said, "Keep it in this trust fund, it will be safe." That is what A David told me.[10]
[10]T47, T48, 1-14
Dr Denan was asked why he felt the need to have cash on call in January 2012 when he did not have such a need when investment proposals were being put to him on 2010. Dr Denan responded as follows:
No, there was some reason also in January. I thought the deal with R&R would have come in and there would have been an urgent need for me to transfer money. There were a couple of reasons which spurred me to send the money over.[11]
[11]T211 , 28-31; T212, 1-2.
He was also asked about why he provided the money to Mr David, rather than Xavier David, the latter being Stamford’s resident director.
You gave evidence on 30 May that Mr Xavier David was the person responsible for the Stamford company in Australia?---Yes
Why then did you not transfer it to his brother’s private company, the company of Aloysius David?---Okay. The reason is because when I asked Aloysius – first, I do not know all these happenings in Australia, nothing was revealed to me that Aloysius David had been involved in this company’s matters. I really did not know until the freezing order or shortly after that, I didn’t know. So he advised me that he had checked with his auditors or he had checked with the bankers that the safest way was to transfer this money to this account which would give us tax relief, avoid tax, that’s what the bankers told him. On that advice and no other advice, I transferred to him, that’s it.
Who did that advice come from?---From A. David.
Why didn’t you speak to X. David, he was your local director?---All the matters, X. David would handle when the joint ventures came up so A. David was the front at that time.
If X. David was the man who was going to handle these things, wouldn’t you put him in charge of the money?---No, I put A. David in charge because he said he was working for MOG, there was no way to – I would have A. David and not X. David at all but because - - -
A. David told you that he couldn’t do it because he was busy working - - - ?
---He couldn’t do it because he was in MOG.Yes, and his brother would do it?---I already transferred the company into A. David.
Why didn’t you give the money to X. David?---I trusted A. David and I felt I could go on with A. David.
Did you not trust X. David?---It’s not a question of trust, A. David would tell Xavier what to do.
Are you saying X. David was a front for A. David?---I don’t know, but I think it is.[12]
[12]T271, 7-31; T218, 1-13.
At a later point during the course of Dr Denan’s cross‑examination, the following exchange took place:[13]
[13]T239, 2-31.
My question to you if Mr Xavier David, who was your resident director and a shareholder in the local Australian subsidiary, if he was to be the person who was going to have the charge of this fund, why was it transferred to the private company of Mr Aloysius David who, on your evidence, was going to have nothing to do with it?---Why was it transferred to this company?
Why was it transferred to Mr Aloysius David’s company when it was Mr Xavier David, who was a director of your local subsidiary, who was going to look after the money?---Because he said – I was consulting David first - - -
Which David?---Aloysius David.
Why - - - ?---The first answer is – you must remember Aloysius David was my friend first so I consulted him and I don’t know where he consulted and he asked me to put it in this trust account.
Why didn’t you put it in an account of Stamford Australia? That company had two accounts, one with the United Overseas Bank and one with the National Australia Bank?---I’m not sure why I did that but I thought it would be safer with Aloysius David.
Safer with Aloysius David?---Yes, safer under Aloysius David’s directions. I didn’t know he was having all this trouble at this time.
All these answers I’ve just taken you to that you gave on 30 May show that you expected it was Mr Xavier David who was going to be in charge of this money?---Yes, Xavier David was going to be in charge of this money but all this came about subsequently after my consultation with Aloysius David.
What - - - ?---Aloysius David - - -
When was that consultation?---It had been going on for a number of months, in fact.[14]
[14]T239, 2-31; T240, 1-4.
The follow exchange took place when Dr Denan was questioned further about the changes to Stamford’s banking arrangements in January 2012:
Mr Theyvendran, there was no need for you to transfer this money out of your Sydney bank accounts into a Melbourne bank account, it could just as easily have stayed in either of your Sydney bank accounts if, indeed, you needed to have cash at call?---Why, if the money is idle, the right thing to do is to transfer to another account which there is a possibility of getting it active. That’s my view anyway, that’s my submission.
It made no sense for you to transfer this money to a private company of Mr Aloysius David when it was Mr Xavier David who was the local director of your company?---Can you repeat that again.
It made no sense for you to transfer this money to a private company of Mr Aloysius David when his brother, Mr Xavier David, was the local director of your Australian subsidiary?---Not true. I asked A. David what I should do and he consulted some accountant or a lawyer and he said it’s best to go into this – I repeated that before – to enter into this company which is a trust account, there would be less tax implications, I don’t know what it is and I just followed it.[15]
[15]T257, 9-30.
Dr Denan was subjected to lengthy questioning about his practices regarding his correspondence by email, being taken to approximately 80 pages of emails collated by MOG’s legal team from documents produced upon discovery and in response to subpoenas issued by MOG. In summary, Dr Denan gave evidence that he received many emails, but, given his intense involvement in business and community activities, would have rarely paid much attention to emails which were merely copied to him, and he would expect many matters to be dealt with by his senior staff. In his view, he was sent, and copied in on a number of emails, including emails regarding Stamford Press’ dealings with R & R Publications that he didn’t really need to read. He agreed that he would generally read emails sent to him by Mr David. However, when taken to one email where he replied to Mr David, he believed that Ms Tan had replied on his behalf because of the language of the response: it being ungrammatical. He was unsure whether he read or personally responded to all of the emails between him and UOB staff regarding the transfer of funds out of those accounts, but he agreed he read and replied to most of them.
Dr Denan was questioned about an email sent to him by Mr David on 27 April 2012, attaching the affidavits of Mr David sworn in the initial proceeding. This email said:
You may take note of these when making your affidavit with regard to the reasons why the $500,000 was deposited with me.
Dr Denan responded as follows:
When you swore that affidavit, you did it after taking note of Mr David's affidavits of 3 April and 10 April? --- The truth is there was nothing to take note. These moneys were mine, I have proved it, how it came into my Sydney account, every single document which shows that it went into a Sydney account and when I want wanted to wind that up, there is nothing to take note. I don't know what lies he said. That's all he wanted to make sure.
Did you read the affidavits of Mr David that he sent to you dated 10 April and 3 April? --- Yes.
Did you read them before swearing your affidavit in the other proceeding on 30 July? --- Even without the affidavit, my notes were facts. I only thought that A. David, as I see it, he was just telling a bunch of untruths. These moneys were mine. I was able to account for every cent of it, I have a trail of it.
HER HONOUR: Mr Pearce is asking you whether you read those affidavits? --- Yes, yes.
MR PEARCE: You did read his affidavits before swearing your own affidavit on 30 July? --- Yes.
You took account of what was in those affidavits before swearing your own affidavit? --- No, I did not have to take any because I'm swearing an honest affidavit and I did my affidavit according to my facts.[16]
[16]T153, 14-31, T154, 1-6.
Dr Denan was taken to an email sent by him to Mr David on 30 June 2012. The email is titled “Re: Draft letter to M & K”.
Dear David
Thanks for your draft letter reference. ZZ/SC dated 29th June 2012.
As discussed, the loan to be granted shall be up to A$250,000/- and not the total sum.
I am not wanting to apply pressure but will help where I can.
My Company has lost substantially and my wife is putting a dagger in my head by wanting 50% of my assets.
Can I therefore know how you intend to return this money as if need be, I have to take a loan from the bank?
I trust you will instruct your lawyers accordingly.
Best wishes.
Dr Denan
…
Dr Denan was asked a number of questions regarding the arrangement with Mr David disclosed by the above email.
Did you send that email personally to Mr David? --- 30 June, yes.
And the email refers to the possibility of you lending Mr David $250,000, doesn't it?---Because he wanted to clear - he wanted to keep his dignity I think and he said whether I could loan him the $500,000, whether I could loan him to settle MOG straightaway and get out of this problem. He wanted to get out of the problem immediately so his name is not tainted in Singapore with all his friends but he borrowing money right, left and centre and he had a lot of money. Why should he ever say this money is his? He was asking part of my money to repay the loan - I mean, as a loan, which he will settle immediately to settle the matter.
HER HONOUR: Right?---My money was there really $500,000 which was supposed to be in joint ventures. Then he wanted the whole of the $500,000. He said he had committed in some interrogation that that money was his. I said how could you say that, this money is not yours, I told you never had and if I owed you any money I would have said look, take this money now in settlement but that was not the case. I sent it to him much earlier thinking he could be my investment advisor because I never had cause to doubt him. He would have asked me settle my money now, settle my money now, he never said anything like that. There’s no trail of him at all. He asked me for – let him use that 500,000, I said no I need that money as well, so I said I can lend you up to 250,000, that was the honest story.
MR PEARCE: You were considering lending him money in June 2012 so he could repay some of the money he had stolen from MOG and that was the situation?---No, because the bankruptcy office wanted to seize his house so I thought as old friends, okay, everybody makes a mistake in life, this is nothing. If I wanted to play around with $500,000 – I have donated more than $3 million of my own money in Singapore and I can give you all the evidence on it, so why should I be playing around.
HER HONOUR: Can I just ask, the loan you were talking about, were you talking about that in addition to the money that was already in the account or using some of that money?---I told him if this 500,000 is clear then I will use some of this money to settle the bankruptcy office. He was already a bankrupt I think by then. He was chasing to settle, the house was in both the wife and his name, so he was trying to settle the money at least to keep the house over himself and keep his dignity.
Right?---If this money is a loan from him, then I would say, look you better deduct the loan or take back the money. That was the honest truth. I don’t know why all this confusion. Please believe me, I am a man of standing in Singapore and this 500,000 is nothing, nothing at all compared to my wealth. I don't cheat over money, you ask anything. I wouldn't be getting two doctorate degrees from foreign universities if I am delving in this petty money, please understand that.
MR PEARCE: What I want to understand is this, Mr Theyvendran, your evidence to this court is that if your title to this $500,000 we are fighting about is made clear, if that title is made clear, the freezing order it's made clear doesn't apply to the 500,000 and you can get your hands on that 500,000 you are willing to give some of it to Mr David so he can clear some of his bankruptcy debts?---And problems, yes.
That's your evidence to this court?---Yes.
You've just said it's a trivial matter $500,000?---To me.
Why do you say in this email: "My company has lost substantially and my wife is putting a dagger in head by wanting 50 per cent of my assets"?---I was going through some pressure from my wife and my company at the time had lost substantially but not that substantially that I cannot afford it.
Not that substantially that you wouldn't miss $500,000?---Yes.
When you say in that email: "Can I therefore know how you intend to return this money", your reference there to this money is the prospective loan of $250,000 that you were talking about earlier, isn't it?---I would tell you very frankly, I needed no loan from the bank but I wanted Aloysius David to know that I was also hoping that the money would come back to me, ultimately when he clears all his problems. I was just hoping, I mean, I just put that statement, please be assured that you can check with any banks, I don't have any loans, personal or otherwise, outstanding. I always believe in cash reserves, in all the organisations, from Temple, from everywhere, I'm a man of great standing and wealth and this was - I'm not going to say further, my lawyers will probably testify to that.
So when you told Mr David you would have to take a loan from the bank so that you could lend him the money, let me ask you about that. I don't understand that because I thought the loan was going to come out of the $500,000 when it was unfrozen?---Yes, but I expected it to be repaid.
Why then would you have had to take a loan from the bank?---I was just trying to use that word to apply pressure on David that some day he has to pay me this money and not take for granted, as he has this, this is a loan, it cannot be. A. David thought this was his money he would have said refund my loan, but that was not so.[17]
[17]T154, 10-31; T155; T156; T157, 1-19.
Dr Denan was also taken to further correspondence between him and Mr David during the course of 2012. He agreed that he read and responded to these emails personally, because it was “a critical matter”.
Dr Denan was taken to the bundle of emails from 2010 attached by Xavier David and Mr David and sent to him in August 2012. He agreed that these emails had been sought by him for the purposes of demonstrating, in this litigation, that Stamford had been actively pursuing business opportunities in Australia, as his lawyers had been interrogating him in relation to these matters.
Dr Denan was taken to the 5 January email chain, and, after giving a lengthy explanation for his surprise when seeing the emails on the first day of the trial, denied having read or replied to the 5 January email. He was asked whether he went through his email account for the purposes of discovery, and said that he did, but he didn’t see the 5 January email chain. He later gave evidence that he had one of his staff go through his email account for the purposes of making discovery, but that he checked the affidavit of documents “line by line”. He made reference to there being a different process for discovery in Singapore, but he understood that he was obliged to disclose documents which did not assist his case.
Dr Denan was asked about why he answered “yes” on the first day of trial to a question about him having corresponded with Mr David on 5 January 2012, when he later denied ever seeing the 5 January email chain. He responded as follows:
… --- I just thought they were one of the many emails I received. At that point of time I thought it was one of emails but I didn't realise, you can see the shock I had when the contents was read by me.[18]
[18]T183, 14-17.
He agreed he generally read emails from Mr David, and concerning financial matters with Mr David. However, in respect of the 5 January email chain, in response to a question as to why he didn’t read it, he said:
So I didn’t look at the email.
…
The email was already answered by my secretary because it looked like a very simple matter.
Later, Dr Denan gave evidence that he had in fact “skimmed” the first message in the 5 January email chain, and that he hadn’t registered the import of the words “return” and “my”. He did not read the reply sent by Ms Tan. When asked about what instructions he had given Ms Tan about what emails she should or should not reply to on his behalf, he replied that she had some discretion as she had worked for him for nearly fifty years and would know the manner of his thinking.
It was put to Dr Denan that he has suppressed the 5 January email chain because it was very damaging to his case. He denied that, and said that he was shocked by the disclosure of the 5 January email chain because he could not believe that Mr David would have written that when it was not his money. He did not think the 5 January email chain was damaging to his case, because he knew he had an explanation for what had occurred.
Dr Denan was taken to the correspondence between him and the UOB regarding the transfer of funds to the company bank account. His attention was drawn to a fax to the UOB dated 26 January 2012, which instructed UOB to make the funds transfer and provided the details for the company bank account, and Ms Tan’s evidence that she had not read the 5 January email chain. Notwithstanding that evidence, Dr Denan said he believed that this fax must have been prepared by Ms Tan, and she must have been aware of the details for the company bank account.
Finally, senior counsel for MOG put to Dr Denan a number of matters upon which he proposed to make submission adverse to Stamford’s case and Dr Denan personally, including, as follows:
(a) that Dr Denan saw, read, replied to and understood the import of the 5 January email chain;
(b) that he deliberately suppressed the 5 January email chain, because it would not help his case;
(c) that the $500,000 transferred to the company bank account was transferred to Mr David’s private company pursuant to the arrangement between them evidenced by the 5 January email chain;
(d) that after Mr David told Dr Denan about the 4 April freezing orders, he and Mr David hatched a plan to try and put the $500,000 transferred to him beyond the reach of his creditors;
(e) that plan involved Dr Denan saying that he had given him the money for a business venture, and that they were looking around for proposed investments back in 2010 to support this story;
(f) when he realised that the investment proposals in 2010 were too far back in time to be plausible as a pretext for paying the money, the only faintly plausible thing to say was that he was looking at an investment in R & R Publications;
(g) however, the suggestion that the funds might be used for an investment in R & R Publications is not plausible, because Dr Denan had made it clear at the time that he would not consider an equity investment until R & R Publications had cleared its outstanding debts;
(h) in any event, Dr Denan had formed a view that the principals of R & R Publications were liars and crooks;
(i) even if there was a possibility of an investment in R & R Publications, there would be no reason for Stamford to have $500,000 sitting in an “at call” bank account;
(j) it made no sense for Stamford to transfer the funds from the UOB accounts in Sydney to an account in Melbourne, or to an account controlled by Mr David when Xavier David was the local director of Stamford; and
(k) Dr Denan was shocked by the disclosure of the 5 January email chain because it exposed his lies.
Dr Denan of course denied these propositions and his responses to these questions covered no new ground.
In the course of his re-examination, Dr Denan gave the following evidence:
(a) when taken to the fax sent to the UOB on 26 January 2012 giving instructions for the transfer of the funds to the company bank account, Dr Denan said that Ms Tan would have typed this letter. It is something he would not have normally typed himself, and it is under his personal letterhead, which he does not keep in his office;
(b) the honorary doctorates and awards he has received;
(c) that he has visited Australia four or five times for the purposes of this proceeding;
(d) he agreed that after the 4 April freezing orders and Mr David’s troubles had come to light, he had contemplated making a loan of $250,000 to Mr David, but he has not done so because he has not yet received the funds back;
(e) when asked what he would have done if he had owed Mr David moneys from a long time ago, Dr Denan responded: “I would have easily sent over the money straight away, I had this money idle”.
(f) he was asked about reference in the emails in evidence to his wife “having a dagger at his head”. Dr Denan responded:
My wife was threatening because I was always out, always away, was threatening to divorce me even at this age, we thought we lived the life we lived, and she was telling my sons she wanted 50 per cent of my wealth so I didn’t know how far she would go on that.
Stamford also relied upon two affidavits sworn by Mr David: one on 10 April 2012, in compliance with the freezing orders, and a further affidavit sworn on 22 July 2013. The making of the latter affidavit was prompted by the discovery at trial of the 5 January email chain.
In his first affidavit sworn on 10 April 2012, Mr David deposed as follows:
I also attach hereto a copy of the bank statement of Aloysius David Pty Ltd. This company has no assets and is not trading.
The amount of $503,035.41 currently in this account was deposited by Stamford Aus-Trade and Press Pty Ltd ($500,000) and is held on trust for that company by Aloysius David Pty Ltd. The further sum of approximately $3,000 in that account is accrued interest belonging to Stamford Aus-Trade and Press Pty Ltd.
In his affidavit sworn on 25 July 2013, Mr David deposed as follows:
…
Dr Theyvendran and I have been friends for a number of years. We initially became friends when we both lived in Singapore. We initially met each other when I worked for the Singapore government in matters relating to co‑operatives and their establishment. Dr Theyvendran was active in that area also. We maintained a relationship after I came to Australia.
In or around the end of 2011 and the beginning of 2012 Dr Theyvendran told me that he was interested in investing funds which he had in Sydney into a possible venture in Melbourne. He said that he wanted to transfer the funds to me so that if he needed to move urgently in terms of investing the funds then those funds would be available. He said that he would tell me how this sum was to be used for any business venture. When he came to Australia in January 2012 we discussed various companies that he was considering investing in including R&R Publications but no decision was made.
However, MOG’s submissions seek to elevate the principles in the Quistclose case as applicable not only to a particular “sub-species” of trust, but to the law regarding the creation of trusts generally, such that in order for a party to establish that it had retained beneficial ownership of funds paid to another, it must, if it pleads a particular purpose, establish that the funds were paid for that particular purpose. I could find no support for such a proposition in the authorities. The touchstone of determining the existence of a trust is not the ultimate purpose or purposes of the transaction concerned, but the intention whether actual or presumed of the parties with respect to the beneficial ownership of the relevant property. The fact that a party might seek to advance evidence of a particular purpose in support of a contention that it held the requisite intention to retain beneficial ownership of property where the legal title of that property passed to another does not, of itself, mean that party’s claim to beneficial ownership must necessarily fail if the evidence of that purpose is equivocal, or there is evidence of another purpose.
It seems to me that all that is necessary is that the evidence establishes the relevant intention to establish an express trust, and that the transaction otherwise satisfies the requirements of a trust at law: that is, there must be a trustee, a beneficiary or charitable purpose, the trust property and a personal obligation annexed to that property.[33] In the current case, there is a trustee (Mr David), a beneficiary (Stamford), trust property (the funds in the company bank account), and a personal obligation annexed to the trust property. In regard to the latter requirement, the evidence of Mr David is that he considered himself bound to deal with the funds in the company bank account in accordance with the instructions of Mr David. Further, the evidence of Dr Denan establishes the intention to create a trust. It is well established that no particular formalities are required, and that trusts of legal interests in personal property may be created orally.[34]
[33]Heydon & Leeming Jacobs’ Law of Trusts in Australia (7th ed) at [104].
[34]Ibid, at [705].
I do not consider the fact that Stamford “pleaded” that the funds were held by the company on trust by it for a particular purpose is fundamental to the determination of the beneficial ownership of the funds in the company bank account, noting that, in any event, the proceeding was commenced by way of originating motion, and “points of claim” rather than pleadings, were only ordered to be provided after the trial had commenced, so the reference by MOG to Stamford’s “pleaded” case is not entirely correct. In my view, the “purpose” for which the funds transferred to the company bank account were to be utilised is of relatively limited relevance, except in the circumstances where, if for some reasons Stanford failed to establish that an express trust had been created in its favour, Stamford had sought to rely upon the principles in the Quistclose case to establish beneficial ownership of the funds in the company bank account.
In my view, MOG’s reliance upon the authorities referred to in paragraph 145 above does not support its contention that in order to establish beneficial ownership in the funds in the company bank account, Stamford must prove, on the balance of probabilities, that the funds were transferred to be held on trust for a particular purpose. In Re Australian Elizabethan Theatre Trust, the funds concerned were donations solicited from the public where the donors enjoyed tax deductibility, and donors were encouraged to express their “preferred” organisation to ultimately benefit from the donation from amongst a range of arts organisations. When the Australian Elizabethan Theatre Trust (“AETT”) went into liquidation, a number of those arts organisations sought to rely upon the principles in the Quistclose case to contend that funds representing donations accompanied by an expression of preference received by the AETT, but not passed on to the preferred organisation, were held by the AETT’s bankers on trust for those organisations.
This contention that the donations were held by the AETT on trust for the preferred organisation was rejected by Gummow J on the basis that, on the particular facts of that case, a donor’s statement of motive or expectation imposed no legal or equitable rights upon the AETT to fulfil that expectation. Gummow J stressed the importance of ascertaining the mutual intention of the parties with respect to the beneficial ownership of the funds, which was to be ascertained by the language employed by the parties in question, the nature of the transaction, and the relevant circumstances attending the relationship between them. Of particular significance to Gummow J in the case before him was that in the forms accompanying the donations the gifts were expressed to be “unconditional”, as was specified as necessary by the Commissioner of Taxation as being a necessary pre‑condition to enable the donors to claim a tax deduction for the gift. Also of significance was the fact that the donations were pooled with the general funds of the AETT, and not held in a separate account.
Indeed, in my view, the decision of Gummow J in this case undermines the contentions advanced on the part of MOG regarding what Stamford needed to prove to establish beneficial ownership of the funds in the company bank account. Gummow J expressed some reservations regarding the applicability of the principles in the Quistclose case beyond the particular facts of that case, save that it stood for the general proposition that a transaction may bear a dual character, depending upon the ascertained intentions of the parties.
Gummow J expressed the view that the Quistclose case did not give rise to a separate species of a “non charitable purpose” trust: rather, the reference to the “purpose” of the parties in the Quistclose case bears no significant legal import, but rather was “apt to describe the end sought to be achieved by the settlor”. Once again, Gummow J emphasised that:
The question as to the existence of any express trust will always have to be answered by reference to intention.
Applying such principles to the current proceeding, what is clear is that the critical matter is the intention of Stamford and Mr David with respect to the beneficial ownership of the funds in the company bank account: the overall purpose of the transaction is of secondary or even lesser relevance. One might expect that in many cases where funds are advanced by one person to be held by another on trust for the party advancing the funds, there may be no express purpose, or additional purposes to those expressed at the time of the trust. It might be that the terms of the instrument creating the trust might prescribe the uses to which the funds might be deployed, but the purpose of the establishment of the trust might be a quite different purpose, or, expressed in a different way, the trust may have been established in order to further a particular objective not expressed in the terms of the trust. I cannot see how the objectives of the settlor in establishing a trust can be the critical determinant of the beneficial ownership of the trust property.
As succinctly put by Dawson J in Nelson v Nelson[35] in the context of determining whether there was an intention of a party to make a gift, or to retain beneficial ownership for herself where that party was required to rebut a presumption of advancement:
Intention is something different from a reason or a motive.
[35][1995] 184 CLR 538, at 580.
Senior counsel for MOG also relied upon the following statement of Tate JA commenting upon the Quistclose case in the Court of Appeal in support of its contentions that the funds held in the company bank account were not held on trust for Stamford.
The court made clear, however, that the basis of the decision rested upon the mutual intention of the parties, of which the court had unequivocal evidence. In distinguishing other cases with somewhat similar facts, Lord Wilberforce went on to say:
Those are cases in which money has been paid to a company for the purpose of obtaining an allotment of shares … They are merely examples which show that, in the absence of some special arrangement creating a trust … payments of this kind are made upon the basis that they are to be included in the company’s assets. They do not negative the proposition that a trust may exist where the mutual intention is that they should not [be included in the company’s assets].
A court will not readily infer that funds provided to a company are to be impressed with a primary express trust for use exclusively for a specific purpose, the failure of which creates a secondary resulting trust for the benefit of those who provided the funds. It is not sufficient that funds are provided with an expectation that they will be used for a specific purpose. An expectation or general understanding falls short of the necessary mutual intention that funds have been provided on the express condition that they will be earmarked for use exclusively in accordance with an agreed purpose.[36]
[36]At [95-6].
However, MOG’s reliance upon the above statement illustrates the fundamental difficulty with MOG’s submissions generally: it seeks to undermine Stamford’s alternative claim based upon principles derived from the Quistclose case, while not addressing Stamford’s primary claim that, at the time of the transfer of the funds to the company bank account, an express trust in favour of Stamford came into existence, based upon the mutual intention that the beneficial ownership of the funds remained with Stamford, or, if for some reason, Stamford failed to satisfy the requirements for the creation of an express trust, Stamford could rely upon the unrebutted presumption that the funds were held on a resulting trust in its favour. The decision in Legal Services Commissioner vBrereton does not impose an additional overlay upon the requirements for the establishment of an express trust: rather, it is authority for the proposition that where someone pays another funds for a particular purpose, there must be something more than a mere expectation that the funds be used for that purpose, but rather an agreed stipulation or condition to that effect, such that beneficial title in the funds never became the beneficial property of the recipient. As in Re Australian Elizabethan Theatre Trust, the Court of Appeal in Legal Services Commissioner v Brereton found that the requisite intention to retain beneficial ownership on the part of the relevant parties, once again, at least in part because the tax deductibility of the relevant payment depended upon the persons making the payments retaining the legal or beneficial entitlement to the funds.[37] But this is not the basis upon which Stamford puts its primary case.
[37]At [102] - [103].
After evaluating the evidence in this proceeding, including the somewhat equivocal evidence regarding the purpose for which the funds might ultimately be deployed, in my view Stamford has established that the funds in the company bank account are held on trust for it. Both Dr Denan and Mr David are adamant that the funds in the company bank account were only to be utilised in accordance with Dr Denan’s instructions. The manner in which the company bank account was established is significant: the funds were held in a separate bank account and not mixed with Mr David’s funds.[38] Both Dr Denan and Mr David refer to the tax advantages of holding the funds in the company bank account rather than in Mr David’s name in their evidence, as did Mr David in his interview with Mr Morris: noting that the affidavit of Mr Morris which exhibited the transcript of his interview with Mr David was filed and served in the initial proceeding on or after 3 October 2012, some months after Dr Denan swore his affidavit. This is consistent with their evidence regarding their discussions regarding the establishment of the company bank account. Dr Denan had no need to be concerned about the taxation consequences of the transfer if the monies were not beneficially owned by Stamford. Apart from the interview disclosure, all of Mr David’s statements and conduct since the making of the 4 April freezing orders has been consistent with his recognising Stamford’s title to the funds.
[38]cf ReAustralian Elizabethan Theatre Trust, at 498.
If, however, for some reason I am wrong, and Stamford is unable to satisfy the requirements for the establishment of an express trust, then that is not the end of the matter, as Stamford enjoys the benefits of the presumption of a resulting trust, with that presumption of course being readily rebuttable by either a presumption of advancement, or credible evidence of an intention that the beneficial ownership of the relevant property should pass to the recipient. Again, it is not apparent from either the leading authorities or authors in this area that the transferor is required to establish that there was a particular purpose for the transfer, regardless of whether such a purpose is pleaded or advanced in evidence, although again the purpose of the transaction might be a relevant matter in ascertaining the intention of the parties.
Counsel for Stamford relied upon the decision of the High Court in Russell v Scott[39] in support of the proposition that where one party pays money into a bank account in the name of another party, there is a presumption that the parties intended that the beneficial ownership of the funds remained with the party making the payment. In that case, the relevant funds were held in a bank account in the joint names of an aunt and a nephew, but the sole contributor of the funds was the aunt. On the death of the aunt, the legal title to the funds passed to the nephew, on the basis of the provisions in the relevant banking legislation regarding survivorship. The submissions of the executors of the aunt’s estate that there was a presumption of a resulting trust found favour with the High Court, although, in that case, the Court found there was sufficient evidence of a mutual intention that beneficial ownership would pass to the nephew to rebut the presumption of a resulting trust.
[39][1936] 55 CLR 440.
Senior counsel for MOG submitted that Russell v Scott could be distinguished from the current case as the relevant principles were only applicable to funds in bank accounts held in joint names. Further, in Russell v Scott, there was evidence that the funds were placed in the joint bank account for a particular purpose, that is, for the nephew to operate the bank account to meet his aunt’s living expenses, which emphasised the need for Stamford to establish the purpose for which the funds had been transferred to the company bank account.
MOG submitted (in its written submissions filed on 10 September 2013), that not only was Stamford’s reliance upon Russell v Scott misconceived, but that Stamford, in seeking to rely upon the presumption of a resulting trust, and in contending that MOG bore the evidentiary onus of displacing that presumption, was tacitly conceding that the evidence upon which it relied could not establish the purpose for which the funds were advanced to the company bank account. Further, Stamford’s reliance upon the presumption of a resulting trust amounted to a fundamental shift in the manner in which it had run its case, having earlier conceded that it bore the onus of proof in establishing that the funds in the company bank account were held on trust for Stamford. Allowing Stamford to depart from its pleaded case in such a matter would amount to a breach of natural justice which would cause MOG grievous prejudice, MOG having chosen to conduct its defence of Stamford’s claim in a particular manner. In particular, MOG determined to call no witnesses.
I agree with the submissions of counsel for Stamford that these submissions regarding the way in which Stamford put its case are misconceived. First, the trial did not proceed on pleadings as such: indeed, there would have been no points of claim or points of defence filed had there been no adjournment consequent upon the disclosure of the 5 January email chain. The points of claim, once filed, returned to the funds in the company bank account being held “on trust” for Stamford, not on the basis of an express trust. It is hardly obscure law that there are a number of types of trust known to the law, and there are established principles in determining how they might arise, and MOG was represented at all times by experienced senior and junior counsel and solicitors. While no reference to the term “resulting trust” was made in the points of claim or evidence filed on behalf of Stamford, the matters deposed to in Mr David’s affidavit of 10 April 2012 and Dr Denan’s affidavit of 30 July 2012 gave clear notice of facts which could give rise to the presumption of a resulting trust.
In relation to the question of prejudice, MOG has had ample opportunity to make submissions on the question of whether the presumption of a resulting trust arose, and has in fact taken up that opportunity. What MOG has failed to demonstrate is how it would have conducted the trial any differently. It admitted that Stamford paid the funds into the company bank account, the only necessary pre‑condition to establishing the presumption of a resulting trust. It could hardly be sensibly advanced that this presumption was rebutted by a presumption of advancement. The question remains, how would it have conducted the trial any differently? Counsel for MOG subjected Dr Denan, and to a lesser extent, Mr David to extensive cross‑examination across a range of topics, including the contents of the 5 January email chain and the interview disclosure. It is difficult to see what other witnesses it could have called to rebut the presumption of a resulting trust. Counsel for MOG at one stage indicated a former director of R & R Publications would be called to give evidence, but did not ultimately call that witness. But that would have made no difference, as I have accepted MOG’s contention that the funds in the company bank account were unlikely to be needed at short notice for an investment in R & R Publications.
Even if it is accepted that Stamford’s late reference to the principles applicable to resulting trusts espoused in Russell v Scott represented a fundamental shift in the manner in which Stamford has put its case (which I do not necessarily accept), it seems to me that any protest to that effect would have to be supported by evidence as to how MOG would have conducted its case any differently, and indeed, how it could have conducted its case any differently, in circumstances where I accept, regardless of who bore the onus of proof, that the transfer was not the repayment of a loan made by Mr David to Dr Denan.
I also disagree that the decision in Russell v Scott should be distinguished from the current case for the reasons advanced by senior counsel for MOG. There seems to be no basis of principle which the presumption of a resulting trust could only apply where the relevant bank account was a joint bank account in the name of the party claiming a resulting trust in its favour and another party, rather than a situation where a resulting trust was claimed over funds where legal title rests solely with another party. No such distinction operates with respect to resulting trusts based upon contributions to the purchase of real estate. Again, as to the question of the “purpose” of the transaction, the evidence in Russell v Scott regarding the purpose of the establishment of the joint bank account merely formed part of the factual matrix under consideration.
In the current case, the presumption that, in circumstances where there is a transfer of the legal title in property from one party to another, in the absence of consideration from the recipient, the parties intended that the beneficial ownership of the property remains with the original party, supports Stamford’s claim to the funds in the company bank account. There is no presumption of advancement arising out of the relationship between Dr Denan and Mr David to rebut that presumption. Finally, even setting aside the question of upon whom the onus lies to adduce evidence of a mutual intention sufficient to rebut the presumption of a resulting trust, it is not possible, on the basis of the evidence before me, to reach a conclusion that Stamford intended that the beneficial ownership of the funds in the company bank account pass to either the company or Mr David, such as to rebut the presumption of a resulting trust.
Accordingly, the question remains what relief Stamford should be entitled to in this proceeding. All other things being equal, Stamford should be entitled to the declarations sought by it in its originating motion, that is, a declaration that the funds in the company bank account are held by it on trust for Stamford. However, it is well established that the grant of declaratory relief is a discretionary matter. In my view, there is one matter relevant to the Court’s discretion: that is, my suspicion that Stamford’s transfer of the funds to the company bank account was part of a plan to conceal Stamford’s beneficial ownership of the funds in the company bank account. Indeed, on one view, this hypothesis best fits the evidence, and in particular, the reference by Mr David to the “return of my monies” in the 5 January email chain.
If there was such a plan, then it is possible that, if not for Mr David’s own misdeeds with respect to his employer’s funds, and the subsequent making of the 4 April freezing orders, Stamford’s beneficial ownership of the funds in the company bank account would remain concealed. The question arises, should the Court be facilitating the return of those funds to Stamford? After all, while neither party made submissions in relation to these issues (understandably so), it is not the role of the Court to facilitate, or impliedly approve in retrospect, transactions which have, or may have the effect of concealing assets from current or potential creditors.
One example where the High Court had to grapple with such concerns is the case of Nelson v Nelson.[40] In that case, a mother paid the purchase price for a house which was transferred into the names of her adult children. The purpose of the transfer was to enable the mother to later apply for a subsidised loan available to widows of defence force personnel to purchase a further home, which she did in fact do. After the first property was sold, one of her children resisted an application by her mother that she held the beneficial interest in the subject property. As well as relying upon the presumption of advancement as between parent and child, the daughter also submitted that equity will not enforce a trust which is designed to carry out an illegal purpose.
[40](1995) 184 CLR 538.
In Nelson v Nelson, the High Court considered a number of authorities regarding the enforcement of trusts which either, by their very creation, infringe a statute, or the creation of or execution of the trust may be associated with or in furtherance of a purpose rendered illegal by statute. This class of trusts also extends to those which were created for the purpose of defrauding creditors.[41] Traditionally, the approach has been that an express trust created for such purposes, at least where that purpose had been effected, would be set aside. The position with respect to resulting trusts was somewhat more nuanced: a claim to property based upon a resulting trust where property is transferred for an illegal or moral purpose would only succeed if the claimant was not required to rely upon evidence of that purpose to make good its claim, for example, in order to rebut a presumption of advancement.[42]
[41]See Haigh v Kaye (1872) LR 7 Ch App 469.
[42]See Tinsley v Milligan [1994] 1 AC 340; Blackburn v YV Properties Pty Ltd [1980] VR 290.
The High Court declined to follow Tinsley v Milligan, and in particular, did not consider that the distinction between cases where evidence of illegal purpose was required to establish a resulting trust, and where it was required to support the rebuttal of a presumption of advancement was supportable by principle. The Court also expressly rejected the proposition that in cases where a party seeks to enforce an illegal trust (and the Court did not appear to make a material distinction between express and resulting trusts) that the Court ought to let the loss lie where it falls. Rather, as stated by Deane and Gummow JJ:[43]
equity is equipped to attain a result which eschews harsh extremes.
[43]Ibid, at 559.
In that case, the majority of the High Court found that equity would not permit a result which enriched the daughter at her mother’s expense, notwithstanding the illegal purpose of the trust, but rather that the declarations made in favour of the mother were to be subject to the mother providing restitution of the sum she had improperly received by way of subsidy, thus ameliorating the impact of the illegality.
Deane and Gummow JJ summarised the position[44] as follows:
In our view, as the price of obtaining the relief she seeks for the recognition and enforcement of a resulting trust in respect of the whole of the balance of the proceeds of sale of the Bent Street property, Mrs Nelson must be prepared to do equity according to the requirements of good conscience. That may involve consideration of more than the interests of the parties to the litigation. Here, good conscience calls for the taking of steps by Mrs Nelson of steps sufficient to satisfy the demands of the underlying policy of the Act.
[44]Ibid at 571.
In the current case, there is insufficient evidence for me to make a conclusive finding that the funds were transferred to the company bank account in order to conceal Stamford’s beneficial ownership of the funds, from current or potential creditors. However, the evidence does point to that as being more than a mere possibility. Of course, if that was the real purpose of the transfer of the funds to the company bank account, then that purpose may have not been achieved. However, in my view, given that the declaratory relief sought by Stamford is a discretionary matter, certain conditions ought to be imposed upon the granting of such relief, given the reasonable suspicions the evidence has raised.
Accordingly, consistently with the approach taken by the Court in Nelson v Nelson, I would make the declarations sought by Stamford, subject to Dr Denan, on behalf of Stamford, giving an undertaking to the Court that he will arrange for the funds in the company bank account to be transferred to the effect to an account in either Australia or Singapore, in the name of either Stamford, or some other entity within the Stamford Group in which Dr Denan holds an equivalent financial interest, and, that any information regarding the beneficial ownership of those funds be declared, upon request, to any relevant regulatory authority and/or upon the order of any competent court in Australia or Singapore. Furthermore, I would seek undertakings from Dr Denan that, in the event that the loan agreement between him and Mr David proceeds, he gives 7 days’ notice of the transfer of funds pursuant to any such agreement to the trustee.
I shall hear further submissions from counsel with respect to the precise form of the undertakings to be provided, the ultimate disposition of the initial proceeding and the recovery proceeding, and the question of costs, including reserved costs in both this proceeding and the initial proceeding.
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