Troy Group Pty Ltd v Chittleborough - [2023] WADC 151

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION:   PERTH
CITATION:   TROY GROUP PTY LTD -v- CHITTLEBOROUGH [2023] WADC 151
CORAM:   BLACK DCJ
HEARD:   8-12 MAY 2023
DELIVERED          :   15 DECEMBER 2023
FILE NO/S:   CIV 4783 of 2018
BETWEEN:   TROY GROUP PTY LTD
First Plaintiff
TROY SMSF PTY LTD as Trustee for THE TROY SUPERANNUATION FUND
Second Plaintiff
MARK ANTHONY & GAIL ELAINE TROY as Trustee for THE TROY FAMILY TRUST
Third Plaintiff
DELIA BREE TROY
Fourth Plaintiff
AND
GLENN CHITTLEBOROUGH
Defendant

Catchwords:

Misleading and deceptive conduct - False and misleading representation as to future matters - Break in the chain of causation - Abnormal supervening cause - How to determine loss - Mitigation of loss - Claim for legal and investigation fees incurred while mitigating loss - Manner of calculating loss - Implied loan - Restitutionary claim - Third party subvention

Legislation:

Australian Consumer Law, s 18
Australian Securities and Investments Commission Act 2001 (Cth), s 12DA
Competition and Consumer Act 2010 (WA), s 86
Corporations Act 2001 (Cth), s 1041H

Result:

Claim for damages by the first and third plaintiffs partially allowed
Claim for damages by the second and fourth plaintiffs dismissed

Representation:

Counsel:

First Plaintiff	:	Mr C S Williams
Second Plaintiff	:	Mr C S Williams
Third Plaintiff	:	Mr C S Williams
Fourth Plaintiff	:	Mr C S Williams
Defendant	:	Mr J C Yeldon

Solicitors:

First Plaintiff	:	Solomon Brothers
Second Plaintiff	:	Solomon Brothers
Third Plaintiff	:	Solomon Brothers
Fourth Plaintiff	:	Solomon Brothers
Defendant	:	Huggins Legal

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

ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1
Ansett Transport Industries (Operations) Pty Ltd v Halton (1979) 25 ALR 639
Biggin and Co Ltd v Permanite Ltd [1951] 1 KB 422
British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673
Callaghan v William C Lynch Pty Ltd [1962] NSWR 871; (1962) 79 WN (NSW) 830
Fox v Wood (1981) 148 CLR 438
Frith v Gold Coast Mineral Springs Pty Ltd (1983) 47 ALR 547
FYD Investments Pty Ltd v Promptair Pty Ltd (No 2) [2019] FCA 419
Haines v Bendall (1991) 172 CLR 60
Hay Property Consultants Pty Ltd v Victorian Securities Corporation Ltd [2010] VSCA 247
Hellyer Drilling Co v MacDonald Hamilton & Co Pty Ltd (1983) 51 ALR 177
Henville v Walker [2001] HCA 52; (2001) 206 CLR 459
Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd [1978] HCA 11; (1978) 140 CLR 216
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109
Keys Consulting Pty Ltd v CAT Enterprises Pty Ltd [2019] VSCA 136
Monroe Schneider Associates (Inc) v No 1 Raberem Pty Ltd (1991) 33 FCR 1
Musca v Astle Corp Pty Ltd (1988) 80 ALR 251
Netaf Pty Ltd v Bikane Pty Ltd (1990) 92 ALR 490
O3 Capital Pty Ltd v WY Properties Pty Ltd [2016] WASCA 82; (2016) 49 WAR 517
Parkdale Custom Built Furniture Pty Ltd v Paxu Pty Ltd (1982) 149 CLR 191
Poliwka v Girgis [2021] WASCA 30
Potts v Miller (1940) 64 CLR 282
Progressive Pod Properties Pty Ltd v A & M Green Investments Pty Ltd [2012] NSWCA 225
Ratcliffe v Evans [1892] 2 QB 524
Redding v Lee (1983) 151 CLR 117
RG Maxwell & Associates Pty Ltd v Warner (1990) ATPR (Digest) 46-062
Thurston v Todd [1966] 1 NSWR 321
Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603
Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514
Whitaker v Paxad Pty Ltd [2009] WASC 47
Wyzenbeek v Australasian Marine Imports Pty Ltd (in liq) [2019] FCAFC 167; (2019) 272 FCR 373

BLACK DCJ:

Introduction

Overview of Facts

Mark Troy, his daughter Delia Troy, and the defendant were long‑term family friends who met through their mutual participation in the Jehovah's Witness Church. In late 2013 the defendant suggested to Mr Troy that he should invest in a company known to him as 'Bux'. Bux came to be described by various other names and was a collection of three different corporate entities. For the purposes of this matter, it is sufficient to simply refer to the various companies as 'Bux'.
The defendant told Mr Troy and his daughter that Bux was involved in the creation and distribution of a mobile phone application that would enable the easy transfer of money globally.
Although the precise nature of the defendant's involvement with Bux remains unclear, the evidence shows that he was at least an investor in and promoter of Bux. He told the Troys about the significant money he was making from his own investments in Bux and he urged them to do likewise. They were, because of their friendship with him, able to get a special deal. The promised returns would be large and success was undoubted. It was so lucrative that only a very select group of people were being given the chance to participate in its investment opportunities.
Lured by the promised rewards and large returns and reassured by their long-term friendship and association with the defendant, they decided to invest in Bux.
From December 2014 until early 2016, Mr Troy through the corporate structures of the various plaintiffs and Ms Troy in her own right and as a partial contributor to the funds of the second plaintiff, made a number of investments in Bux with the encouragement, advice and assistance of the defendant.
Each of the plaintiffs contend in these proceedings that, induced by what turned out to be the misleading and deceptive conduct of the defendant, they made various payments, directly and through the various corporate entities to acquire shares in Bux and to assist Bux in the acquisition of companies in the United States of America (USA) and Canada (the Wall Street purchases).
By 2016, after $865,000 had been invested by the four plaintiffs, the plaintiffs discovered that Bux was a sham and that the representations made to them by the defendant regarding the purpose of the investments and the rewards that would follow were false.
Lawyers and private investigators were hired by Mr Troy, arguably on behalf of some or all of the plaintiffs, and a Supreme Court action was commenced in July 2016 with the second plaintiff named as a party to the action. This action sought to recover $350,000 of the lost invested funds. These were the funds invested in the Wall Street purchases.
This civil action ultimately led to a broader settlement with Bux and a number of parties associated with Bux, but not the defendant. The settlement yielded the recovery of an amount which exceeded all of the originally invested funds by the plaintiffs, namely $945,000.
The cost of engaging the lawyers and private investigators who assisted in the recovery of these funds, when added to the amount of the original investments, did however exceed the amount recovered.
This action taken by the plaintiffs, in its primary relief sought, seeks recovery of the remaining portion of these lost funds in the form of the fees charged by the lawyers and private investigators.
While the plaintiffs claim that the defendant is liable for all of the loss they sustained as a consequence of his misleading and deceptive representations that induced them to invest in Bux, the primary relief sought particularises the loss as the difference between the amount invested by the plaintiffs plus the legal and private investigation fees incurred when seeking to mitigate their loss through the Supreme Court settlement, minus the sum of money recovered in the settlement, namely $945,000.
The plaintiffs accept that, although they were not obliged to mitigate the loss caused by the conduct of the defendant, the fact that they did so is relevant to a determination of the quantum of loss caused by the defendant. Equally though, they say that the costs of pursuing the action constituting a mitigation of loss must also be accounted for.
A fundamental issue for the plaintiffs is that Mr Troy personally paid for some of these legal and investigation fees and arguably became contractually liable for all of these fees. This is a potential issue as Mr Troy is not a party to this action. The defendant argues that this is fatal to the plaintiffs' claim irrespective of its merits otherwise.
The matter is further complicated by the fact that the payment of the fees and the receipt of the settlement funds by some of the plaintiffs was somewhat random and disproportionate to the loss incurred by each of the plaintiffs.
Further, the third plaintiff was not a party at all to the proceedings that led to the settlement against Bux nor did it receive any of the settlement funds nor contribute to the payment of any of the fees.
The fourth plaintiff testified at trial that she no longer had any loss that has not been repaid and she was unaware of having any remaining liability in relation to the legal and investigation fees, paid or unpaid. Further, she did not appear to have received any of the settlement funds yet somehow she had been repaid.
Although it is not in dispute that the funds invested by the plaintiffs in Bux were lost directly as a consequence of the actions of Bux, this action is brought only against the defendant. Any right to further claim from Bux was prevented by the terms of the settlement.
The plaintiffs' claim against the defendant is on the basis that he made false and misleading representations to the plaintiffs which they relied on when investing in Bux.
The defendant says that although he did make false and misleading representations to the plaintiffs that they relied upon in making their investments in Bux, he did not cause the loss that they have claimed.

The entities

The plaintiffs

Mr Troy was the director and principal witness for the first, second and third plaintiffs but he was not a party to these proceedings.
The plaintiffs comprise a family group:
(a)The first plaintiff is a company with Mr Troy as its sole director;
(b)The second plaintiff is the trustee of the Troy Superannuation Fund. Mr Troy and the fourth plaintiff were the directors of the second plaintiff (the fourth plaintiff having been appointed a director on 29 October 2015). Mr Troy, the fourth plaintiff and Mr Troy's wife, Gail Troy are the members of the Troy Superannuation Fund;
(c)The third plaintiff comprises Mr Troy and Mrs Troy, in their capacity as trustees of the Troy Family Trust (the Family Trust); and
(d)The fourth plaintiff, Delia, is the daughter of Mr Troy and she was also a witness in this trial.

The defendant

The defendant was known to Mr Troy and Ms Troy through their family connection and association in the Jehovah's Witness Church.
The defendant was at least an investor and promoter of Bux. He also provided advice, encouragement and assistance to the plaintiffs in relation to their investments in Bux.

Bux

The entity referred to in this trial as 'Bux' in fact comprised three separate companies, two of whom were based in Australia and one in Hong Kong. These distinctions, unlike in relation to the various plaintiffs, is generally less important for the purposes of the matters in issue in this trial.
While the actions of Bux are central to the relevant issues to be determined in this matter, none of the entities comprising Bux was a party to these proceedings.

The issues to be determined

This court is tasked with determining, in a broad sense, the following matters:
(a)did the defendant's conduct contravene one or more of the various legislative provisions dealing with engaging in conduct that was misleading or deceptive: s 18 of the Australian Consumer Law (ACL), s 86 of the Competition and Consumer Act 2010 (WA), s 1041H of the Corporations Act 2001 (Cth) (CA) and/or s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act);
(b)did the misleading and deceptive conduct of the defendant in fact induce the plaintiffs to invest in Bux in the manner alleged;
(c)did the defendant cause a loss to any or all of the plaintiffs as a consequence of their investments in Bux;
(d)in what way should the money recovered by the action of some of the plaintiffs in reaching a settlement with Bux following the action in the Supreme Court be applied in these proceedings;
(e)who is liable for the payment of the legal and investigation fees; and
(f) what is the quantum of the loss, if any, for each plaintiff that remains outstanding?

The issues not in dispute

The defendant does not dispute the following matters:
(a)the defendant made the statements and representations as particularised in the amended statement of claim;
(b)those representations were misleading and deceptive and were made in trade or commerce;
(c)those representations induced the first, second and fourth plaintiffs to make the relevant investments in Bux. The disputed issue in relation to the third plaintiff only relates to the basis upon which it paid money in relation toward the Wall Street purchases;
(d)fraudulent shares certificates were issued by Bux to some of the plaintiffs in relation to the purported share investments;
(e)the purported Wall Street purchases did not take place; and
(f)at least some of the plaintiffs paid money to invest in Bux and those funds were fraudulently misapplied by Bux.

The payments made to Bux

The parties agree as to the timing and quantum of the payments made to Bux. There are disputes, however, regarding which of the plaintiffs made some of the payments and there is also a limited dispute regarding the precise purpose for some of the payments.
The following payments to acquire shares in Bux were made by one or other of the plaintiffs as follows:
1.on 15 December 2014, the first plaintiff paid $50,000 to obtain 625,000 shares;
2.on 27 February 2015, the first plaintiff paid $40,000 to obtain 500,000 shares;
3.on 23 April 2015, the fourth plaintiff paid $25,000 to obtain 250,000 shares;
4.on 1 May 2015, the first plaintiff paid $120,000 for the Family Trust to obtain 1,200,000 shares;
5.on 23 July 2015 the third plaintiff paid $50,000 toward Bux purchasing the Wall Street purchases (it is disputed as to the precise capacity in which such payment was made);
6.on 7 August 2015 the second plaintiff paid $300,000 toward Bux purchasing the Wall Street purchases;
7. on 4 November 2015, the second plaintiff paid $10,000 and on 17 November 2015 paid $120,000 to obtain 1,300,000 shares in Bux; and
8. on 10 December 2015, the first plaintiff paid $10,000 and the second plaintiff paid $140,000, to obtain 1,500,000 shares for Troy SMSF.
(Total sum invested: $865,000)

The alleged contravention

The plaintiffs contend that the defendant contravened one or more of the legislative provisions referred to above by the making of misleading or deceptive representations that induced the plaintiffs to make the purported investments in Bux. Nothing in fact turns in this trial upon a determination of which of the provisions is applied as long as a contravention of at least one of the provisions is proved.
For a claim brought under s 18(1) of the ACL the plaintiffs must prove that:
1.the defendant engaged in conduct;
2.in trade or commerce; and
3.that conduct was misleading or deceptive or likely to mislead or deceive.
None of these three elements are disputed by the defendant.
Accordingly, I find that at the very least the defendant contravened s 18(1) of the ACL.
The amended statement of claim pleads that the defendant made misleading or deceptive representations to the plaintiffs on nine particularised occasions. These representations were made by the defendant to the plaintiffs without having reasonable grounds for doing so.
The defendant admits that these representations were made and that they were misleading or deceptive and that they were made without reasonable grounds.
The defendant denies contravening any of the provisions but on a very narrow basis that applies equally to all of the legislative provisions relied upon. He argues that the manner in which the plaintiffs have pleaded their case requires that to establish causation they must prove that shares in Bux were in fact acquired.
There is otherwise no dispute by the defendant that he contravened each of the sections particularised above.
The most significant issue for this trial is whether the loss that is claimed in these proceedings was caused by the defendant and if so, whether it was one or more of the plaintiffs who sustained that loss rather than a non‑party, Mr Troy.

Supreme Court action

On 25 July 2016, the second plaintiff commenced legal proceedings in the Supreme Court of Western Australia, by way of the lodgement of a writ of summons against Bux Global Limited and Bux.Com Pty Ltd, CIV 2271 of 2016 (the Supreme Court action). The purpose of these proceedings was to recover the $350,000 that had been paid by the second (and arguably third) plaintiff for Bux's non‑acquisition of the promised Wall Street purchases.
On or about 22 June 2017, this claim was settled along with other claims against Bux, relating to the investments made by the plaintiffs that involved parties and claims that were not the subject of the initial Supreme Court action.
A Deed of Settlement (Exhibit 29) (Deed) was prepared and signed by the relevant parties. Its terms were the following:
A.Each of Mr Troy, the first, second and fourth plaintiffs were to grant a release from liability to each of the relevant Bux entities and to various persons connected with Bux. The defendant was not included.
B.The sum of $945,000 was to be paid by Bux Global to the second plaintiff. This sum contained no particularisation as to how it was calculated or what particular losses or expenses it related to.
C.Upon payment of the Settlement Sum the non-Bux parties would relinquish, by way of transfer, any purported shares held by each of them in Bux Global or its related bodies corporate.
Although the settlement sum was expressed in the Deed as being payable to the second defendant, the plaintiffs' case at trial was that it would then be on distributed as appropriate to the relevant parties to the Deed.
The consequence of the signing of the Deed was that all of the plaintiffs in these proceedings, with the exception of the third plaintiff, had the capacity to access the settlement sum of money that exceeded the total payments made by them to Bux.
The settlement sum was paid, following which the transfer of the purported shares held by them in Bux Global Limited were transferred to Shampagne Australia Pty Ltd.
The bringing of the Supreme Court action and the funds obtained pursuant to the Deed were as a consequence of work done by Steenhof Brothers (lawyers) and Complexas (private investigators).
The plaintiffs contend that the total cost of the legal fees incurred to achieve the settlement was $88,524.50[1] and the total of Complexas' charges were $211,131.08.
[1] A figure that due to the inclusion of costs relating to the defendant needs to be ultimately adjusted.

Summary of evidence

The oral evidence led at trial comprised the oral testimony of Mr Troy and Delia Troy who were called on behalf of the plaintiffs. The defendant did not call any witnesses.
The balance of the evidence tendered at trial was extensive documentary material that related to:
(a)the investments made;
(b)correspondence with Bux, its agents and the defendant;
(c)the Supreme Court action and Settlement Agreement; and
(d)communications, reports and invoices relating to the engagement of Steenhof Bros (lawyers) and Complexas (private investigators).

Summary of evidence of Mark Troy

Mr Troy confirmed that he was a director of the first, second and third plaintiffs. Delia, his adult daughter and the fourth plaintiff, was also one of the directors of the second plaintiff.

He said that all of the payments made by the plaintiffs, with the exception of those made on 23 July 2015 and 7 August 2015 for $350,000, were made for the purpose of obtaining shares in Bux. The $350,000 was paid to Bux for the Wall Street acquisition which involved Bux purchasing two companies.
He confirmed the first payment made to Bux through the defendant by the first plaintiff, was for the sum of $50,000 and was paid on 15 December 2014 to acquire shares in Bux.
Mr Troy said that prior to this date he had been approached by the defendant who had spoken to him about the benefits of investing with Bux.
The defendant told him that Bux was a new but well-established company that had created an 'App' that was able to transfer money all over the world. Simple returns would be provided to investors and there would be dividends paid within a short-term period.
He said that because he had known the defendant for a long time, he trusted him and he thought it would be of benefit for the Troy Group to invest with Bux. He said:
Glenn and I, we've grown up together, worked together in the mining industry, spent many times together. We had a pretty close relationship, been through a lot together so I deemed him a person as quite trustworthy.
The defendant told him that shares in Bux would normally cost around 40 cents per share but he would be able to get them at a reduced rate because of their friendship.
Mr Troy from December 2014 for about a year, with the assistance of the defendant, caused payments to be made on behalf of the various plaintiffs for the purpose of acquiring shares in Bux.
Mr Troy said on or about in mid‑2015 the defendant told him that there was an opportunity to buy into a company that was up for sale on Wall Street. It involved the payment of a 50% deposit to secure the company and then a further $300,000 to give him a 25% holding in the company.
He was told that there was an old man in Dubai who owned a company that he did not want anymore and he was selling it off. It was apparently for sale for about $1.4 million to $1.5 million. The required deposit from him was $50,000. The defendant suggested to him that he pay for it using the second plaintiff's funds.
Mr Troy said there were subsequent meetings with his accountant, his daughter, the defendant and a man associated with Bux, Ray Webber.
Mr Troy said that he arranged to pay the deposit of $50,000 out of the third plaintiff's account. He said this was paid as a loan by the third plaintiff to the second plaintiff and was paid on behalf of the second plaintiff.

He was told by the defendant that upon payment of the total funds, namely $350,000, the second plaintiff would obtain a 25% ownership of the Wall Street purchases. The agreement was reduced to writing and was signed at his accountant's office.
Mr Troy said that the fourth plaintiff had on advice from the defendant, asked him to move money from her superannuation account into a single account where they could have a self‑managed super fund account together. She told him that she wanted to use her part of the superannuation money to buy shares in Bux.
In due course she transferred $130,000 which was used for the purchase of 1.3 million shares for $130,000 for the benefit of the second plaintiff.
Mr Troy said on 10 December 2015 the second plaintiff purchased another $150,000 worth of shares at 10 cents, giving them 1.5 million shares. He was told they would be getting dividends over the next month and the shares would be worth a dollar by December 2015.
The second plaintiff contributed $140,000 and the first plaintiff contributed $10,000.
He explained that the first plaintiff was making payments into the second plaintiff's account based on advice from the defendant and his accountant who had told him that this was the best way to receive tax offsets and benefits.
Mr Troy stated that by January 2016 he had become very curious as to why he had not received any documentation. It was then that he discovered that one of the Wall Street entities, namely the one in Canada, may not have been purchased by Bux.
Mr Troy contacted the defendant and others and began an investigation into where the purported Wall Street payments had gone. He was fobbed off and largely ignored.
By mid to late January 2016 Mr Troy said he decided to get legal advice regarding the whereabouts of the funds provided for the supposed Wall Street purchases. It was at this time that he first contacted the law firm, Steenhof Brothers.
On 10 February 2018 Mr Troy met with the principal of the firm, John Steenhof, to discuss the investments made by the plaintiffs in Bux. By this stage he suspected all the investments were fraudulent.
He was told by Mr Steenhof that it was fortunate he had the signed contract for the $350,000 relating to the Wall Street purchases as without it he 'would not have had a leg to stand on or even be able to take them to court'.
Mr Troy decided to engage Steenhof Brothers and it was his understanding that this was on behalf of the first, second and third plaintiffs.

He provided his lawyers with all the documents he had including the purported share documents and a copy of the Wall Street contract.
In due course Mr Steven Penglis SC, a barrister, was also engaged on his behalf. Mr Penglis told him that they had grounds to set out a case in the Supreme Court in relation to the failure by Bux to use his funds for the purpose of the Wall Street purchases.
Shortly afterward on 25 July 2016, a writ of summons was lodged in the Supreme Court. He said that he, as one of the directors of the second plaintiff, gave instructions to Steenhof Brothers to commence the action on its behalf.
ASIC were also notified of the conduct of Bux and others by Mr Troy and Mr Steenhof.
Mr Troy decided at around that same time that he needed to engage a private investigator. It was proving difficult for him to get information about Bux and to trace the whereabouts of the apparently invested funds.
He said that he was contacted by another investor, Peter Hooke, who had also lost a large sum of money from investing in Bux.
Mr Hooke told him that he wanted to join the second defendant's case in the Supreme Court. Mr Troy said his lawyers recommended he not do this as it would all become too complicated. The two men did however decide to jointly engage a private investigation firm, Complexas. Complexas had been recommended to Mr Troy by another failed investor in Bux, Marcus Ward.
The owner of Complexas was a man based in England by the name of Dave Womble and he was told that he would also be working with Nina Hobson.
He said the first meeting with Complexas occurred in the following circumstances:
Dave and Nina had come to our house, and Delia and I had the initial meeting in our house ... Peter Hooke was on the phone while we were having this meeting cos he's in Queensland. And then we set about discussing after they left what we're going to do.
Following the initial discussions, he said that he and Mr Hooke signed a contract with Complexas in November 2021 engaging them to carry out a broad investigation into Bux relevant to both of their loss investment funds.
He stated that he understood that he was signing this agreement on behalf of his companies, namely the first, second and third plaintiffs.
He was unable to explain why there were two versions of the agreement with some differences, Exhibits 21 and 22, which both appeared to bear his signature, (the difference between these two documents were a significant issue from the perspective of the defendant at trial).
Mr Troy could not clearly remember the circumstances surrounding the signing of the cost agreement and only recalled signing one document. This was the one signed at the kitchen table of his house.
Mr Troy explained that Complexas was engaged at that time because he and Mr Hooke were struggling to get anywhere further with the courts and lawyers in relation to their missing investment funds with Bux.

He explained that the agreement entered into with Complexas required that he and Mr Hooke would pay a monthly sum of money but if Complexas were able to help them retrieve all the money then Complexas would take a percentage of the recovered sum.
From time-to-time Complexas provided updates and reports regarding the status of their investigation. These updates were both in writing and delivered orally.
Toward the middle of 2017 Mr Troy said that Mr Steenhof contacted him to tell him that they had received an offer in relation to a settlement of the Supreme Court proceedings from the lawyers acting for Bux. He said:
I was driving my Landcruiser when John Steenhof rang me, and I was in Fremantle when he told me that he'd received an offer from Whittens.
I'll tell you what I said to him. I told him to bugger off. That was my first words. And then he reasoned with me and he said, 'Mr Penglis suggests that you take the offer because you've just had to go further in court in relation to this issue, so you need to think about it', so I did.
Then I had to have a discussion with Mr Penglis.
He said that it was in the best interest to take that was offered to us because you might not get anything offered to you at all again.
I accepted the offer.
Mr Troy then confirmed the details of the settlement.
Mr Troy was then asked by his counsel to go through each of the lawyer's and investigator invoices and confirm details that were, again, apparent on the face of the documents.
He did explain that the reason why some of the payments were made from an account in his personal name was as follows:
Complete Access was part of the Troy Group account. Money would come into the Troy Group and we'd transfer it in the Complete Access account to be moved out.
He confirmed that not all the invoices for payment by Complexas had been paid. His explanation was as follows:
At present I hadn't caused the invoice to be paid because I really didn't have the funds to pay it. And I explained to Mr Womble that I had ongoing court actions and that I'd settle at the end of the court actions even if I was to pay it off. … He was happy for me to wait to pay him off because I'd paid all my lawyers off and I'd be paying everybody off through the process of it all.
He also said that Complexas had told him that they would be increasing the amount payable on the final invoice (unpaid) because he had taken too long to pay it:
Had you had any communications with Mr Womble before you received this email?---With this, yeah, we discussed about payment of the existing email at - what I understand is, when I received this one it was an - an increase, because they're taking too long to pay.
He discussed the amount that had not been paid and I said the event of the settlement of court cases, as I finished the court cases, I would then cede the finished payment on or pay him off for the full amount.
And have you caused the amount of this invoice (exh 34) .. to be paid?---No.
And can you confirm to her Honour the reason why you have not caused it to be paid?---Well, I've been paying everybody else off and he will be one of those that will be paid off.
He said that all of the invoices from Steenhof Brothers had been paid.
Mr Troy contended that, although on occasions he personally made payment of the fees, he was doing so on behalf of the Troy Group because 'they were engaging Steenhof Brothers'. He said that the account that was used for payment was generally the first plaintiff's bank account.
Mr Troy asserted that the 'Troy Group was being represented by Steenhof Brothers and the self-managed super fund and the trust underneath the Troy Group'. He said he believed that this was the case 'because my accountant suggested that I pay for it through the Troy Group'.
He also said in response to a direct question from his counsel, rather unhelpfully, that the reason why he caused the payments to be made from the funds of companies, rather than personal funds was because 'the money was taken from the companies and not my personal funds'.
The following exchange with his lawyer took place:
Were there any reasons why, on occasions, you might have caused amounts to be paid to Steenhof Brothers from the funds of one company as opposed to another?---No.

Cross-examination

In cross‑examination, Mr Troy accepted, without specifically recalling, that the $50,000 that was paid to Bux as the deposit for the Wall Street purchase came from the third plaintiff and went into the second plaintiff's fund as a loan to the second plaintiff.

He accepted that the third plaintiff was not a party to the Deed but denied that this was because he knew that the third plaintiff had not invested in Bux.
Mr Troy also denied that the absence of any reference to the defendant in the Supreme Court action was because he had considered at that time that his failure to acquire his share of the Wall Street companies were not related to any conduct of the defendant.
Contrary to the propositions put in cross‑examination in relation to the Steenhof Brothers cost agreement sent under cover of a letter dated 11 February 2016, Mr Troy maintained that he signed the document as a director for all of the entities rather than his personal capacity.
In response to questions about who had paid the initial retainer required by Steenhof Brothers, namely $5,000, he said that this was paid out of the funds of the first plaintiff.

He was cross‑examined at length regarding the fact that more money was recovered by the plaintiffs than what was actually spent in investing with Bux. The following exchange occurred:
I wanted 1.3 million but Mr Penglis and I had the discussion to accept the 945.
‑ ‑ ‑ the amount you invested, and assuming that $945,000 is what you received, do you accept that means you got $80,000 more than you invested? Well, I wasn't aware of that right at this time. I can't recall that.
So I suggest that there was more than enough money to compensate all of the plaintiffs for their share investments in Bux from the settlement sum? No.
The settlement deed doesn't refer to Delia getting any money, does it? I don't know. I'll have to have a look. Which page?
Well, if you look at?---Well, then she's part of the super fund of course she would have been getting the money cos money went back into the super fund.
In relation to the fourth plaintiff's purported investment of $25,000 Mr Troy stated, 'that's something we missed'. (This was contrary to the evidence later given by the fourth plaintiff).
It was put to Mr Troy that the Deed required the handing back of shares that had never in fact been received. Mr Troy became confused by this line of questioning. This was not surprising given the fact that, contrary to the questions being asked, the Deed in fact required the handing back of 'purported shares'.
Mr Troy agreed that the $945,000 that was received was paid into the trust account statement of Steenhof Brothers and was distributed under the instructions of his accountant.
While he accepted that he did not consider making any distribution from the settlement funds towards the fourth plaintiff's investment in shares, he said it was because he had never 'given it a thought … and not until you've highlighted the fact in … that settlement deed that it was missed'.
Mr Troy was unaware why the first plaintiff received $290,000 of the settlement funds when their investment was $220,000.
In response to the assertion he was seeking to recover more than was due to the plaintiffs, Mr Troy pointed out that he had in fact been seeking $1.3 million.
Mr Troy denied that he had demanded more money from Bux than he was entitled to.
Mr Troy was cross‑examined regarding the fact that most of the legal and investigative work that was done did not expressly reference the defendant. He agreed with this although it must be said that it was difficult to ascertain the purpose of this line of questioning by counsel for the defendant.
Mr Troy was cross-examined at length about the movement of the various investment funds over time. He was uncertain as to precisely what moneys had been transferred and why the transactions occurred in the way they did. He was generally unable to provide any meaningful explanations regarding these matters beyond what was apparent from the documents.
Mr Troy was asked about the specific fees charged by Complexas and the work being performed by them. He said that he considered that the monthly fee they were charging was reasonable and confirmed that a 15% success fee was agreed with them at the initial meeting at his house. He could not recall if there were any signed documents that made any reference to the purported success fee.
Mr Troy was questioned about the allegedly improper tactics utilised by the private investigators and his possible complicity in this. The lack of relevance of this line of questioning was later accepted by the defendant during closing after his counsel abandoned the only aspect of the defence to which this issue related.
Mr Troy agreed that Complexas was formally engaged by himself and Mr Hooke.
He accepted that Complexas were reviewing and recording a general history of Bux from its origins, rather than simply the time period during which the defendant was involved with Bux.
Mr Troy denied falsely creating any invoice and said it was genuine. He asserted that Exhibit 34 was genuine. In response to the assertion that the fee referred to in the invoice was not payable, Mr Troy said 'Yes, it is because I said I'd settle it. So whichever way it goes Mr Womble has been paid off like everybody else. Unless you want to pay it for me'.
Mr Troy was unable to explain why the second plaintiff was not a payer on the invoice and said 'probably should be but it's not. Date is wrong. 2017, 2018'.
Mr Troy was also specifically questioned above who it was who had actually engaged Complexas. Of relevance is the following passage:
I think earlier you told me and you told the court that it was you personally that engaged Complexas Investments Limited to look into BUX.com?---Well, for the Troy Group, for everybody … I recall we signed it personally … I hired Complexas on behalf of all the companies to reclaim our funds ...

You say that this agreement covers all the plaintiffs, do you?---Yes.
Is that what you understood at the time, Mr Troy?---Yes.
You didn't take any care to remind Complexas that they were acting for more than yourself or your daughter, correct?---No.
So it's the case, isn't it, that as far as Complexas is concerned, their agreement with you suggests that yourself and Delia Troy are the clients?---No.
The only people who signed the document, Mr Troy, are yourself and Mr Hooke?---Well, the parties would come underneath me, Mark Troy. Troy Group, Troy Self-Managed Super Fun and the Troy Family Trust would be the parties underneath Mark Troy.

Re-examination

In re-examination Mr Troy explained the manner in which the settlement sum was distributed as follows:
My accountant was contacted and it was diverted into the companies in line with the taxation purposes that had to take place.
And do you know how your accountant derived figures of $630,000 for Troy SMSF and $290,000 for Troy Group?---No.

Summary of evidence of Delia Troy

Ms Troy is the daughter of Mr Troy. Her involvement with Bux was as a consequence of the representations made to her by the defendant. It was the first time she had become involved in any financial investments.
She said that during a family holiday in around March 2015, her father told her about an investment he had made after speaking with the defendant. He advised her to speak to the defendant if she was interested.
Upon return from her holiday, she met with the defendant. She had known him for most of her life and considered him to be a trusted family friend.
She said that he told her of a potential investment in Bux and described it as 'a really good opportunity' that was not going to be available to many people. Ms Troy thought it sounded interesting and exciting.
As she did not have the necessary funds readily available and in order to fund the intended investment of $25,000 she took out an investment loan with ANZ Bank.

She said that in further discussions with the defendant he told her how he and his mother had a self-managed super fund and that he could make withdrawals and do things with it because they had a shared fund. She told him that she did not know much about self-managed superannuation funds but the defendant said she could make an investment in Bux with her super if she joined in a self-managed fund with her father.
Following that advice, she joined with her father to form the second plaintiff and transferred $130,000 from her AMP account into the self‑managed fund. She understood that these funds would be used to purchase shares in Bux.
Ms Troy said that following her initial investment she assisted the defendant for a time with the preparation of newsletters for Bux.
She said that in early 2016 she became aware that her father had been unable to get documentation for the Wall Street purchases. She had begun to hear that the investments were not what she had understood them to be. She also said that she had access to the email account used to send the newsletters she was assisting with and that 'there was some responses that came through from people that were suggesting it was a scam'.
It was in around January or February of 2016 that she ceased contact with the defendant and others from Bux and commenced taking steps to try and recover her funds.
After unsuccessfully trying to resolve the issues with the defendant and Ray Webber she, along with her father, spoke to private investigators. She was not involved in the initial contact with the investigator, but she was involved in the initial meeting where there were two investigators from Complexas present. She thought this was prior to July 2016.
She could not recall the terms in which investigators would be engaged. Further she was only aware of the first meeting with investigators but could remember little from it.
She gave no evidence of having personally retained the investigators in the sense of contracting to be responsible for payment of their fees. As is apparent from the cost agreement, she was not a signatory to it.
Ms Troy also recalled attending a meeting with a barrister and Mr Steenhof regarding the pursuit of the return of their investment funds. Following that meeting she said she would be asked for information from time to time from Mr Steenhof's firm.
She did not recall having any specific communications regarding the terms of engagement of Steenhof Brothers. She knew that her father was going to consult lawyers but 'as to how that would be funded … I wasn't in a position to financially contribute at that time. I was all for seeking payment back because … I lost money too; except I wasn't in a position to get it back'.
Her understanding of the settlement that occurred when the Supreme Court action settled was that the shares had to be returned and there was a confidentiality clause. She did not understand there to be any other terms or obligations flowing otherwise to or from her in relation to the settlement.

Cross‑examination

In cross-examination Ms Troy agreed that she signed the Deed relating to the resolution of the Supreme Court action. She agreed that when she signed the Deed she expected to be compensated under the Deed.
She said she understood she would be able to use some of these settlement funds to pay out her loan. She agreed there was currently no loan with the ANZ Bank that she was still liable for.
Importantly, in response to being asked whether she understood that she would be able to pay out her loan from the settlement moneys received, she said 'Yes and I did'. She agreed she was able to pay out all of it from the funds and that there was no longer any loan with ANZ that she was yet to pay.
She gave no evidence of having sustained any loss for which she had not already been compensated.

Credibility of witnesses

Mark Troy

Mr Troy was an affable and honest witness. He was prepared to accept the accuracy of documentation when it did not accord with his independent memory. He was prepared to make concessions against his interest and was open regarding his lack of memory and lack of understanding of many aspects of the details of the investments he arranged to be made in Bux.
He was not however a particularly reliable or useful witness in that his recollection and understanding of the material matters for the purpose of this trial, such as in what capacity moneys were paid by or into the accounts of the various companies he controlled, was vague and uncertain.
Mr Troy appeared to follow the advice of others such as the defendant and his accountant, which of course partly explained why he was vulnerable to the representations made by the defendant to him. It also resulted in him often engaging in conduct relating to his finances and the plaintiffs' that he did not particularly understand.
He was informal in his approach to the various corporate structures and seemed to take money out and put money into accounts based on tax advantage and the availability of funds rather than in a manner that related to the actual ownership of funds.
It was apparent from his evidence that he did not generally turn his mind to the question of on whose behalf he was acting when he took money from the plaintiffs or gave money to them.
I note that the defendant sought, particularly in his opening submissions, to highlight the way in which asserted changes in the pleadings had occurred over time and the late discovery of documents should impact upon my findings as to the credit of Mr Troy.
The defendant failed to provide any evidential basis to attribute any changes in the pleadings or later discovery to factors that were attributable to the credibility of Mr Troy. While in theory such conduct, if it occurred, could impact upon a witnesses' credibility, there was no evidence to support such a contention in this case.
Overall, I believed the evidence given by Mr Troy but I did not find it particularly helpful in resolving many of the matters in dispute by reason of its unreliability and uncertainty.

Delia Troy

I accept that Delia Troy was an honest witness. She accepted that her involvement in the matters the subject of this trial was relatively peripheral. Surprisingly, given the fact that she was making a claim for loss, the point in her evidence where she appeared particularly confident and certain was when she testified that she had not sustained any loss for which she had not already been repaid.

Legal principles and application to the facts

Was there a contravention?

Whilst the defendant has not admitted that his conduct constituted a contravention of any of the pleaded legislative provisions, namely s 18 of the ACL; s 1041H of the CA; and s 12DA of the ASIC Act, there is no dispute that the defendant engaged in, at least, misleading and deceptive conduct in trade or commerce.
If the defendant's conduct was in relation to a financial service, s 1041H of the CA and s 12DA of the ASIC Act would be engaged; or if it was in relation to a financial product s 1041H of the CA would apply; or if neither then s 18 of the ACL would be engaged.
The defendant expressly admitted that he engaged in the pleaded conduct (the making of representations), the subject of the alleged contraventions, and further admits that such conduct was misleading and deceptive.

Key issues

Broadly speaking, the following issues are necessary to be resolved in determining whether or not any or all of the plaintiffs suffered any loss by reason of the defendant's misleading or deceptive conduct; and, if so, the quantification of such loss:
1.Did the conduct of the defendant in fact induce the plaintiffs to make payments for the purpose of acquiring shares in Bux and for the Wall Street purchases?
2. Did the defendant cause a loss to each plaintiff?
3.In what way should the settlement funds be applied in these proceedings? There is no dispute that the Supreme Court action was seeking to mitigate loss.
4.What is the quantum of the loss, if any, for each plaintiff that remains outstanding?
Further to these issues, it is also necessary to determine the following:
(a)the legal liability of Mr Troy personally for the legal and investigation fees in circumstances when he is not a party to these proceedings; and
(b)whether the evidence adduced at trial is capable of proving the alleged loss.

Inducement, causation and loss: legal principles

Where a person suffers loss or damage because of the conduct of another and the conduct contravenes s 18 ACL, the person may recover the amount of the loss or damage by action against the other person. Relief under s 236 of the ACL requires proof by the plaintiff, on the balance of probabilities, of a causal link between the breach and the pleaded loss or damage.
The principles applicable to the assessment of loss or damage in a s 18 ACL case are equally applicable to the alternative causes of action.
When considering the question of causation in the context of determining loss or damage, it is necessary to ask whether the misleading conduct materially contributed to the loss or damage: I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109; Henville v Walker [2001] HCA 52; (2001) 206 CLR 459.
The court is to look to the damage or loss suffered by the plaintiffs by action (or inaction) taken by them under the influence of the breach.
It is not necessary for the plaintiffs to show that the defendant intended to mislead or deceive or deceived them: Hornsby Building Information Centre Pty Ltd v Sydney Building Information CentreLtd [1978] HCA 11; (1978) 140 CLR 216 and Parkdale Custom Built Furniture Pty Ltd v Paxu Pty Ltd (1982) 149 CLR 191.
In Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514, 525, Mason CJ, Dawson, Gaudron and McHugh JJ said that where misleading conduct consists of a misrepresentation, 'as at common law, acts done by the representee in reliance upon the misrepresentation constitute a sufficient connection to satisfy the concept of causation'.
The authorities considered collectively suggest that there are two distinct matters which must be proved in this regard:
(a)it must be shown that the error induced by the breach resulted in particular acts being done or being refrained from, namely attention is on how the plaintiff acted in reliance of the misleading or deceptive representations; and
(b)there must be proof of a sufficient link between the act of reliance and the loss or damage claimed.
Accordingly, where a claimant has engaged in a course of conduct as a result of the breach, such as funding the purchase of purported shares, or investing in the purchase of an entity, they are entitled to an award of damages that will compensate for the actual loss incurred.
This is subject to the rules relating to supervening causes, which the defendants rely on in this case.
Events that do no more than 'expose what was inherent in the asset [purchased in reliance on the breach] will not break the chain of causation': ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1 (Jacobson, Gilmour & Gordon JJ).
Loss which flows from a cause which supersedes the defendant's misleading conduct is not recoverable: see for example Frith v Gold Coast Mineral Springs Pty Ltd (1983) 47 ALR 547, 566.
The supervening cause principal makes a distinction between loss that arises from something inherent in the thing acquired that is caused by the misleading conduct as compared to loss arising due to a supervening or extrinsic cause for which recovery is not permitted: Netaf Pty Ltd v Bikane Pty Ltd (1990) 92 ALR 490 [494] (Sheppard J, Wilcox J & Pincus J).

Loss

If the plaintiff can prove that they suffered loss or damage because of the conduct of the defendant and that the conduct contravened s 18 of the ACL (or one of the alternative provisions), then the plaintiff is entitled to recover the loss or damage against the person involved in the contravention.
The plaintiffs bear the evidential onus of proving the fact of loss and the amount of loss: Keys Consulting Pty Ltd v CAT Enterprises Pty Ltd [2019] VSCA 136. The court in KeysConsulting Pty Ltd v CAT Enterprises Pty Ltd did go on to say however at [69] that a:
… mere difficulty in quantifying damages does not necessarily defeat the plaintiff's entitlement to a remedy against the wrongdoer. In appropriate circumstances, where some sort of actual loss has been established the court must estimate the damages as best it can.³¹…
(FN³¹: Chaplin v Hicks [1911] 2 KB 786, 792; Fink v Fink (1946) 74 CLR 127, 143; McRae v Cth Disposals Commission (1951) 84 CLR 377, 411 - 412.)
There is a distinction however to be drawn with a situation that does not permit damages to be assessed with certainty, and one in which the plaintiff has simply failed to produce evidence that was otherwise reasonably available. Where a party is able to produce evidence about loss and damage, they must do so with as much certainty and particularity as it reasonable in the circumstances: Ratcliffe v Evans [1892] 2 QB 524, 522 - 523. As Devlin J said in Biggin and Co Ltd v Permanite Ltd [1951] 1 KB 422:
[W]here precise evidence is obtainable, the court naturally expects to have it, but where it is not, the court must do the best it can.
As a general proposition, a party who has suffered loss is entitled to be placed into the position it would have been in had the conduct not occurred: see Haines v Bendall (1991) 172 CLR 60, 63. The plaintiff is entitled to all the consequential loss directly flowing from his reliance on the representation: see Potts v Miller (1940) 64 CLR 282, 297 - 298.
In Henville v Walker the High Court described the task of the court being to 'to select a measure of damages which conforms to the remedial purpose of the statute and to the justice and equity of the case'.
In assessing loss, the court's approach must be flexible and best adapted to give the plaintiff an amount that will most fairly compensate for the wrong suffered: see ABN AMRO Bank [186].
In misleading and deceptive conduct cases orders as to loss or damage are essentially compensatory in character, see Musca v Astle Corp Pty Ltd (1988) 80 ALR 251, 262 (French J), and there is no punitive aspect to such awards.
The court in Ansett Transport Industries (Operations) Pty Ltd v Halton (1979) 25 ALR 639, 669 (Aickin J), said:
It has long been settled that the difficulty of ascertaining an amount of damages does not warrant their denial. This was established at least by the time of the decision in Chaplin v Hicks (1911) 2 KB 786; (1911) 13 All ER Rep 224. On the other hand, the ascertainment of damages is not an exercise in imagination. It is therefore necessary to examine the material in order to see what assumptions are involved and, insofar as they are not justifiable, to see what adjustments can be made which will enable a reasonable approximation to be obtained.
In Thurston v Todd [1966] 1 NSWR 321, 327 Jacobs JA quoted with approval, the following passage from Callaghan v William C Lynch Pty Ltd [1962] NSWR 871; (1962) 79 WN (NSW) 830, 834:
Lack of relevant evidence may of course make it impossible to assess damages at all, for example, when there are a number of other contingencies on which the loss may depend. But where it is established that damage has been incurred for which a defendant should be held liable, the plaintiff may be accorded the benefit of every reasonable presumption as to the loss suffered. Thus, a jury doing the best it can, may have to form conclusions on matters of slender material and to make allowances for contingencies even to the extent of guesswork or speculation. Specific authority is not readily found as the matter is so taken for granted and it is unnecessary. For it is clear on principle that damages for future or prospective loss may be recovered if such is reasonably to be anticipated as a result of a defendant's wrong whether such damages certain or contingent …
and continued:
The words 'guesswork or speculation' must be carefully read in their limited context but in my view the passage correctly states the law and correctly states the principle applicable in the present case.
The cases referred to by the defendant, namely the dicta of McHugh J in Henville v Walker at (493) and Hayne J at (510); and Hay Property Consultants Pty Ltd v Victorian Securities Corporation Ltd [2010] VSCA 247 [87] ‑ [92] do not assist the defendant's argument.
In Henville v Walker at (493), [106] the court held that:
If the defendant's breach has materially contributed to the loss or damage suffered, it will be regarded as a cause of the loss or damage, despite other factors or conditions having played an even more significant role in producing the loss or damage. As long as the breach materially contributed to the damage, a causal connection will ordinarily exist even though the breach without more would not have brought about the damage. In exceptional cases, where an abnormal event intervenes between the breach and damage, it may be right as a matter of common sense to hold that the breach was not a cause of damage. But such cases are exceptional.
Further at [107] and [109] the court went on to state the following:
107Of particular importance to the present case is the long-standing recognition of the possibility that two or more causes may jointly influence a person to undertake a course of conduct. In separate judgments in Gould v Vaggelas, Wilson and Brennan JJ emphasised that a representation need not be the sole inducement in sustaining the loss. If 'it plays some part even if only a minor part', in contributing to the course of action taken - in that case the formation of a contract - a causal connection will exist.
…
109Similarly, in respect of claims under s 82 [of the TPA], courts have accepted that loss or damage is causally connected to a contravention of the Act if a misrepresentation was one of the causes of the loss or damage sustained by the claimant.
I note in the decision of Hay Property Consultants Pty Ltd v Victorian Securities Corporation Ltd to which the defendant referred the court's attention, the court stated:
The fact that the breach has initiated one train of events rather than another is not, or at least may not, be sufficient in itself. It is necessary, to determine whether there is a causal relationship, to look more closely at the breach and what (to use a neutral term) flowed from it.
True it is that the lender would not have suffered any loss if it had not made the loan. But the misrepresentations simply initiated a train of events, commencing with the making of the loan, and did not create a legally causal relationship between the loss caused by the damage to the properties and the making of the loan. The criminal damage could have occurred regardless of the valuers' negligent misstatement.
The circumstances here are distinguishable. The plaintiffs assert that their losses arose not as a consequence of the fraud of a third party but rather because they did exactly what the defendant told them to do, namely invested in Bux. Unlike in Hay Property Consultants Pty Ltd v Victorian Securities Corporation Ltd, the misrepresentations did create a legally causal relationship between the representations made and the loss suffered.

Loss: specific principles for determining quantum

The principles regarding the assessment of damages for misleading or deceptive conduct were summarised in Wyzenbeek v Australasian Marine Imports Pty Ltd (in liq) [2019] FCAFC 167; (2019) 272 FCR 373, 390 - 393 (Rares, Burley & Anastassiou JJ) and Poliwka v Girgis [2021] WASCA 30 (Buss P, Murphy & Mitchell JJA). Those principles include that, where misleading or deceptive conduct induces the purchase of an asset, there is no rule requiring damages to be assessed by deducting a hypothetical market value at the time of purchase from the price paid for the asset.

This leaves the second plaintiff in a position where I find it has suffered no relevant loss that has not already been compensated for.

Third plaintiff

The claim by the third plaintiff is limited, by reason of my findings, to an asserted loss arising from a payment of $50,000 on 23 July 2015 to Bux on behalf of the second plaintiff.
This payment formed part of the larger $350,000 payment which was made for the purpose of Bux's acquisition of the Wall Street companies.
The third plaintiff was not a party to the Supreme Court action nor to the settlement. The third plaintiff did not receive any funds from the settlement and did not make any payment toward the fees.
The defendant and the plaintiffs disagree over the precise legal categorisation of the nature of the $50,000 paid to Bux by the third plaintiff.
Mr Troy said at trial that he arranged to invest $50,000 out of the third plaintiff's account to be used as a deposit for the second plaintiff's investment. He said it was a loan by the third plaintiff to the second plaintiff and accordingly was paid by the third plaintiff on behalf of the second plaintiff.
While there was other evidence adduced at trial to suggest there may be some inconsistency in this regard, the resolution of this issue impacts upon which of the plaintiffs made the investment rather than whether this investment was made. In any event, I accept the evidence of Mr Troy, which is consistent with the documentary evidence, that this payment was a loan from the third plaintiff to the second plaintiff. The third plaintiff paid $50,000 to Bux in reliance on the representations made by the defendant and that loss remains outstanding as the loan remains outstanding.
Given that the third plaintiff has not been repaid $50,000 it remains a loss that was caused by the defendant. I do however observe that the second plaintiff took from the settlement proceeds, in a settlement that did not include the third plaintiff, close to $50,000 more than it had expended on the fees combined with its original investment.
I find that the second plaintiff was pursuing the claim for the total amount invested in relation to the Wall Street purchases on the basis that the third plaintiff had loaned it $50,000 and that loan would be repaid following receipt of the settlement proceeds.
Applying the flexible approach to a determination of loss in a case of this type, I find that the third plaintiff is entitled to be reimbursed by the second plaintiff to the extent that the second plaintiff has additional funds, and can then claim the difference from the defendant. On the present figures, there is $3,602.50 to be paid by the defendant and the third plaintiff is owed $46,397.50 from the second plaintiff. These figures will need to be adjusted to account for the costs of these proceedings.

Fourth plaintiff

The fourth plaintiff did not pay any of the fees. Nor did she have any liability to pay those fees.
She did borrow money from the bank to invest in Bux which amounts to $25,000 plus the relevant interest and bank fees. She gave evidence however that at an earlier time she received a sum of money that she used to discharge that loan and she is no longer out of pocket.
It is unclear from the evidence led at trial how she was repaid or who paid her but the evidence did not establish that her evidence that she was repaid was mistaken. The fourth plaintiff is best placed to know if she has sustained any loss or not.
In circumstances where the fourth plaintiff has not paid any of the fees and has no liability to do so and otherwise asserts she has no remaining loss, her claim must fail.
Accordingly, the claim brought by the fourth plaintiff is dismissed.

Conclusion

For these reasons, I find that the first and third plaintiffs have established that they have suffered a loss for which they are entitled to an award of damages. As I have mentioned above however, the amount of legal fees to be accounted for in the calculation of that loss, needs to be adjusted to remove the legal costs of these proceedings which will need to be addressed separately.
I will need to hear from the parties further in relation to how these fees are to be apportioned as between the first and second plaintiffs and Mr Troy and on the question of the costs of this action.

Orders

I will hear further from the parties as to the orders to be made in light of these findings.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
MS
Associate to Judge Black
15 DECEMBER 2023