Grounds 1-8: did the primary judge err in the rejection of Ms Nichols' evidence?
52 Ms Nichols gave the following evidence in chief:
MR MARTIN: Now, if on the 22nd or 23 December, taking into account that the company was wound up on 22 December, if either on the 22nd or 23 December, the liquidator or one of them, Mr Dinoris or Mr Combis, had rung you and asked you about these transactions and the money in the bank account of the company that had been taken out, what would you have told them?---Well, I would have told them the truth, where it had gone.
If they had asked you to repay what you had, what would you have done?---I would have repaid it.
53 In cross-examination it was put to Ms Nichols that had she been contacted by Mr Dinoris she would not have repaid the money. Ms Nichols denied this, stating that Mr Dinoris was the liquidator and "the authority" and she would have complied with his direction. The evidence was as follows:
MR ERSKINE: All right. I suggest you would not have repaid the money? --- No, I - I think that I would have repaid the money.
I put to you that you would have sought the advice of Mr Levis? --- Well, like, I've said Peter Levis was - Peter Levis told me that Peter Dinoris was already aware of what had happened with this money so ---
…
HIS HONOUR: So was the answer yes or no?: You would have told-you would have sought Mr Levis' advice or no? ---Yes, I - I suppose, yes.
You would have? --- As far as his advice I -I probably would have spoken to him, but as far as paying it back, I mean, Peter Dinoris, he is the liquidator as such. So he, you know, he is -the authority so I -I guess I'm trying to say I -I would have paid it back.
MR ESRKINE: Well, you had already received a letter ---? --- I just - I ---
I's Sorry? --- Sorry. It - this is just a little bit because Peter Dinoris and Peter Levis as far as I'm aware through this whole thing knew. So had I received a phone call from Peter Dinoris I do believe I would have paid it back.
54 The primary judge rejected Ms Nichols' evidence. At [163], his Honour stated:
When Ms Nichols' evidence at the trial of this matter approximately five years after the events of late 2010 and early 2011 is assessed against the evidence bearing on all the relevant surrounding circumstances existing at that time, I consider the likelihood is that she would not have responded to an enquiry from Mr Dinoris in late 2010 or early 2011 by agreeing to pay back the funds. Instead, I consider she would most likely have sought advice from Mr Levis, or Mr Doyle, or both of them, and acted on that advice. Further, in the circumstances, I consider it is more likely that both Mr Levis and Mr Doyle, for different reasons, would have advised her not to repay the funds to Mr Dinoris…
55 The primary judge considered that the second question put to Ms Nichols in her evidence in chief was leading and imprecise and the answer so ambiguous that its meaning was difficult to discern. This significantly affected the weight he gave to Ms Nichols' answer. At [164] the primary judge said:
First, I agree with Mr Dinoris that the second and most critical question put to Ms Nichols in her evidence-in-chief above (at [161]) was a leading question: "If they had asked you to repay what you had, what would you have done?" Her answer ("I would have repaid it") must therefore be weighed accordingly. Furthermore, the question was so imprecise and the answer was so ambiguous that its meaning is difficult to discern. There is no difficulty with the word "they" in the question because, in the context of the previous question, it plainly meant Mr Dinoris or Mr Combis: "if on the 22nd or 23 December, ... Mr Dinoris or Mr Combis, had rung you and asked you about these transactions and the money in the bank account of the company that had been taken out, what would you have told them?" However, in the same context, the words "repay what you had" is more problematic. It could mean the money "that had been taken out" of the company's bank account, or it could mean the money that Ms Nichols "had" at the time. Both possibilities are open on the previous question and both suffer from similar difficulties. On the first possibility, in fact, there were at the time two company bank accounts - one at Suncorp and one at the Bank of Queensland - and different amounts had been taken out of each at different times: $264,531.02 from the Suncorp account on 15 December 2010 and $236,500 from the Bank of Queensland account on 21 December 2010. On the second possibility, the difficulty is whether "had" meant in her possession, or under her control, bearing in mind the fact that, at the time, Mr Levis had the remainder of the money, namely $56,500. These features demonstrate the importance of framing precise non-leading questions when a witness is being asked to state how he or she would have acted in a particular hypothetical situation. In this case, the imprecise and leading nature of the question significantly affects the weight that can be given to Ms Nichols' answer.
56 The primary judge noted that late 2010 was clearly a stressful period for Ms Nichols in view of her separation from her husband, her domestic violence order application against her husband, the withdrawal of support from her parents-in-law and the contemporaneous financial pressures associated with Asden Developments' affairs. The primary judge said at [167]:
In my view, this stress affected the reliability of Ms Nichols' evidence about the events of this period. She acknowledged as much in cross-examination when she said her recollection of those events was: "A little bit hazy, but I would try and - I will do my best. I've tried to put a lot of this behind me." I do not therefore consider her hypothetical evidence about what she would have done in this period is likely to be accurate.
57 The primary judge discounted Ms Nichols' evidence as reliable based on other matters as well. Those matters included Ms Nichols' pattern of conduct during the relevant period.
58 The primary judge had regard to the evidence concerning the steps immediately taken by Ms Nichols after she received the second cheque for $170,000 from George Nichols on or about 14 December 2010. At [171], the primary judge stated that it was clear that Ms Nichols and Mr Levis began to implement their scheme to protect her from financial ruin at the hands of the Nichols family almost immediately after she received the second cheque. At [172], the primary judge stated that the scheme took seven days to implement and "[b]y any measure, it was elaborate". His Honour detailed that the scheme involved incorporating TJI, establishing a bank account in Asden Developments' name at the Bank of Queensland, transferring approximately $264,000 to that account, approaching Mr Dinoris to accept appointment as liquidator of Asden Developments in preparation for placing it in voluntary liquidation, establishing a bank account in the name of TJI at the Bank of Queensland, transferring $236,500 to Urban Property's bank account, transferring $180,000 to TJI's bank account, and placing Asden Developments in voluntary liquidation and appointing Mr Dinoris as its liquidator. The primary judge noted that the end result of the scheme was that approximately $264,000 was removed from the company's bank account and, through a series of transfers, placed in two bank accounts, neither of which bore Ms Nichols' name. As well, Ms Nichols had removed herself from the directorship of Asden Developments.
59 The primary judge found that Ms Nichols, in undertaking these steps, was at all times acting on the advice of Mr Levis whom she had retained for the purpose of protecting herself. At [174], the primary judge stated that his assessment of Ms Nichols' oral and written evidence was that "from relatively early in the events of late 2010, Ms Nichols was sensitive to the personal financial dangers that might befall her as a result of her involvement with [Asden Developments] and was astute in her actions to avoid them." The primary judge noted that:
Sometime before matters came to a head on 15 December [Ms Nichols] had realised that the Nichols family may abandon [Asden Developments] and leave her with the responsibility for its debts. Having appreciated that possibility, she obtained advice from Frederiks Accountants and then, on referral to, Mr Levis, she obtained advice from him. Having obtained that advice she acted on it and participated in the elaborate scheme.
The primary judge noted that Ms Nichols involvement with Mr Levis did not cease in December 2010 but continued in March 2011 when she obtained advice from him about the sale of a boat and paying out a loan.
60 The primary judge further reasoned that Ms Nichols displayed the same astuteness in relation to her legal rights in connection with the family law property dispute with her husband. She had received advice from a solicitor upon receipt of the letter from her husband's lawyers on 20 December 2010 demanding repayment of the $270,000. The solicitor advised her that the funds were part of the joint matrimonial property and acting on that advice she did not comply with the demand set out in the letter. At [175], the primary judge said that the fact that Ms Nichols was alerted to the family law property implications of the funds at this early stage provided a further demonstration of her vigilance in relation to her legal rights. At [176], the primary judge made a finding that Ms Nichols must have accepted the solicitor's advice to defend the proceedings against her by the Nichols family. At [177], the primary judge noted that at no stage from late 2010 until final judgment did Ms Nichols demonstrate any intention to comply with any demand from the Nichols family with respect to those funds and she did not comply with the demand from Mr Dinoris in his letter of 22 December 2010 to deliver up any assets of the company that she held.
61 At [178]-[179] the primary judge concluded:
I do not therefore accept Ms Nichols' evidence that the "authority" of a personal approach from Mr Dinoris in late December 2010 or January 2011 would have caused her to pay the funds to him. I also do not accept that Ms Nichols was naïve and merely doing what Mr Levis told her to do. To the contrary, as I have already observed above, I consider Ms Nichols was alert to the risks her directorship of Asden posed to her personal financial security and she was vigilant to protect herself from that. She was also jealous to protect her legal rights in connection with respect to the family law property dispute with her husband. It was in this light that I consider Ms Nichols received, and acted on, Mr Levis' advice, not as a naïve compliant. The same applies to the advice she received from Mr Doyle [sic Harris] with respect to her rights concerning the family law proceeding. In both cases, she acted on their advice in order to protect herself from attacks she was convinced were being made on her by various members of the Nichols family.
To sum up, all this evidence is consistent with Ms Nichols' pattern of conduct throughout this period of obtaining and acting on the advice she received from Mr Levis or Mr Doyle [sic Harris] whenever any issue arose with respect to the funds, or her family law property matters, respectively. I therefore consider that if Mr Dinoris had approached Ms Nichols in late 2010, or early 2011, and asked her about the whereabouts of the funds, she would have reacted in the same way. That is to say, she would have sought advice from either Mr Levis or Mr Doyle [sic Harris], or both of them, and acted on that advice. The former is reinforced by the answer she gave during cross-examination when pressed to answer whether she would have sought advice from Mr Levis: "Yes, I suppose so" (see at [162] above). If she had sought advice from Mr Levis, given the elaborate scheme he had constructed for her with respect to the funds, his personal stake in that scheme to the extent of $56,500, the evasive response he gave to Mr Dinoris on 23 December 2010 when he asked him a similar question and the tenor of his advice to her throughout this period, I consider Mr Levis would most likely have advised Ms Nichols to deny any knowledge of the funds, or to give an evasive answer similar to that which he gave to Mr Dinoris on 23 December 2010.
62 At [180], the primary judge rejected as "fanciful" the contention that Mr Levis would have bowed to a "threatening" telephone call from Mr Dinoris to repay the $56,500 he held in the Urban Property bank account.
63 At [181], the primary judge said that had Ms Nichols approached her solicitor for advice, the solicitor would most likely have advised her that she should pay the funds into his trust account to abide by the outcome of the family law proceeding, consistent with the advice that the solicitor had given to her throughout this period.
64 At [182], the primary judge concluded:
Taking into account the difficulties associated with the form and wording of the question, the stress Ms Nichols was experiencing at the time and the evidence relating to the surrounding facts and circumstances outlined above, I do not accept Ms Nichols' evidence that, had Mr Dinoris made an enquiry of her in late 2010 or early 2011 about the whereabouts of the funds, she would have disclosed where they were and paid them to him.
65 It was argued that the primary judge fell into error in rejecting the evidence of Ms Nichols:
(a) in holding, and placing significant weight on the "erroneous" view, that the questions asked of Ms Nichols in evidence-in-chief were leading and imprecise. It was argued that the questions were not leading or imprecise because at trial it was not disputed that the only money that Ms Nichols "had" as at 22 or 23 December 2010 was the $180,000 in TJI's account;
(b) in placing significant weight on the stress which Ms Nichols was suffering in late 2010, finding it affected the reliability of her evidence. It was argued that not only was this not a factor that was pursued to any great extent in cross-examination, it did not matter what stress Ms Nichols may have been suffering at the time because she was not being asked to recall what she said, or did, in 2010 but what she would have done at that time if particular demands had been made of her; and
(c) in failing, accordingly, to give "the appropriate weight" to Ms Nichols' evidence that she would have repaid the funds had she been contacted by Mr Dinoris.
66 Criticism was also made of a number of paragraphs of the primary judge's reasoning, namely:
(a) the finding at [174] that Ms Nichols was "sensitive to the personal dangers that might befall her as a result of her involvement with Asden Developments and was astute in her actions to avoid them" was said to be contradictory to the evidence from Ms Nichols in cross-examination that she ultimately placed $173,000 into her solicitors' trust account because she did not want it and did not know what to do with it and her solicitors told her to put it into their trust account where it would be safe;
(b) the finding at [176] that "Ms Nichols must have accepted Mr Doyle's [sic Harris'] advice to defend [the Federal Magistrates' Court] proceeding to final judgment" was said to be factually incorrect as Ms Nichols was represented at that trial by a Mr Curram, who was briefed directly;
(c) the ultimate conclusion at [179] was said to be inconsistent with the findings at [178] in that at [178] the primary judge found that Ms Nichols was alert to the risks that her directorship of Asden Developments posed to her personal financial security and was vigilant to protect herself from that, and was also jealous to protect her legal rights with respect to the family law property dispute with her husband. The primary judge stated that it was "in this light that [his Honour considered] Ms Nichols received, and acted on, Mr Levis' advice, not as a naive compliant". At [179] the primary judge concluded that had Ms Nichols sought advice from Mr Levis if she had been approached by Mr Dinoris, Mr Levis "would most likely have advised Ms Nichols to deny any knowledge of the funds, or to give an evasive answer similar to that which he gave to Mr Dinoris on 23 December 2010". It was submitted that "lying at the behest of Mr Levis would be Ms Nichols being naïve and doing simply what [Mr] Levis told her";
(d) the rejection as "fanciful" at [180] of the contention for Asden Developments that Mr Levis would have bowed to a threatening call from Mr Dinoris given Mr Levis was a source of work for Mr Dinoris and in constant contact with him in late 2010 and 2011, and, it was said, "there can be no doubt that [Mr] Levis' conduct exposed him to criminal prosecution". It was submitted that there was "every reason to believe that if the liquidator found out [Mr] Levis had $56,000 of [the company's] money in a bank account which he controlled some or most of it would have been returned upon a threatening telephone call from the liquidator". It was also put that the submission was made at first instance that it would have been a relatively inexpensive exercise to obtain a freezing order against Mr Levis' bank accounts if he was not cooperative, but this was "not something with which the [primary] judge dealt".
67 It was argued that as the rejection of Ms Nichols' evidence was not based upon Ms Nichols' conduct or demeanour as a witness, it was the "entitlement and duty" of this Court, on the appeal, to conduct its own analysis on the evidence and to give effect to the conclusions derived from that analysis: CSR v Della Maddalena [20016] HCA 1; (2006) 224 ALR 1 per Kirby J at [44] and [48]. It was further argued that, on the evidence, it was more probable than not, that if Mr Dinoris had made a direct and personal inquiry of Ms Nichols as to the whereabouts of the funds, they would have been returned to the extent they remained in bank accounts controlled by Ms Nichols and Mr Levis.
68 Reliance, among other things, was placed on the fact that Ms Nichols was challenged in cross-examination as to whether she would repay the money and she affirmed that that was the course she would have adopted. It was submitted that there was no reason for Ms Nichols to give false and misleading testimony at the trial. The moneys that she withdrew from the company's account were found to be held on trust for the Nichols family and the evidence she gave in this proceeding was a further admission of wrongdoing by her. It was also put that she had no more allegiance to Mr Clout than she did to Mr Dinoris, and in failing to take that factor into account the primary judge fell into error.
69 However, the primary judge was not bound to accept the answers given by Ms Nichols in cross-examination as truthful and reliable: [Australian Competition and Consumer Commission v Australia and New Zealand Banking Group Limited [2015] FCAFC 103, (2015) 236 FCR 78 at [264]]. Even if the question was not truly a leading question, it does not mean that the primary judge should have given significant weight to the answer. The question asked was a hypothetical question and the primary judge correctly and properly took into account all the evidence in weighing up the cogency and reliability of Ms Nichols' evidence as to what she would have done had she been contacted by Mr Dinoris as put to her.
70 The task of an appellate court on an appeal by way of rehearing on the evidence that was before the primary judge is to conduct a "real review" of the evidence given at first instance and of the primary judge's reasons for judgment to determine whether the judge has erred in fact or law. The task is the correction of error: Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 at [20]-[31]. But an appellate court should not, however, interfere with the primary judge's findings of fact unless persuaded that the finding was plainly and obviously wrong, or where it is concluded that the findings made are glaringly improbable or contrary to compelling inferences in the case: Robinson Helicopter Company Incorporated v McDermott [2016] HCA 22; (2016) 90 ALJR 679 at [43].
71 In the present case, the primary judge's findings of fact are not demonstrated to be wrong by incontrovertible facts or uncontested testimony, nor are they glaringly improbable or contrary to compelling inferences. To the contrary, it was plainly open to the primary judge to conclude that Ms Nichols' evidence in examination in chief and cross-examination should carry little weight and, taking into account the evidence relating to the surrounding facts and circumstances and the stress Ms Nichols was experiencing at the time, then to reject her evidence about what she would have done. Ms Nichols' subjective assertion did not have to be accepted by the primary judge without critical assessment but required a close examination of the facts and surrounding circumstances at the time.
72 Moreover, contrary to the submission for the company, it was not immaterial that Ms Nichols was under stress at the time but a legitimate factor to take into account in assessing the probity and reliability of Ms Nichols' evidence. The evidence showed that Ms Nichols was extremely concerned at the time with her exposure to substantial liabilities as a result of her position as the sole director of the company and where she had lost the support of the Nichols family, following a serious breakdown in the matrimonial relationship with Phillip Nichols and, in the circumstances where she refused to return the $270,000 paid by George Nichols, having received advice that the funds were joint matrimonial property. Mr Levis informed Ms Nichols, on or around 14 December 2010, that she would have been "left in extreme debt and destitute if she did not protect [herself] and the outcome would possibly mean bankruptcy". On that advice she withdrew the $236,500 from the company's bank account through the elaborate scheme and, having done so, put the company into liquidation.
73 Much was made of the fact that the primary judge fell into error at [177] in stating that Ms Nichols had agreed in cross-examination that she understood that the letter from the liquidator dated 22 December 2010 related, at least in part, to the funds. It appears that was not her evidence but, rather, her evidence was that she did not read at least that part of the document informing her that she was required to deliver up "any money or property to which the company [was] prima facie entitled". Ms Nichols also gave evidence in cross-examination that she did not know what "prima facie" meant. Senior counsel submitted on the strength of that answer that it was clear that Ms Nichols really had no idea what this document meant. It is telling though that Ms Nichols did not include the funds she had removed from the bank account in the report as to the affairs of the company. It is not to the point, as submitted for the company, that the report was prepared by Mr Levis, as she signed that document in her capacity as director.
74 For the reasons given by the primary judge, there was an abundance of evidence, direct and circumstantial, justifying the rejection of Ms Nichols' evidence, which is supportable on a consideration of the whole of the evidence before the Court. The rejection of her evidence cannot be said to be plainly and obviously wrong, nor was the rejection contrary to compelling inferences in the case. The other factual errors said to have been made by the primary judge do not compel any different assessment. The undisputed facts were that Ms Nichols, acting on Mr Levis' advice in circumstances where she was advised by him that she would be left in extreme debt and destitute if she did not protect herself, withdrew the $236,500 from the company's bank account through the elaborate scheme and, having done so, put the company into liquidation. Mr Levis, who set up the elaborate scheme, then assisted Ms Nichols by filling out the report as to affairs of the company, knowing about, but omitting reference to, the funds withdrawn and, notwithstanding his statement to Mr Dinoris that the funds withdrawn by Ms Nichols were not received by Ms Nichols personally and Mr Dinoris should investigate the withdrawal, did not disclose to Mr Dinoris that he had $56,500 of those funds in a bank account of a company he controlled. The evidence supported the findings that Ms Nichols was "sensitive to the personal financial dangers that might befall her as a result of her involvement with [Asden Developments] and was astute in her actions to avoid them" and was not a naive compliant. The evidence also supported the finding that had Mr Dinoris contacted her personally about the missing funds, and had Ms Nichols asked Mr Levis for advice at the time, Mr Levis would have advised her to deny any knowledge of the funds, or to give an evasive answer as Mr Levis had done and she would have acted on that advice.
75 Accordingly, grounds 1 to 8 have not been established.