Aurora Australasia Pty Ltd v Hunt Prosperity Pty Ltd trading as trustee of the Aurora Australasia Investment Fund Unit Trust

Solicitors: McCabes Lawyers (Plaintiff / First and Third Cross-Defendants) Gilbert + Tobin (First Defendant / Second Cross-Defendant) DC Balog & Associates (Second Defendant / Cross-Claimants) File Number(s): 2023/459309

JUDGMENT

1. HER HONOUR: This is a bitter fight about money between two businessmen, David Driver and Adam Hartley. Together, they set up a fund to invest in foreign exchange (FX) trading, called the Aurora Australasia Investment Fund Unit Trust (the Fund). Mr Hartley's company, AMHP Pty Ltd, and Mr Driver became equal shareholders in the investment manager, Aurora Australasia Pty Ltd (Aurora). But Mr Driver was (and is) the sole director of Aurora.
2. Hunt Prosperity Pty Ltd was appointed as trustee of the Fund. Through an undocumented arrangement, Aurora charged the trustee a performance fee of one-third of the Fund's monthly profits. The fee was split between Mr Driver and Mr Hartley. The fee was not paid but 'reinvested' by Aurora in the Fund. The trustee issued two Unit Certificates to record these investments, being Certificates No 3 and No 4. Both certificates were in the name of Aurora but, for working purposes, the trustee prepared monthly spreadsheets notionally allocating these units to Mr Driver and Mr Hartley respectively.
3. Separately, Mr Hartley and AMHP lent Mr Driver $7.5 million. Mr Driver assured them that the loans would be repaid on the settlement of legal proceedings at a mediation in June 2023. Shortly before Mr Driver headed overseas, Mr Hartley's offsider, Trent de Wit, prepared a Loan Agreement from a precedent obtained online, so that there was some record of the loans in case something happened to Mr Driver whilst abroad. The Loan Agreement imperfectly recorded the arrangement between the parties but was signed by Mr Driver, recording that the loan was to be repaid "on initial receipt of funds from court case".
4. June 2023 came and went. Mr de Wit learned that the mediation had been put back to November 2023. Mr Hartley was most displeased and pressed Mr Driver to transfer his shares in Aurora to AMHP and resign as a director of the company. Mr Driver offered a pledge over his shares in Aurora and his units in the Fund. Mr Hartley's efforts to document further security came to nought, as Mr Driver proved increasingly elusive. The men fell out. Mr Hartley provided the trustee with Mr Driver's email, offering the pledge.
5. Mr Driver attempted to get his money out of the Fund, then thought to be some $3 million. A problem emerged as the units in which Mr Driver's half-share of the performance fee had been recorded (Certificate No 3) was not in his name, but in the name of Aurora. Mr Driver submitted a redemption request to the trustee, who sought clarification as to where the redemption monies were to be paid (where Mr Driver had not given the name of the transferee bank account, which was, in fact, in his name). Mr Driver tried again. As the sole director of Aurora, Mr Driver opened a new bank account in Aurora's name, signed a director's resolution on behalf of Aurora and submitted a second redemption request to the trustee. Mr Driver also commenced these proceedings in the name of Aurora to seek orders that the trustee process the redemption request. Mr Hartley obtained an interlocutory injunction preventing the trustee from so doing.
6. Obviously enough, Mr Driver - whilst owing Mr Hartley $7.5 million plus - sought to remove some $3 million from the reach of his creditor. As a matter of commercial conduct, Mr Driver's actions are difficult to admire. The legal question is whether he is entitled to the redemption monies. The plaintiff, Aurora, did not by its pleading seek an order that the redemption proceeds be paid to or at the direction of Mr Driver. This issue was raised in the plaintiff's submissions, underlining the tension between the suit having been commenced by the plaintiff but for the benefit of Mr Driver. (In what follows, I have generally referred to the plaintiff and Mr Driver as, simply, Mr Driver. Likewise, I have generally referred to Mr Hartley and his company as, simply, Mr Hartley.)

Witnesses

1. Mr Driver gave evidence in a careful and cautious manner. He appeared nervous and to be under a lot of pressure. This may be explained by Mr Hartley's lively presence in the courtroom during Mr Driver's cross-examination. Mr Driver's evidence was, on occasion, somewhat evasive. As will be seen, Mr Driver relied on his authority as the sole director of Aurora when it suited his purpose but otherwise disclaimed responsibility for Aurora's activities or inactivity, saying the company was run by a team comprising himself, Mr Hartley and Mr de Wit: see [17], [24], [50].
2. Mr de Wit gave evidence for Mr Hartley. He did not appear to have as much commercial experience as Mr Driver. Mr de Wit appeared straightforward, albeit he made some gratuitous remarks about Mr Driver, which were probably justified. Mr de Wit's description of the day-to-day operations of Aurora appeared more accurate, having regard to the contemporaneous material: see [24]. I am inclined to accept Mr de Wit's evidence in preference to that of Mr Driver where there is a conflict between them but, in either case, have deferred to the contemporaneous documents.
3. Mr Hartley made two affidavits in these proceedings and attended Court when Mr Driver was cross-examined but did not make the short walk to the witness box. A Jones v Dunkel inference was sought; I infer that Mr Hartley's evidence would not have assisted him.
4. The trustee called no witnesses but relied on documents. Philip Hunt had earlier made several affidavits in these proceedings but was not called to give evidence. A Jones v Dunkel inference was sought; I infer that Mr Hunt's evidence would not have assisted the trustee. Where Mr Driver did not press various claims against the trustee in these proceedings, I also record (by agreement between Mr Driver and the trustee) that any findings of fact set out below are not binding in any future proceedings between them for same.

FACTS

1. Mr Driver is a businessman. One of his business ventures was a plant-based beverage company, Botanical Water Technologies Pty Ltd. That business venture ended up in Court. This becomes relevant where some of the money borrowed by Mr Driver from Mr Hartley was for the purposes of that litigation. Mr Driver also expected to repay the loans with funds received on the settlement of the litigation.
2. Mr Hartley is a property developer and businessman. He is the sole director and shareholder of AMHP. Mr Hartley was assisted in his business dealings by Mr de Wit, who dealt with correspondence and assisted in financial matters on Mr Hartley's behalf and on behalf of associated companies and trusts.
3. In February 2022, Mr Driver and Mr Hartley renewed their acquaintance.

First loan

1. In May 2022, Mr Hartley agreed to lend Mr Driver $1.5 million. On 18 May 2022, Mr Driver provided his bank account details to Mr Hartley's assistant, "for the short-term loan of $1,500,000. The loan will be repaid in full, with interest, immediately following my settlement which is anticipated within the next three months." The next day, 19 May 2022, Mr Driver pressed Mr Hartley's assistant for the funds, "unfortunately, I require the funds ASAP to demonstrate to the other side that I can cover my current and future legal costs. It is just ridiculous!". Mr Driver indicated that he was amenable to signing a loan agreement and paying monthly interest to Mr Hartley's nominated account. Mr Hartley's MYOB accounts record a loan from Mr Hartley to Mr Driver on 24 May 2022 of $1.5 million.

Aurora

1. Mr Driver and Mr Hartley discussed establishing a fund which undertook FX trading. Mr Driver was introduced by broker, Pepperstone Group Ltd, to one of its traders, Scott Schade, who then introduced Mr Driver to his business partner in the United States, Cody Burgat. Mr Driver came to learn that Mr Schade had access to certain FX trading strategies; Mr Burgat was "the brains" behind those strategies. Mr Schade also recommended the services of accountant, Mr Hunt, to Mr Driver. Mr Hunt is a financial advisor, accountant, tax advisor and auditor. He is the sole director and shareholder of Hunt Prosperity.
2. Mr Driver reported on these discussions to Mr Hartley. Mr Driver proposed that the FX trading be undertaken by Mr Schade and Mr Burgat, who would receive a one-third share of profits generated by trades. Mr Hartley and Mr Driver would also receive a one-third share of the profits, having regard to Mr Driver's role in conceiving of the project and Mr Hartley providing the initial trading funds. The remaining one-third share would be divided amongst those who held a stake in the project going forward. Mr Hartley said it was a good idea and agreed.
3. On 11 August 2022, Aurora was incorporated. Mr Driver was appointed as director and secretary. The company was owned equally by Mr Driver and AMHP; each held 100 shares. Mr Driver said that, although he was the only officeholder, responsibility and control was shared with Mr Hartley and Mr de Wit. Mr Driver said "we never managed ourselves or discussed things as if there was a hierarchy in the company at all. … Technically, on ASIC, … my name is the director and secretary … but that is not how we functioned as a company."

Second loan

1. By August 2022, the first loan of $1.5 million was expected to be repaid, this being "within the next three months" of the loan having been made: see [14]. Instead, on 16 August 2022, Mr Driver emailed Mr de Wit and Mr Hartley, asking for a second loan. Mr Driver advised: "Following discussions with Adam this morning, he has generously agreed to provide me with a short-term loan of $5 Million across 2 transfers, each of $2.5 Million. The first to be sent ASAP and the second (if required) on 30 September 2022. The loan will [be] repaid immediately upon receipt of funds from the sale of my shares in Botanical Water Technologies Pty Ltd (BWT). The valuation of the company is currently being negotiated; however, the current offer price is $100 Million, and my counteroffer is $250 Million. My personal shareholding of 37.5% will result in a receipt within a range of $37.5 Million to $95 Million following the share sale. I am standing firm on my required price. The negotiation and subsequent share purchase is anticipated to conclude within the next 3 months."
2. Noteworthy, the second loan was expected to be repaid from the sale of Mr Driver's shares in Botanical Water Technologies, rather than from "my settlement". Again, the timeframe for repayment was said to be "within the next 3 months". According to Mr Hartley's MYOB accounts, the second loan of $2.5 million was advanced by Mr Hartley to Mr Driver the same day.

The trustee

1. Establishment of the FX trading fund also progressed. On 22 August 2022, Aurora opened a bank account with the Commonwealth Bank of Australia. Mr Driver and Mr de Wit were authorised signatories. The account could be operated by two authorised signatories.
2. On 23 August 2022, Mr Driver met Mr Hunt for the first time. Mr Hunt was informed of the three-way split of profits generated by trades. After the meeting, Mr Hunt sent Mr Driver a "Service Offering" for Aurora, together with a sample Monthly Statement and sample Information Memorandum. Mr Hunt also set out a summary of their discussion: "● Name of fund is Aurora Australasia Investment Fund ?? ● Investment Manager is Aurora Australasia Pty Ltd … ● Profits are to be split equally between:- ○ Trading Platform Fees - Scott's nominated entity ○ Investment Manager - Aurora Australasia Pty Ltd ○ Investor ● David and Adam are going to be the Founding Investors in 'Aurora Australasia Investment Fund'. …" Mr Driver was asked to confirm whether this was acceptable and, if so, to prepare a logo and banner in the name of the fund.
3. On 25 August 2022, the Fund was established. The trust deed was executed by Mr Hunt on behalf of Hunt Prosperity. (I will return to the relevant provisions in due course.) On 27 August 2022, Mr Hunt emailed Mr Driver some further content for the Information Memorandum for review. Mr Driver provided amendments and additions on 29 August 2022.
4. An Information Memorandum was issued in respect of the Fund. While I will consider the relevant provisions in more detail in due course, three features deserve mention at the outset. First, Aurora was referred to in the Information Memorandum as the "Investment Manager". Second, whilst there were no management fees, a Performance Fee would be levied of one third of profits generated, which would be calculated and paid monthly to the Investment Manager. Third, the "Management structure" comprised the Investment Manager and an Investment Committee comprising Mr Driver, Mr Hartley and Mr Hunt. Mr Driver and Mr Hartley were described as co-founders, whilst Mr Hunt was Head of Operations.
5. Mr Driver said there were no formal meetings of the Investment Committee. Rather, Mr Hartley, Mr de Wit and himself all worked out of Mr Hartley's offices at the time. Mr Hartley and Mr de Wit "sort of worked as a single entity". They talked about Aurora "all day every day … It was a continuing discussion." Trading results were looked at each day. The trading strategy came from Mr Burgat. Decisions were made collectively. The contemporaneous documents, however, suggest that Mr Hartley played a fairly minor role; Mr de Wit appears to have effectively acted as Mr Hartley's representative in dealing with Mr Driver in respect of the Fund. Mr de Wit said that, as the sole director of Aurora, Mr Driver controlled its activities. Mr Driver spoke to Mr de Wit from time to time regarding the various FX trading strategies which the trustee undertook under its arrangements with Mr Burgat using the Pepperstone trading platform. Mr de Wit's description appears more accurate, having regard to the contemporaneous material.
6. On 30 August 2022, Mr Hunt met with Mr Driver at the Commonwealth Bank to grant "view only" access to the trustee's bank account. On 31 August 2022, Mr Hunt emailed Mr Driver, confirming that his role as Trustee and Custodian was to act in the best interests of the beneficial owners of the unit trust "including you and Adam" and asked to contact the relevant person at Pepperstone "to review some of their internal processes particularly around fund transfers".
7. On 9 September 2022, Mr Driver provided Aurora's bank account details to Mr Hartley's in-house accountant, copied to Mr de Wit, "As … discussed with Adam, we are both going to contribute $150,000 each, as loans to the company, for working capital purposes". Instead, Mr Hartley and Mr Driver each contributed $75,000. (According to the bank statement, these funds were drawn upon from time to time to meet business expenses including accounting software, telephone bills, laptops, cleaning and rent.) On 16 September 2022, Mr Hartley was also added as an authorised signatory to Aurora's bank account.

Third loan

1. On 26 September 2022, Mr de Wit emailed Mr Driver, copied to Mr Hartley, attaching bank records for a transfer of $2 million to Mr Driver's account. According to the attached records, the funds had been transferred from AMHP's bank account to Mr Driver's account, with a transaction description "Loan from AH-DD". AMHP's MYOB accounts recorded a loan from AMHP to Mr Driver of $2 million. On 27 September 2022, Mr de Wit emailed Mr Driver again, attaching the bank records "for the $500,000.00 balance of $2.5M loan from Adam". The bank record is not in evidence but AMHP's MYOB accounts recorded the additional $500,000 as a loan from AMHP to Mr Driver. Presumably, the missing bank record indicated that the $500,000 was transferred from AMHP's bank account.
2. Whilst Mr de Wit's email and transaction description on the bank record indicated that the loan was from Mr Hartley, the funds clearly came from AMHP and Mr Driver would have been in no doubt of that fact. Presumably, this was the second instalment of the short-term loan of $5 million described in Mr Driver's email of 16 August 2022: see [18]. As such, the loan was to be repaid immediately on the receipt of the funds from the sale of Mr Driver's shares in Botanical Water Technologies which, in August 2022, was expected to conclude "within the next 3 months", that is, by mid-November 2022.

Trading begins

1. On 28 September 2022, Mr Hunt emailed an application form for the Fund to Mr Driver at Aurora for him to complete "as an individual investor in the fund and also a separate application for AMHP". The initial trading funds came from Mr Hartley, who provided some $7.5 million. Pepperstone opened two accounts for Aurora, one ending 005 and the other ending 423, being a separate account for the two trading strategies initially engaged in by the FX traders on behalf of the Fund. The trustee issued Unit Certificate No 1 to AMHP (1,068,875 fully paid units) and Unit Certificate No 2 to AMHP (6,947,692 fully paid ordinary units). As I read the monthly statement, AMHP's investment recorded in Unit Certificate No 1 was deployed in the account ending 005 whilst AMHP's investment recorded in Unit Certificate No 2 was deployed in the account ending 423.
2. Pepperstone issued its first monthly statement to the trustee for the month ended 31 October 2022. Mr Hunt provided the statement to Mr Driver, who circulated the statement to Mr de Wit, Mr Hartley and Mr Hartley's accountant. By the end of the month, the Pepperstone accounts together held some $8.4 million, of which some $1.6 million was profit. On 1 November 2022, the trustee issued Unit Certificate No 3 and Unit Certificate No 4, each to Aurora and each for 258,284 fully paid ordinary units. By my rough calculations, this was the one-third share of profits generated by trades in October 2022, effectively divided between Mr Driver and Mr Hartley. Unit Certificate No 5 was also issued to AMHP (2.2 million fully paid ordinary units) being, apparently, a further investment by AMHP in the Fund.
3. On 1 December 2022, Mr Hunt provided Mr Driver with the Pepperstone statement for the month ended 30 November 2022. Where each subsequent month followed a similar pattern, both in terms of the monthly statement and Mr Hunt's cover email, some attention will be paid to this first report. Based on Pepperstone's monthly statements for the accounts ending 005 and 423, Mr Hunt set out the total monthly performance for the Fund, being some $1.13 million in profit. One-third of this figure was Aurora's monthly performance fee, being some $377,000. The same monthly performance fee was payable to the FX trader. Further: "The initial investor has elected to reinvest their profit in the Aurora Australasia Investment Fund so no further action at this point regarding payment of their monthly performance fee. Please confirm if reinvestment approach has changed."
4. As I read it, the "initial investor" was Aurora. In his email, Mr Hunt sought confirmation that he could attend to the payment of monthly fees as proposed. An accompanying monthly spreadsheet, entitled "Monthly Income Distribution Calculation", detailed the unit holders and the total return to each unit holder for that month. Of note, the names of the unit holders in the monthly spreadsheet differed somewhat from the names on the unit certificates. Relevantly, although Unit Certificates No 3 and No 4 were both issued to Aurora for 258,284 fully paid ordinary units each, the trustee's monthly spreadsheets recorded Unit Certificate No 3 in the name of Mr Driver and Unit Certificate No 4 as being issued to Mr Hartley. Further, Aurora's one-third monthly performance fee of $376,985.42 was divided equally between Mr Driver (as the holder of Unit Certificate No 3) and Mr Hartley (as the unit holder of Unit Certificate No 4). As such, each enjoyed a profit share that month of $188,492.71.
5. As much was clarified by Mr Hunt in an email to (apparently) Mr Hartley's accountant on 8 December 2022, copied to Mr Hartley and Mr Driver, explaining the monthly reports "for Adam's Entities". While Unit Certificate No 4 was in the name of Aurora, this was "ADAM SHARE OF MONTH PROFIT AS DIRECTOR AND 50% SHAREHOLDER OF THE COMPANY". One-third of the Monthly Performance was "for Aurora … (David and Adam)".
6. In January 2023, Mr Hunt provided Mr Driver with the monthly performance figures for the Fund for the month ended 31 December 2022. The monthly performance was $566,497 profit, of which one-third went to Aurora's monthly fee, being $188,832. Certificate holders No 1 to No 5 proposed to reinvest their distributions. Confirmation was sought that month-end transactions could be completed, including payment of monthly performance fees. Mr Driver circulated Mr Hunt's email and attached documents to Mr de Wit and Mr Hartley. The accompanying spreadsheet followed the format earlier described.
7. These emails and reports continued each month thereafter. By all accounts, the Fund was performing well. Mr Driver and Mr Hartley each received $561,749 in January 2023 and $656,987 in February 2023. According to the emails and spreadsheets, these amounts were re-invested by Mr Driver and Mr Hartley into the Fund. Mr Driver said that Aurora re-invested the monthly performance fee in the Fund. Mr Driver understood that Unit Certificate No 3 represented his personal interest in the unit trust and was attributable to his benefit, whilst Unit Certificate No 4 represented Mr Hartley's interest in the same way.

Fourth loan

1. It will be recalled that Mr Driver had indicated that he would repay the loans from Mr Hartley by mid-November 2022. This did not happen. According to Mr de Wit, in late March or early April 2023, Mr Hartley asked Mr de Wit to meet with Mr Driver. During that meeting, Mr Driver asked for a further loan of $1 million from Mr Hartley, where "my court case will be going to mediation in June and I need more money for legal costs." Mr de Wit asked when all the loans would be repaid, and Mr Driver said, "With the mediation in June, I will definitely have my money by July and Adam will get his money back. If [Mr Hartley] could agree to lend me the additional million for legal costs, I will pay him interest on the loans of an additional $2.5 million when I pay him back in July, making a total of $10 million." Mr de Wit said he would talk to Mr Hartley, and did so.
2. Mr Driver agreed that he told Mr de Wit that he anticipated that the court case would conclude in three months, as they then had a date for mediation in June 2023. Mr Driver agreed that he told Mr de Wit that he was anticipating that the matter would be resolved favourably at mediation. However, Mr Driver denied that he ever said that he would definitely have moneys to repay the loan by June 2023. He said it was always his understanding that the loans would be repaid on the completion and final determination of the legal proceedings. However, Mr Driver's professed understanding is not consistent with his promises in earlier emails that the loans would be repaid "within the next three months", including from the sale of shares rather than from the litigation.
3. Mr de Wit agreed that whether there would be any settlement of the court case in June 2023 depended on an agreement being reached at mediation; otherwise the court case would carry on. It may settle later, in which event Mr Driver would be in funds later. Mr de Wit did not accept, however, that Mr Driver would continue the case to final judgment, "We were told that he was going to settle at mediation. … We were told regularly and constantly that it would be settled at mediation and he wasn't going to take it to court. We were told … he wasn't going to push to the end. … he didn't intend to take it to trial."
4. I accept Mr de Wit's evidence as to the various assurances given by Mr Driver. Mr Driver, by then, had borrowed a substantial amount of money from Mr Hartley and had failed to repay those funds within the timeframes promised. He now needed further funds. It may be inferred from Mr Driver's offer to pay an additional $2.5 million in interest, if a further advance of $1 million was made, that Mr Driver was somewhat desperate for the additional money. Such desperation would likely have prompted Mr Driver to give whatever assurances were thought necessary to obtain the additional funds, including those described by Mr de Wit. I accept that Mr Driver said that he planned to resolve the court case at the mediation in June 2023 and did not plan to proceed to trial; Mr Hartley could expect to be repaid in full in July 2023. Whether Mr Driver actually expected or intended to proceed in that manner is not known, but I accept that he made those representations to Mr de Wit, which were conveyed to Mr Hartley.
5. On 5 April 2023, Mr de Wit emailed Mr Driver in respect of "Adam Hartley Loan", attaching a bank record "for the $1,000,000 loan from Adam Hartley." The accompanying bank record showed a transfer from Mr Hartley's account to Mr Driver's account, with a description "Loa[n] - David Driver." In total, Mr Driver had now been advanced $7.5 million by Mr Hartley and AMHP.
6. Later on 5 April 2023, Mr Driver forwarded to Mr de Wit an email from the trustee, with the monthly performance figures for the month ended 31 March 2023. The monthly performance of the Fund was $1,617,324, of which Aurora's one-third monthly performance fee was $539,108.26. It was proposed that Aurora's performance fee would be reinvested.
7. On 2 May 2023, Mr Hunt circulated the monthly performance figures and proposed investor distribution for the month ended 30 April 2023. On 4 May 2023, Mr Driver participated in a Zoom meeting with Mr Hunt and Mr de Wit to discuss the monthly results. Each of Mr Driver and Mr Hartley received $268,442 as their half-share of Aurora's fee.

Loan agreement

1. By early May 2023, Mr de Wit said that Mr Driver had stopped taking Mr de Wit's phone calls and was generally communicating only by text messages and emails. In early May 2023, Mr Driver told Mr de Wit that he was planning to travel to China for business. On 5 May 2023, Mr de Wit called Mr Driver and said that Mr Hartley was concerned that there was no written loan agreement, "What happens if you drop dead?". Mr Driver said he was happy to sign a loan agreement before he departed.
2. On Sunday, 7 May 2023, Mr de Wit emailed Mr Driver a loan agreement, advising "I have gone online and completed a standard loan agreement for the loan to you from Adam." He asked Mr Driver to sign and return "as discussed yesterday." Further, "As discussed I don't have the dates for the payment amounts with me at home so I will complete Annexure A and forward through to you." Mr Driver executed and returned the document without alteration. There was no Annexure A, as referred to in the document, nor was the annexure subsequently prepared.
3. Whilst Mr de Wit's modifications to the online document were imperfect, the import of the Loan Agreement was that Mr Driver promised to repay $7.5 million to Mr Hartley with interest: cl 1. Under the Loan Agreement, the Lender was Mr Hartley and the Borrower was Mr Driver. AMPH was not included as a Lender, although there was no mystery that the company had provided the funds for two of the loans. Further: "Payment 2. Repayment to be made in full including interest on initial receipt of funds from court case. … Default 4. Notwithstanding anything to the contrary in this Agreement, if the Borrower defaults in the performance of any obligation under this Agreement, then the Lender may declare the principal amount owing under this Agreement at that time to be immediately due and payable. Extra Clause 5. Borrower to pay $2,500,000.00 as an interest payment on receipt of funds from court case. … Entire Agreement 12. This Agreement constitutes the entire agreement between the parties and there are no further items or provisions, either oral or otherwise."
4. Mr de Wit said that, by the time he drafted the loan agreement and sent it to Mr Driver on 7 May 2023, he had been told by Mr Driver on more than one occasion that he would have the money to repay Mr Hartley by July 2023. Mr de Wit denied that he did not include an obligation to repay the loan by the end of July 2023 because Mr Driver never promised such a thing. Rather, "It was because I'm not a lawyer, and I done it on a Sunday, at home, as best I could. It was because he was travelling overseas, and we had no documents, and … we were worried about the risk of him flying overseas, or something happening to him while he was overseas with no documents in place." Whilst Mr de Wit agreed that it would not have been difficult to include a clause to that effect, "but I'm not a solicitor. We were promised numerous times that we would be repaid in three months … In hindsight, … I would have loved to write that … but unfortunately, I drafted on a Sunday, at home, while I was trying to do chores. I done the best I could at the time. … we were promised so much, and it never come in doubt. We never thought … that we'd end up in this position." Mr de Wit maintained that Mr Driver did say that he would repay the loan by July 2023. I accept Mr de Wit's evidence. The issue is the effect of the Loan Agreement on Mr Driver's representation, to which I will return in due course.

Trading continues

1. In the same week in May 2023 when Mr Driver signed the Loan Agreement, Mr de Wit and Mr Driver participated in a telephone conference with Mr Burgat. Mr Burgat suggested diversifying beyond the Fund's existing two trading strategies to six strategies. Mr Driver and Mr de Wit agreed. On 10 May 2023, Mr Burgat emailed data for the April 2023 month to Mr Driver and Mr de Wit. Mr de Wit asked how to manage the transfer of funds to the additional strategies given the existing open trading positions. On 16 May 2023, Mr Driver followed up Mr Burgat in respect of the proposed new strategies, noting that the existing accounts were "currently very flat". On 31 May 2023, Mr Driver provided Mr Burgat with further instructions, noting that the account opened for strategy one (the account ending 005) "remains almost static so a speedy resolution to this topic seems necessary."
2. On 5 June 2023, Mr Hunt circulated the monthly performance figures for the month ended 31 May 2023 and proposed distributions. Relevantly, Mr Driver and Mr Hartley each received $216,226 for the half-share of Aurora's performance fee, which was to be re-invested. On 6 June 2023, Mr Burgat provided Mr Driver and Mr de Wit with further advice in respect of spreading the Fund between additional trading strategies. Mr de Wit asked Mr Hunt, copied to Mr Driver, to organise two new accounts with Pepperstone to facilitate the additional strategies.
3. Units in the Fund were issued to parties other than Mr Hartley and Aurora. On 29 June 2023, one of these unit holders, Nic Walters, advised that his $700,000 investment needed to be withdrawn by the close of the financial year (that is, the next day). Mr Hunt advised that the trustee could arrange redemptions as soon as possible. On 5 July 2023, $700,000 was transferred from Aurora's Commonwealth Bank account to Mr Walters. (The relevance of this is that Mr Driver complains that the trustee has not dealt with his redemption request in a similar timeframe.)
4. Also in preparation for the end of the financial year, Mr Driver attended a meeting with accountants in June 2023, who advised that there should be tax invoices prepared by Aurora for its performance fees. Mr Driver understood that this had to be done by the end of June 2023. Mr Driver was unaware whether Aurora was registered for GST. Whilst Mr Driver said he assumed that Mr Hunt was taking care of the accounting, he acknowledged that Mr Hunt was the accountant for the Fund and not for Aurora. Mr Driver said that, as Aurora was controlled by himself, Mr de Wit and Mr Hartley as a team, it was not necessarily his task to ensure that the invoices were prepared by the end of the financial year. Mr Driver was not aware whether this happened, as he fell-out with Mr Hartley soon afterwards. I take it that Aurora has never properly complied with its obligations to render tax invoices, collect or remit GST. Nor does it appear that Mr Driver is inclined, or perhaps able, to attend to these tasks now, given the falling out with Mr Hartley.
5. On 5 July 2023, Mr Hunt provided the monthly report to Mr Driver and Mr de Wit. Mr Driver forwarded the material to Mr de Wit, asking whether he had any issues or concerns, "If all is OK, I will confirm the same to Phil and he can prepare and settle the distributions to the various certificate holders." Mr de Wit confirmed that he was "in agreeance with your workings" and, if Mr Driver also approved the figures, then Mr Hunt could attend to the transfers. Mr Driver and Mr Hartley each received $309,828 as half of Aurora's performance fee, which was re-invested in the Fund.
6. On 6 July 2023, Mr Driver followed up Mr Burgat in relation to the establishment of the two new trading accounts, "We are obviously very keen to get started." On 12 July 2023, Mr de Wit emailed Mr Burgat querying the current open position on the Strategy 2 account as he "started to freak out a bit about it." Mr Burgat provided a detailed explanation to Mr de Wit and Mr Driver, which Mr Driver forwarded to Mr Hunt.

Repayment anxiety

1. Mr de Wit tried to call Mr Driver to find out the outcome of the June 2023 mediation. Eventually, he was able to speak to Mr Driver, who said that the mediation had now been postponed until November 2023. Mr de Wit reported their conversation to Mr Hartley. On 13 July 2023, Mr Hartley and Mr de Wit visited Mr Driver at his office and demanded that he resign as a director of Aurora and transfer his shares in the company, given the delay in the mediation. Mr Driver agreed that Mr Hartley was very annoyed.
2. On 14 July 2023, Mr Driver emailed Mr Hartley, copied to Mr de Wit, entitled "David Driver - Security against loans". Mr Driver apologised for having not repaid the loans, "I honestly expected this matter to have resolved and the loans repaid within the 3 months following the provision of the loans. I am guilty of being both naïve and stupid in relation to both the court case and my property developments." Further: "To provide security against your loans and up until the loans are repaid in full, I offer you the below:- 1. Pledge my 50% shareholding in Aurora to you. 2. Pledge my share of the current retained profits and future profits held in Aurora under my name to you, currently $2 Million."
3. In addition, Mr Driver offered security over his share of profits in various development properties and his shares in Botanical Water Technologies, thought to be worth at least $37.5 million. Mr Driver advised that he intended to exit Botanical Water Technologies and sell his shares "regardless of the outcome of the court case" and noted that there was a proposed mediation on 2 and 3 November 2023. A letter from a law firm was attached (but not in evidence), presumably confirming the details of the mediation. Further: "The above pledges can be formally placed in a document drafted by a lawyer. In the meantime, I am doing everything I possibly can to conclude the court case and return the loans to you, on or before December 2023. Following your consideration of the above, let us meet next week at a time convenient for you to go through everything. I genuinely want to give you comfort and security over the loaned amounts and I am deeply saddened that this has damaged our relationship and friendship. I am truly sorry for this."
4. Later that evening, Mr de Wit replied, following a meeting with Mr Hartley, noting that the issues discussed in their meeting the day before "need to be resolved and formalised for both you and Adam. As such, Adam proposes the following …". First, the $7.5 million debt owed to Mr Hartley and AMHP was to be repaid in full "at the earliest possible opportunity and, at the latest, via a direction to pay as part of your settlement in your current Supreme Court proceedings". Second, Mr Hartley was to be compensated as if the loan moneys had been invested in the Fund, compounded monthly and paid "at the latest" by a direction from the settlement of the legal proceedings. In addition, Mr Hartley would receive 10% of "your component of the determination value" of the legal proceedings, to be paid out of the settlement of those proceedings. Further: (emphasis added) "With regards to Aurora Australasia Pty Ltd, for security the shares will be transferred to AMHP Pty Ltd and Trent de Wit is to be appointed as director. The retained funds in Aurora Australasia Pty Ltd will be distributed to AMHP Pty Ltd in compensation as previously agreed (up to $4.9 million). The relocation of the shares shall be determined in consultation once the debt is paid in full. … If you are in agreeance with the above, please confirm in writing so a loan agreement can be drafted. The security of the above will be determined on advice."
5. Mr Driver did not reply. As to the $4.9 million referred to in Mr de Wit's email, he later explained in an email to the trustee (see [80]) that $4.9 million was an amount which Mr Driver had already pledged would be distributed to Mr Hartley, where Mr Driver had been the key advisor on an investment by Mr Hartley, which later proved to be fraudulent.
6. On 18 July 2023, Mr de Wit emailed documents to Mr Driver "As discussed". Two "Change to company details" forms were provided for lodgement with the Australian Securities & Investments Commission (ASIC), transferring Mr Driver's 100 shares in Aurora to AMHP and appointing Mr de Wit as a director in Mr Driver's stead. Also provided was a share transfer form, share certificate, director's resolution and associated documents to effect these changes. There was no reply from Mr Driver.
7. On 21 July 2023, Mr Hartley emailed Mr Driver; Mr Hartley was clearly most displeased on a number of fronts. On 24 July 2023, Mr Driver replied, advising that he had asked his solicitors to respond to Mr Hartley's request for further information on the legal proceedings, and to clarify the details and timing for the repayment of the loan.
8. On 25 July 2023, Mr Hartley's solicitor emailed Mr Driver, advising that the law firm had been instructed to draw up two loan documents to reflect the loans made to him by Mr Hartley and AMHP. Two draft loan agreements were attached. Mr Driver was asked, "If you believe that the Agreements accurately represent the intentions discussed in your email dated 14 July 2023 with Adam, kindly proceed with arranging its completion and signature as instructed". Mr de Wit texted Mr Driver separately to make sure that he had received the loan agreements and to "get this sorted". Mr Driver replied that he would have his solicitors review the documents as a matter of priority.
9. Both loan agreements were in similar terms and were, unsurprisingly, more comprehensive than that earlier drafted by Mr de Wit from the online document. The two Loan Agreements appear to have proceeded on the basis that Mr Driver would separately execute the documents provided by Mr de Wit, transferring his shares in Aurora and standing down as a director. The Loan Agreements documented the other security offered by Mr Driver, over his interest in various development properties and his shares in Botanical Water Technologies. In addition, the documents implemented Mr Hartley's requirements for the repayment of the loans on resolution of the Supreme Court proceedings (the loans were to be repaid 30 days after finalisation of the Supreme Court proceedings) and compensation for Mr Hartley's inability to invest the loan moneys in the Fund in the meantime. Neither loan agreement sought to document Mr Driver's proffered pledge of his units in the Fund.
10. On 27 July 2023, Mr Driver advised Mr de Wit that his lawyers had suggested some amendments to the documents. Mr Driver's solicitor emailed Mr Hartley's solicitor, noting that Mr Driver was presently enroute overseas and they would seek instructions and revert as soon as possible. Mr de Wit texted Mr Driver "Are you running away Dave??? It appears so!".
11. On 1 August 2023, Mr Hartley's solicitor pressed Mr Driver's solicitor for immediate signing and return of the loan documents, timely completion of which was "vital to ensure the registration of the agreed securities over the loan moneys received and accepted by your client." (Presumably, this was a reference to the proposed security over Mr Driver's interest in development properties and his interest in Botanical Water Technologies.) Separately, Mr de Wit forwarded to Mr Hunt the email from Mr Driver of 14 July 2023, offering to pledge his 50% shareholding in Aurora and his share of "the current retained profits and future profits" in the Fund to Mr Hartley.

Change of investment manager

1. On 2 August 2023, Mr Hunt sought legal advice from Thomson Geer Solicitors "as there is a bit of disharmony amongst the shareholders of the investment manager". Mr Hunt was considering deleting cl 16.2 from the trust deed "so either investment manager shareholder cannot control the trust". Where there was no written agreement between the Investment Manager and the trustee, Mr Hunt enquired whether the trustee could remove the Investment Manager and appoint a new investment manager as required, "If the d[y]sfunction between the shareholders of the Investment Manager continues and it effects the operation of the fund I would contemplate removing the Investment Manager." Mr Hunt was advised that he could do both things.
2. On 3 August 2023, Mr Driver's solicitor provided Mr Hartley's solicitor with amendments to the proposed loan agreements. By his amendments, Mr Driver proposed to acknowledge that Mr Hartley had lent $5 million and AMHP had lent $2.5 million. He accepted the obligation to pay interest of $2.5 million. He agreed to provide the lenders with security. He agreed to repay the loans 30 days from receipt of Compensation, being the proceeds received by way of settlement, judgment "or any other non-appellable conclusion of the Supreme Court Proceedings". Rather than offer security over Mr Driver's interest in Botanical Water Technologies, Mr Driver offered security over his interest in the right to dividends paid on his shares in Aurora and two other companies, not presently relevant. As I read it, Mr Driver's proposal fell well short of what he had offered on 14 July 2023.
3. On 4 August 2023, the trustee circulated the monthly report for July 2023 to Mr Driver and Mr de Wit, proposing to distribute $543,984 to each of Mr Driver and Mr Hartley as their 50% share of Aurora's performance fee, to be reinvested as usual. Mr Driver said that, soon after receiving this monthly financial information, he attempted to access Aurora's bank account via his smartphone but was unable to do so. He called the bank and was not able to obtain any information as to why he could no longer access the account.
4. On 7 August 2023, a new company, Aurora Capital and Investment Pty Ltd was incorporated. Mr de Wit was the director and secretary. AMHP and Mr de Wit's company, TL & LJ de Wit Holdings Pty Ltd, were equal shareholders.
5. On 8 August 2023, Mr Hartley's solicitor emailed Mr Driver's solicitor, advising that the proposed amendments to the loan agreements did not reflect the parties' intentions nor provide adequate security. Mr Hartley did not agree to sign the documents. Both Mr Driver and Mr de Wit's emails of 14 July 2023 were provided, "Upon which the loan agreements were drafted". Mr Driver was asked to sign the loan agreements as earlier provided within seven days. Mr Hartley's solicitor suggested that, if Mr Driver's solicitor had any queries, a conference should be organised that week to discuss any issues with the terms of the loans "with all parties present." Separately, Mr de Wit texted Mr Driver to "do the right thing". Mr Driver did not reply.
6. On 11 August 2023, Mr de Wit emailed Mr Hunt, copied to Mr Hartley, expressing concern about Mr Driver on behalf of various unit holders, particularly, Mr Hartley and his family trust. The investors wished to change the Investment Manager to Aurora Capital and Investment Pty Ltd effectively immediately. Mr de Wit and Mr Hartley also telephoned Mr Hunt to explain their concerns. Mr Hunt asked his solicitor to prepare the necessary documents to replace the Investment Manager.
7. On 16 August 2023, Mr Hunt prepared a letter to Aurora, terminating its investment management services. Mr Driver said he did not receive this letter.
8. The trustee continued to issue monthly spreadsheets, which now differed in three respects. First, the spreadsheets were no longer circulated to Mr Driver. Second, the separate columns in the spreadsheet for Unit Certificate No 3 (formerly "David Driver") and Unit Certificate No 4 (formerly "Adam Hartley") were now combined in a single column for both Unit Certificate Nos 3 and 4 in the name of Aurora, together with a notation "Ceased as Fund Management Company 16 August 2023". An additional column was now added for Unit Certificate No 21 in the name of Aurora Capital and Investment Pty Ltd, with a notation "New Fund Management Company from 17 August 2023". Third, in the August 2023 spreadsheet, the performance fee was apportioned between Aurora ($273,775) and Aurora Capital and Investment Pty Ltd ($276,609). In the September 2023 spreadsheet, the performance fee was allocated to Aurora Capital and Investment Pty Ltd alone ($662,082). As such, the performance fee was no longer paid to Aurora but to Aurora Capital and Investment.

Getting his money out

1. On 26 October 2023, Mr Driver emailed Mr Hunt, copied to Mr Hartley, asking to redeem his units in the Fund as held under Unit Certificate No 3. Mr Driver asked that the redemption proceeds be paid to an account ending 5213. Although the name of the bank account was not specified in the email, Mr Driver agreed that the bank account was in his name. Mr Driver said, "The units were held in my name. So it made sense for the units being redeemed to go into a bank account held in my name, not to the company's." Mr Driver denied that he knew that Certificate No 3 was issued in the name of Aurora. I reject his evidence, where the fact that the unit holder of Certificate No 3 was Aurora was often stated in the trustee's monthly emails to Mr Driver.
2. Mr Hartley retained new solicitors. On 27 October 2023, Mr Hartley's new solicitor emailed Mr Driver, setting out in detail each of the advances made by Mr Hartley and AMHP. Further: "We are instructed that repayment of the entirely of the amount of the advances together with a further amount of $3,000,000.00 to be apportioned between our client in respect of the advances agreed to at the time of the making of the advance on 31 May 2023 by way of compensation for the payment of past advances and the making of an additional advance of $1,000,000.00, was to be repaid on or before 31 July 2023. We are also instructed that neither the primary amount of advances nor the amount referred to in the preceding paragraph have been paid, compromised or secured by you in favour of our respective clients."
3. The instructions received by the new solicitor, as reflected in this letter, may have been a little jumbled. The additional interest of $2.5 million, which Mr Driver agreed to pay when requesting the fourth loan of $1 million, had become $3 million in this letter. What was clear is the understanding that the loan would be repaid by the end of July 2023. Demand was made for repayment of the loans and interest by 3 November 2023, failing which, legal proceedings would be commenced.
4. On 30 October 2023, Mr Hunt replied to Mr Driver's redemption request, copied to Mr Hartley, asking "Please advise in what capacity you are requesting to redeem units." Mr Driver was also asked to provide a copy of a bank statement for the transferee account, which disclosed the name of the bank account. Given the vagaries of Mr Driver's redemption request, both questions were fair.
5. On 3 November 2023, Mr Driver replied, "I do not understand the controversy in the request. Can you please confirm who holds Unit 3 and Unit 4 and provide me with copies of both certificates as a matter of urgency?". Mr Driver did not answer the trustee's question, nor provide a copy of a bank statement. Mr Driver denied that he "dodged the question" asked by Mr Hunt, or that he knew at the time that the unit holder for the No.3 certificate was Aurora. Mr Driver's avoidance of Mr Hunt's request was, with respect, patent. As earlier mentioned, nor do I accept Mr Driver's evidence that he did not know that the unit holder for Certificate No 3 was Aurora.
6. Separately, Mr Driver's solicitor also corresponded with Mr Hartley's new solicitor, seeking detailed particulars of the terms of the advances said to have been made and details of the other entitlements set out in the letter of demand. Whilst some of the requests for particulars were understandable, given the apparent inaccuracy in the contents of the letter of 27 October 2023, other requests for particulars were surely unnecessary, enquiring whether the terms of the loans made by Mr Hartley were "oral or in writing or both … if they were oral, please provide us with particulars of the oral terms of the said advances. If the terms were in writing please provide copies of those said written terms."
7. Also on 3 November 2023, Mr Hunt forwarded his emails with Mr Driver in respect of the redemption request to Mr de Wit, advising that Mr Hunt would consider an appropriate reply and obtain legal advice, "Just keeping you in the loop as 50% shareholder of Aurora Australasia Pty Ltd which was removed as Investment Manager. It appears there is some urgency from Driver however I don't want to be rushed and need to consider all aspects as trustee … and the interest of all other unit holders including your units held by your other entities."
8. On 10 November 2023, Mr Driver followed up his redemption request with Mr Hunt, "I am at a loss as to the delays. Please attend to this matter as a priority." No bank statement was provided, nor an answer to Mr Hunt's initial question. On 13 November 2023, Mr Hunt pressed for the information requested in his email of 30 October 2023 "in order to assist Hunt Prosperity Pty Ltd with several of its obligations."
9. Later on 13 November 2023, Mr de Wit emailed Mr Hunt, copied to Mr Hartley, setting out their views on Mr Driver's redemption request. Mr de Wit advised, "there is no way David is entitled to any money from Aurora Australasia", where the Unit Certificates 3 and 4 should not be in Mr Driver and Mr Hartley's names. Rather, there should only ever have been one unit certificate in the name of Aurora Australasia "as this is Aurora Australasia's funds … David has never invested any money in Aurora Australasia Investment Fund." Further: "2. [Mr Driver] has pledged that the first $4.9m (after tax dollars) would be distributed to Adam due to the issue he was a key advisor on with the Vincent Vocisano investment fraud. David has independently confirmed this with yourself … … 4. He pledged the current earnings in Aurora Australasia to Adam in his email dated 14 July 2023. (attached) 5. He also pledged his 50% shareholding in Aurora Australasia to Adam in his email dated 14th July 2023. (attached) 6. He currently owes Adam $7.5m loan monies + $2.5m interest/compensation that he refused to sign loan agreements and now when we have sent a letter of demand he has not responded or made contact." Putting all of this to one side, Mr de Wit contended that any funds should be transferred to Aurora's bank account for distribution equally to both shareholders, being Mr Driver and Mr Hartley.
10. On 14 November 2023, Mr Hunt replied, "I agree with every aspect of what you have written. … There will not be any transactions even contemplated without speaking to you first as a 50% shareholder of Aurora Australasia Pty Ltd."
11. On 17 November 2023, Mr Driver emailed Mr Hunt, pressing his redemption request and for confirmation of the holders of Certificates 3 and 4. There was still no answer to the trustee's question, nor a copy of a bank statement. On 22 November 2023, Mr Hunt replied to Mr Driver, "Aurora Australasia Pty Ltd is the Unitholder of Certificates 3 and 4".
12. It must have been apparent to Mr Driver, at this point, that the trustee was not going to pay any redemption monies to a bank account which did not correspond with the name of the unit holder. Whilst Aurora already had a bank account, payments from the account required two signatories. Getting either Mr Hartley or Mr de Wit to agree to co-sign a transfer of the redemption monies from Aurora's bank account to himself was just not going to happen.
13. On 29 November 2023, Mr Driver opened a new bank account in Aurora's name. The same day, Mr Driver emailed a redemption request to Mr Hunt for Certificate No 3 on behalf of Aurora. The redemption proceeds were to be transferred to the new Aurora bank account. Attached was a copy of an account opening confirmation for the new Aurora bank account. Mr Driver signed the redemption request on behalf of Aurora as director, but maintained that he did so "in reference to my redemption for Unit Certificate No 3 and that's simply my position in the company as director of Aurora Australasia." Mr Driver maintained that he was personally entitled to Certificate No 3.
14. Mr Driver said he opened the new Aurora bank account as he was concerned that, if the proceeds of the redemption request were deposited into Aurora's existing account, "persons without authority in relation to [Aurora] could transfer and dissipate the funds to accounts outside the reach of the Company." More likely, Mr Driver opened the new account so that he could have access to the redemption monies, where the trustee was clearly not prepared to pay the redemption moneys to a non-Aurora account and Mr Hartley or Mr de Wit were clearly not prepared to authorise a transfer of the redemption monies from Aurora's existing bank account to Mr Driver.
15. On 4 December 2023, Mr Hunt emailed Mr de Wit, forwarding Mr Driver's redemption request. Mr de Wit replied that the bank details provided by Mr de Wit were not Aurora's operating bank account, "He has obviously opened a new bank account deceitfully to redeem moneys (that don't belong to him) without notifying the shareholders (ie. Adam Hartley)." Mr Hunt was asked to ensure that no funds were transferred out of the Fund to Mr Driver.
16. On 8 December 2023, Mr Driver pressed Mr Hunt to process his redemption request, failing which legal action would be taken. On 13 December 2023, Mr Driver's solicitors sent a letter before action to the trustee. On 19 December 2023, Mr Hunt advised that the trustee would offer all unit holders the opportunity to redeem their units in the Fund before determining what funds were available for distribution, and would then process redemptions on a pro rata basis.

These proceedings

1. On 19 December 2023, Mr Driver's solicitors filed a summons on behalf of Aurora, commencing these proceedings against the trustee. An order was sought that the trustee process the redemption request or, alternatively, that the trustee be removed under the Trustee Act 1925 (NSW). On 25 January 2024, Mr Driver's solicitor provided a resolution of Aurora, signed by Mr Driver on 29 November 2023, to issue the redemption request. On 29 January 2024, Mr Driver's solicitors suggested that the trustee had engaged in misconduct by consulting Aurora's shareholder, AHMP, rather than acting on the request of Aurora's sole director.
2. On 1 February 2024, Mr Hartley filed a cross-summons against Aurora, the trustee and Mr Driver seeking an interim injunction restraining the trustee from paying any redemption entitlements, together with a declaration that Aurora had charged its right, title and interest in Certificate No 3 in favour of AMHP to secure repayment of moneys borrowed by Mr Driver. A declaration was sought that payment of the redemption moneys should go to AMHP. Judgment was also sought against Mr Driver in respect of the unpaid loans. Hammerschlag CJ in Eq granted ex parte injunctive relief, restraining the trustee from redeeming Certificate No 3. On 4 March 2024, Slattery J made orders inter partes continuing the injunction until further order: Aurora Australasia Pty Limited v Hunt Prosperity Pty Limited [2024] NSWSC 195.
3. The proceedings were expedited. On 13 June 2024, the trustee's solicitor advised, without admission, that the trustee was prepared to resign and for a new trustee to be appointed. Communication ensued between the parties as to whether agreement could be reached to abridge the time when the trustee could retire (otherwise three months) and to agree on a replacement trustee. No consensus was reached. On 3 July 2024, the trustee served notice that it would retire as trustee in three months' time. This had the consequence that many of the issues agitated by Mr Driver fell by the wayside. The following issues remain.

WAS AURORA ENTITLED TO THE PERFORMANCE FEE?

1. This issue arose where Mr Hartley denied that Aurora was validly appointed as Investment Manager. He submitted that the Information Memorandum clearly suggested to prospective investors that there was a written "Investment Management Agreement". The defined term "Investment Management Agreement" implied an identifiable document, "It outlines the powers of the Investment Manager in managing the investment portfolio and its obligations to the Fund and the Trustee". The reference to an indemnity implied the existence of an agreement in writing, as did the expressions "Under the terms of the Investment Management Agreement" and "duties under the Investment Management Agreement". There was no such agreement.
2. Mr Hartley submitted that Aurora did not perform any services or have the resources to do so. Mr Driver admitted that he had no expertise in FX trading or in establishing or running a fund for that purpose. There was no suggestion that Mr Hartley or Mr de Wit had any expertise either. From the outset, Mr Driver envisaged that Mr Hunt would be providing the services. Mr Hunt organised solicitors to prepare the Information Memorandum and trust deed. Mr Driver understood that it was Mr Hunt who was responsible for, and was, reviewing the trading records provided to the trustee from the trading platform and preparing high level summaries for Aurora's consideration. Mr Driver did not undertake any close analysis of the details of the trades in the Pepperstone statements sent to Mr Hunt and, to Mr Driver's knowledge, neither did Mr Hartley or Mr de Wit. The most that could be said of what Mr Driver or Aurora did was that they received monthly reports and, on one occasion in May 2023, talked to Mr Burgat about the performance of the Fund and followed Mr Burgat's advice on opening two new accounts for two new trading strategies.
3. Mr Hartley submitted, to the extent that Mr Driver understood that the basis of Aurora's one-third profit share was that he conceived of and implemented the project while Mr Hartley provided the initial trading funds, Mr Driver in fact did little to conceive of and implement the project. Rather, the purpose of Aurora's proposed role as "Investment Manager" was to create a specious basis for skimming off a one-third profit share for doing nothing. The receipt of information about the performance of the Fund was so they could keep an eye on, and have some continuing involvement in, their own investments. That is, Aurora gave no consideration for its one-third profit share. The lack of commerciality in the arrangement was supported by the absence of invoices rendered by Aurora for its supposed remuneration. If Aurora's remuneration was reinvested as units in the Fund, how was it suggested that Aurora would fund GST and income tax obligations on that remuneration? The Court should find that there was no oral investment management agreement and that Aurora was not entitled to the profit-share credited to it.
4. Mr Hartley contended that the trustee was under an obligation to maintain the Fund and an obligation not to pay or allocate the moneys under its control otherwise than in accordance with the trust deed. The trustee allocated to Aurora one-third of monthly trading profits in circumstances where Aurora had no contractual or other entitlement to be paid this share. The crediting of the one-third profit share to Aurora was an unjustified diversion of profits away from the Fund, to the detriment of unit holders generally. The trustee should not have been a party to that arrangement and had the power to eliminate the "performance fee": paragraph 6.2, Information Memorandum. (The Information Memorandum does not go so far but reserves to the Trustee the right "on advice from the Investment Manager" to change the Performance Fee in the future.) Such action constituted a breach of the trustee's obligations.
5. Mr Driver and the trustee contended that Aurora was appointed as Investment Manager of the Fund, as disclosed in the Information Memorandum. Its appointment as Investment Manager was as described by Mr Driver, there being no requirement for any such agreement to be in writing, and confirmed by the subsequent conduct of the parties in accordance with the terms of such an agreement. The role of the Investment Manager was to found the project, locate a trading house and brokers with expertise in FX trading, and seek and obtain advice and documentation needed to establish the Fund. In addition, the Investment Manager had an ongoing role in receiving reports from the trustee as to whether the Fund was performing profitably and, if so, the amount of profits available for distribution. The Investment Manager's reward for the performance of this role was a one-third share of the profits made by the Fund each month. Aurora could choose not to receive payment of this one-third profit share and instead allow the trustee to keep that amount for investment purposes and provide to Aurora, in lieu of payment, an additional number of units commensurate with the amount of profit share in question.
6. Mr Driver submitted that paragraph 9.6 of the Information Memorandum referred to an Investment Management Agreement. It did not specify that the agreement was in writing. It was clear that Aurora had already been appointed as such. The fact that the parties may have contemplated some separate agreement to record such matters did not derogate from the fact that, as the Information Memorandum recorded, the trustee had already appointed Aurora and agreed to pay it one-third of the monthly profits of the Fund. The fact that this profit share was acceptable to Mr Hartley was confirmed by new investment manager continued to enjoy that arrangement after Aurora was removed as investment manager.

Consideration

1. The question whether there was a contract entered into between the parties is essentially a question of fact: Ta Lee Investment Pty Ltd v Antonios (2019) 19 BPR 39153; [2019] NSWCA 24 at [153] (per Bathurst CJ, Beazley P, Macfarlan JA). As Bathurst CJ observed in Pavlovic v Universal Music Australia Pty Ltd [2015] NSWCA 313 at [15]: "It is well established that the question of whether the parties intended to bind themselves to a contract is to be determined objectively, having regard to the intention disclosed by the language the parties have employed: Masters v Cameron [1954] HCA 72; 91 CLR 353 at 362. In cases such as the present, which do not depend on the construction of a single document, what is involved is the objective determination of the question from the communications between the parties in their context and the parties' dealings over the time leading up to the making of the alleged contract. This involves consideration of the subject matter of the communications: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 550. As was said by Mahoney JA and McHugh JA in Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309, that includes consideration of what the parties said or wrote (at 334, 337)."
2. See likewise, Stellar Vision Operations Pty Ltd v Hills Health Solutions Pty Ltd [2023] NSWCA 102 at [64]. Of assistance in resolving these issues is post-contractual conduct, which is admissible on the question of whether a contract was formed: Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [25]-[26].
3. As to the evidence of witnesses, Mr Driver gave evidence on this subject alone, unchallenged by evidence which Mr Hartley might have given of a different arrangement. I infer that Mr Hartley's evidence would not have assisted him.
4. Looking at the documentary evidence, Mr Hunt's email of 23 August 2022 confirmed that the Investment Manager was Aurora and profits were to be split equally between the FX traders, Aurora and investors. Aurora was referred to in the Information Memorandum as the "Investment Manager". The first page of the Information Memorandum, "Important information", noted that Aurora (defined as the Investment Manager) was the investment manager of the Fund. This defined term was used throughout the document; a "Corporate directory" referred to Aurora as Investment Manager, as did the "Fund overview". Part 6 of the Information Memorandum concerned "Fees and costs". A performance fee of one third of the realised profits would be charged, "The Performance Fee will be calculated and paid monthly to the Investment Manager".
5. The glossary to the memorandum also referred to the "Investment Management Agreement" as being "the investment management agreement entered into between the Trustee and the Investment Manager in respect of managing the Fund". Part 9 of the memorandum provided "Additional information" including: "9.6 Investment Management Agreement Under the terms of the Investment Management Agreement, the Investment Manager is appointed as the exclusive investment manager of the Fund. It outlines the powers of the Investment Manager in managing the investment portfolio and its obligations to the Fund and Trustee. The Investment Manager and its directors are indemnified against all losses in respect of its duties under the Investment Management Agreement, except to the extent that those losses arise from the actions or failures of the Investment Manager and are finally determined to have constituted negligence, fraud or dishonesty."
6. Looking at post-contractual conduct, all parties conducted themselves on the basis that Aurora was entitled to payment of a performance fee comprising one-third of the profits realised by the Fund each month, paid in units. Each month, the trustee proposed to make the payments and Mr Driver (with Mr de Wit and Mr Hartley's knowledge) approved the payments.
7. The trustee was authorised to appoint an Investment Manager and to agree to pay the Investment Manager fees: cll 13, 15.9 and Sch 1; s 53, Trustee Act 1925 (NSW). There was no written Investment Management Agreement between the trustee and Aurora. I agree that the Information Memorandum rather suggested that the Investment Management Agreement was a written document, but it did not require this in terms. Nor was there a legal requirement that there be an agreement in writing. I am satisfied nonetheless that there was an agreement between Aurora and the trustee that Aurora would be the investment manager for the Fund, and be paid one-third of the monthly trading profits as its fee.
8. Mr Hartley's submission that the services provided by Aurora did not warrant a one-third profit share may well be right, albeit the submission was somewhat hollow where the new investment manager, owned by Mr Hartley and Mr de Wit, has continued to receive the same fee. Assuming for the moment that the fee was excessive, this just means that the contract between Aurora and the trustee was a bad deal. But that was the agreement nonetheless, being an agreement about which Mr Hartley was aware at the time and an agreement which Mr Hartley has adopted via the new investment manager, Aurora Capital and Investment. Aurora was entitled to the performance fee under its agreement with the trustee.
9. Given my conclusion in respect of this issue, it is not necessary to consider whether Mr Hartley is estopped from contending that Aurora is not entitled to the performance fee of a one-third profit share.

SHOULD THE UNITS ISSUED TO AURORA BE CANCELLED?

1. Mr Hartley contended that Aurora was not entitled to be registered as the unit holder in Certificates No 3 and No 4 as Aurora did not subscribe for or otherwise become entitled to the issue of the units. The process for issuing units, as described in the Information Memorandum and Trust Deed, was disregarded. In particular, the trustee had to be paid a price. Whilst the trustee could specific the minimum application fee, the trustee could not just give the units away. Mr Driver and Aurora did not contribute to the Fund, whilst Mr Hartley provided millions to the corpus of the fund for use in FX trading, being some 80% of invested funds. The trustee breached its obligations. The trustee was said to be accountable to the unit holders to account for and restore the corpus of the Fund to the extent of the present value of the units issued by it in Certificates No 3 and No 4 in the name of Aurora. Alternatively, issuing unit certificates in the name of Aurora constituted a breach of trust by the trustee. Orders were sought for delivery up and cancellation of the certificates.
2. Mr Driver and the trustee contended that the units were validly issued by the trustee in accordance with the agreement to appoint Aurora as the Investment Manager. There was no breach by the trustee in issuing the units to Aurora in return for it investing its one-third profit share into the Fund. The trustee submitted that the payment/issue of the unit was authorised by the trust deed under cll 13.1, 13.1(a), 13.3(a), (b), (f) (ii), 15.9(a), "Expenses" at cl 1.1 and Schedule 1. In any event, the issue of breach was said to have no utility as there was no relief sought against the trustee by Mr Hartley in respect of the alleged breach, such as equitable compensation, falsification or surcharge. Further, any such relief was precluded by cll 17.1 and 18.1 of Deed.

Consideration

1. I have already found that there was an agreement between the parties that Aurora, as investment manager, was entitled to receive a one-third profit share as its performance fee. The trustee proceeded to calculate that fee each month. Aurora opted not to be paid that fee but to invest an amount equivalent to the fee into the Fund. The trustee issued units to Aurora to record that investment. All parties were ad idem in respect of this arrangement. The same arrangement has continued with the issue of units in Certificate No 21 to Aurora Capital and Investment, about which Mr Hartley makes no complaint.
2. The trustee had power to issue units: cl 4.2 of the trust deed. As to applications for units, cl 5 of the trust deed provided: (emphasis added) "5 Application Procedure 5.1 Offers The Trustee may at any time offer Units for subscription or sale and may invite persons to make offers to apply for or buy Units. 5.2 Minimum amounts The Trustee may specify a minimum initial application amount, minimum further application amount, and minimum holding amount in respect of Units for the Fund as a whole or a Class and vary those amounts at its discretion. 5.3 Form of application (a) Each application for Units will, unless the Trustee approves otherwise: (i) conform with the form and content requirements of any relevant Offer Document; (ii) if there is no relevant Offer Document, be made in such manner as the Trustee approves; and (iii) be accompanied by application moneys as required by any relevant Offer Document. … 5.5 Acceptance or rejection The Trustee may, without being bound to give any reason: (a) accept an application; … 5.12 Defective applications Where, within ten Business Days (or such other period as the Trustee determines) of the creation and issue of Units in the Fund, the Trustee determines that: (a) the applicant was not entitled to hold the Units issued; … then the Trustee may in its sole discretion cancel those Units, make an appropriate entry in the Register and repay the application money to the applicant out of the Assets. …"
3. Unit holders can 'reinvest' their profits in the Fund. Clause 12.16 of the trust deed enables a Unit Holder to elect to reinvest some or all of their Distribution Entitlement by applying their distribution to acquire additional Units. The Trustee can also elect to be issued with Units instead of cash in payment of its fees or reimbursement of its expenses: cl 15.7, trust deed.
4. Having regard to the overall scheme described in the Information Memorandum and trust deed, and the consensual arrangements adopted by the parties, I am not satisfied that the trustee breached its obligations in issuing units to Aurora in lieu of its performance fee. The trustee invited Mr Driver and AMPH to complete application forms for units at the outset (albeit completed application forms are not in evidence): see [29]. True it is that Aurora did not transfer funds to the trustee to pay for the units in Certificates No 3 and No 4. The trustee's liability to pay Aurora's performance fee was effectively offset against the application money. The trustee's wide powers in respect of the application procedure for units were sufficient to permit this arrangement.
5. Further, even if the trustee were to cancel Certificates No 3 and No 4, then the trustee would be obliged to "repay the application money to the applicant out of the Assets": cl 5.12, trust deed. That is, the corpus would not be restored by cancelling the units, as the trustee would be obliged to pay Aurora's performance fee, which has been treated as the application money. Nor is it clear why the trustee should itself restore the corpus by replenishing the Fund to the extent of the performance fees paid to Aurora, where that performance fee was agreed between the parties, made plain in the Information Memorandum and effectively paid 'in kind' by units in the Fund, with the agreement of all parties.

ARE THE LOANS PRESENTLY DUE AND PAYABLE?

1. Mr Hartley contended that the $7.5 million was lent to Mr Driver on terms that the moneys would be repaid by Mr Driver on demand or, alternatively, that the moneys would be repaid within three months of each loan advance. Mr Hartley relied, in particular, on the conversation between Mr Driver and Mr de Wit before the last advance of $1 million. Mr Driver was said to have represented that a mediation of his "court case" was fixed for June 2023. Mr Driver expected to receive money sufficient to repay his existing indebtedness of $7.5 million by the end of July 2023 and he would repay the borrowings by that time. The Loan Agreement was partly oral (comprising conversations) and partly in writing, comprising the Loan Agreement signed by Mr Driver on 7 May 2023. In addition, the agreement contained implied terms, being that Mr Driver would take all reasonable steps to settle the "court case" as soon as possible but in any event by the end of July 2023. Further, Mr Driver would pay a total of $10 million by the end of July 2023.
2. Mr Hartley sought judgment against Mr Driver in the sum of $7.5 million together with an addition $2.5 million by way of interest or, alternatively, judgment for $7.5 million with interest under s 100 of the Civil Procedure Act 2005 (NSW). The relevant loan agreement was said to be that reached at the meeting between Mr de Wit and Mr Driver in March or April 2023. That was when offer and acceptance occurred, supported by consideration on both sides. The Loan Agreement signed by Mr Driver on 7 May 2023 did not constitute the making of the agreement, nor was it a complete and accurate record of that agreement. Consistent with a clear assurance of payment in July 2023 was the vehemence of Mr Hartley's response to non-payment at this time and the fulsomeness of Mr Driver's apology in his email of 14 July 2023. The fact that Mr Driver set out pledges to secure the future payment of the loans was a new element in the loan relationship. The pledges were made because of his breach of the agreement to pay the monies when due. Accordingly, judgment should be entered in respect of the unpaid loans.
3. Further, Mr Hartley submitted that the Loan Agreement in particular, "on initial receipt of funds from court case" must be understood by reference to its context. That phrase took its meaning from the conversation between Mr de Wit and Mr Driver. Mr Driver had given a firm assurance to Mr de Wit that the mediation would occur in June 2023 and that he would pay the loan moneys by the end of July 2023. This was what "receipt of funds from court case" meant. The parties knew that that assurance was to be fulfilled in July 2023. The specification of a fixed amount of interest supported the conclusion that Mr Driver gave an assurance of a particular time for payment. If he had not given an assurance of a particular time, it would have been more logical to agree on a rate applying until repayment. The construction proffered by Mr Driver was uncommercial as there was no certain repayment date. If there was uncertainty about the date for repayment, then the loan should be construed as repayable on demand. On 27 October 2023, Mr Hartley's solicitor demanded repayment of the debt. Alternatively, AMHP and Mr Hartley claim moneys payable by Mr Driver to them under the common law money count of money loaned to Mr Driver.
4. Mr Driver accepted that the loan and interest was owed but not presently payable. Mr Driver denied that any funds were advanced by AMHP, as AMHP was not a party to the Loan Agreement. Mr Driver denied that it was a term of the Loan Agreement that the moneys advanced to him would be repaid on demand or, alternatively, within three months of the loan advanced in each case. Rather, the Loan Agreement recorded all of the terms and conditions of the loan, in particular, that the loan would be repaid on receipt of funds from the "court case". Mr Driver denied making any representations to the contrary. In any event, whatever was said before the Loan Agreement was executed was superseded by the contract, noting the "entire agreement" clause.

Consideration

1. As the High Court held in Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471, "Where parties enter into a written agreement, the Court will generally hold them to the obligations which they have assumed by that agreement": at [35]. There are exceptions, "But these exceptions must be proved according to established categories. The obligations of written agreements … cannot simply be ignored or brushed aside": at [35].
2. The Loan Agreement was signed by Mr Driver but not by Mr Hartley. This does not matter, where there is "evidence independently of the agreement itself to prove that the defendant has assented to it": Parker v South Eastern Railway Company (1877) 2 CPD 416 at 421 (Mellish LJ). Here, the Loan Agreement was drafted by Mr Hartley's authorised agent, Mr de Wit, submitted for acceptance by Mr Driver, and accepted.
3. An entire agreements clause "is a positive contractual provision containing a promise by each party to the other that the contract embodies the entire understanding of the parties and constitutes the entire terms agreed on between them … For a party to depart from that promise is a breach of contract": Coast Corp Pacific Pty Ltd v Stockland Development Pty Ltd [2018] QSC 305 at [120] (Jackson J). Such clauses "preclude a party to a written agreement from threshing through the undergrowth and finding in the course of negotiations some (chance) remark or statement (often long forgotten or difficult to recall or explain)" on which to assert a collateral warranty: Inntrepreneur Pub Co (GL) v East Crown Ltd [2000] 2 Lloyd's Rep 611 at 615 (Lightman J). The effect of an entire contracts clause is to denude promises or assurances made in the course of negotiations, but not recorded in the agreement, of contractual effect: Inntrepreneur Pub at 615. That is the effect of cl 12 of the Loan Agreement in this case. As such, Mr Hartley cannot rely on the verbal assurances given by Mr Driver to Mr de Wit in the meeting at which Mr Driver sought a further $1 million loan, albeit I accept that Mr Driver gave those assurances.
4. As to the proper construction of the Loan Agreement, the relevant principles are notorious, recently repeated in Laundy Hotels (Quarry) Pty Ltd v Dyco Hotels Pty Ltd [2023] HCA 6 at [27], quoting Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544 at [16] (per Kiefel, Bell and Gordon JJ): "It is well established that the terms of a commercial contract are to be understood objectively, by what a reasonable businessperson would have understood them to mean, rather than by reference to the subjectively stated intentions of the parties to the contract. In a practical sense, this requires that the reasonable businessperson be placed in the position of the parties. It is from that perspective that the court considers the circumstances surrounding the contract and the commercial purpose and objects to be achieved by it."
5. If after considering the contract as a whole and the surrounding circumstances, the Court concludes that the language of a contract is unambiguous, then the Court must give effect to that language unless to do so would give the contract an absurd operation: Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295 at [73]-[75] (per Leeming JA, Gleeson and White JJA agreeing).
6. Clause 2 of the Loan Agreement specified when the loans were to be repaid, being "on initial receipt of funds from court case". The "court case" was not identified in the document but there is no dispute that the parties were referring to Mr Driver's court case concerning Botanical Water Technologies. The fact that repayment was to be made on "initial receipt of funds from court case" indicates that time for repayment arrived at the first opportunity, the moment any funds were received. The fact that the funds were received "from court case" rather than, say, from final judgment indicates that the obligation to repay arose whenever funds were received in relation to that litigation, including by way of commercial settlement. If Mr Driver did not receive funds from the court case as a result of a commercial settlement of the dispute at the mediation in June 2023 or November 2023, then the time for repayment has not yet arrived. As such, Mr Hartley is not presently entitled to judgment against Mr Driver.

AN EQUITABLE CHARGE?

1. In the event that Aurora is entitled to receive the redemption proceeds of Certificate No 3, Mr Hartley sought a declaration that Aurora had charged any right, title and interest that it held in the certificate in favour of AMHP and Mr Hartley to secure repayment of $7.5 million plus interest borrowed by Mr Driver. As such, AMHP and Mr Hartley were entitled as chargees to receive the payment of all entitlements which may be due to Aurora upon redemption of Certificate No 3 in satisfaction of Mr Driver's obligations to repay the said sum. By his email of 14 July 2023, Mr Driver was said to have implicitly requested that Mr Hartley defer action to recover the outstanding loans. Mr Driver intended by the terms of his email to immediately charge the redemption proceeds of Certificate No 3 in favour of Mr Hartley or AMHP. Acting on the faith of Mr Driver's statement of intention, Mr Hartley was said to have deferred recovery action against Mr Driver. Mr Driver has unconscientiously denied the existence of the charge. As such, Aurora held the benefit of the redemption proceeds charged with repayment of Mr Driver's debt.
2. Mr Driver contended that there was no charge over the redemption proceeds in favour of Mr Hartley, and certainly no charge in favour of AMHP, where it was no loans were advanced by AMHP and Mr Driver did not offer a pledge to AMHP in his email of 14 July 2023. Mr Driver's offer of a pledge was met with a counter-offer and thus rejected. There was no subsequent agreement but a series of offers and counter-offers. Mr Driver submitted that, in the case of a charge created as between creditor and debtor as security for repayment of a loan, including an equitable charge, there must be an agreement between the parties: Halsbury's Laws of Australia at [315-745]; Swiss Bank Corporation v Lloyds Bank Ltd [1980] 2 All ER 419 at 426 (per Buckley LJ). There could not be said to be an agreement here, but an offer by Mr Driver which was rejected by a counter-offer. Whether the parties intended to contract turns on the parties' intentions, objectively determined: Pudney v Man GHH Logistics (Victorian Court of Appeal, 13 December 1993, unrep) quoting Edward I Sykes and Sally Walker, The Law of Securities (5th ed, 1993, The Law Book Company Limited) at 196 ("The only actual requirements of the equitable charge seem to be … intention … the existence of definite ascertainable property … over which it is contemplated that the charge shall exist … and … consideration …").
3. In reply, Mr Hartley submitted that an equitable charge did not depend on the existence of a contract. What was vital was the chargor's intention to create a security in favour of the chargee over the property identified: Swiss Bank Corporation v Lloyds Bank [1982] AC 584 at 594-595 (per Buckley LJ). The only requirements for an equitable charge were intention, the existence of definitive ascertainable property over which it is contemplated that the charge would exist and, sometimes, consideration. Edward I Sykes and Sally Walker, The Law of Securities (5th ed, 1993, Law Book Co) (The Law of Securities) at 196 citing White v Conroy (1921) SR (NSW) 257. No particular formality was required to create an equitable charge, provided an intention to create the charge can be established: Peter Young, Clyde Croft and Megan Smith, On Equity (2009, Thomson Reuters) at [9.190] citing Cradock v Scottish Provident Institution (1893) 69 LT 380 at 382 (Romer J); see also In re Bank of Credit and Commerce (No 8) [1998] AC 214 per Lord Hoffmann at 226. The email from Mr Driver sent on 14 July 2023 evinced a clear intention to charge identified assets in favour of Mr Hartley. It satisfied the certainty requirement. The debt which the charge was asserted to secure was the admitted liability of Mr Driver to repay $7.5 million plus $2.5 million in interest, which has not been paid. It was beside the point that the parties and their solicitors never finally agreed on a formal document. This was analogous to a Masters v Cameron enquiry; a binding contract was formed with further terms to be worked out and recorded.

Consideration

1. The nature of an equitable charge was explained by Buckley LJ in Swiss Bank Corporation v Lloyd's Bank Limited [1982] AC 584 at 594: an equitable charge is "created when property is expressly or constructively made liable, or specially appropriated, to the discharge of a debt or some other obligation, and confers on the chargee a right of realisation by judicial process, that is to say, by the appointment of a receiver or an order for sale". This description was endorsed by Bathurst CJ (with whom Beazley JA and Tobias AJA agreed) in Roberts v Investwell Pty Ltd (in liq) [2012] NSWCA 134; (2012) 88 ACSR 689 at [27].
2. Whilst an equitable charge may be created by contractual agreement, it may also be created unilaterally from voluntary transactions: Patrick Parkinson (ed), The Principles of Equity (2nd ed, 2003, Lawbook Co) at 65. A charge may be created in a settlement, will or other instrument whereby property is expressly or constructively made liable or specifically appropriated to the discharge of a debt, or declared to be subject to a charge for securing the debt: Fisher and Lightwood's Law of Mortgage (15th ed, 2019, LexisNexis) at 82.
3. For example, in Countess of Bective v Federal Commissioner of Taxation (1932) 47 CLR 417, Dixon J observed that, when a gift is made to a person but subject to them paying money to another, "the provision takes effect as a charge … The second object of the disposition thus obtains proprietary and not merely personal rights, and is not left in danger of losing the intended benefit through the donee's electing to reject the gift with its attendant condition": at 419.
4. Another example is Toocooya Investments Pty Ltd (1978) 3 ACLR 252, where a company sent a letter to its solicitor, directing the solicitor to account to a bank with the settlement proceeds of a sale of property. Separately, the company director had assured the bank manager that the proceeds would be paid to the bank; the bank manager asked for an order on the solicitor and the director agreed. Needham J considered that the question was whether the chargor intended to divest the title to the property to the chargee, where no particular form of words is necessary: at 253. Nor was it necessary to specify the quantum of the charge, nor for the amount due at that date to have been ascertained: at 254. His Honour concluded that the company gave an equitable charge to the bank over the proceeds of sale, which I note was not granted under a contract between the company and the bank per se.
5. As the learned authors of Sykes & Walker, The Law of Securities, observe, an equitable charge over land may be created by words of present grant without contractual privity, as can also be done in relation to wills or by a direction in a deed: at 193. As the learned authors concluded at 196: "The only actual requirements of the equitable charge seem to be, first, intention; secondly, if over land, the presence of writing; thirdly, the existence of definite ascertainable property, even though future, over which it is contemplated that the charge shall exist; and lastly, in a few exceptional cases the presence of consideration; consideration would not save a purely oral agreement." This passage was endorsed by the Court of Appeal of the Supreme Court of Victoria in Pudney v Man GHH Logistics (Victorian Court of Appeal, 13 December 1993, unrep).
6. Whether an equitable charge has been created - by contract or otherwise - is a question of construction of the language used to create the security: Parkinson, The Principles of Equity, at 65. As Romer J noted in Cradock v Scottish Provident Institution (1893) 69 LT 380, "To constitute a charge in equity be deed or writing it is not necessary that any general words of charge should be used. It is sufficient if the Court can fairly gather from the instrument an intention by the parties that the property therein referred to should constitute a security": at 382. The intention to create an equitable charge may be expressed or may be inferred: Swiss Bank v Lloyd's Bank at 595 (per Buckley LJ). As Ward CJ in Eq put it, "an equitable charge is a creature of intention": Morris Finance Ltd v Free (2017) 18 BPR 37,223 at [30].
7. In this case, Mr Driver offered, in his email of 14 July 2023, to provide security for the loans until the loans were repaid in full, including to "pledge" his 50% shareholding in Aurora and to "pledge" his share of the "current retained profit and future profits held in Aurora under my name to you, currently $2 Million". The reference to the value of Mr Driver's share of retained profits as "currently $2 Million" makes plain that he was referring to the units the subject of Certificate No 3. As I read it, Mr Driver pledged the units in Certificate No 3, both to the extent that the certificate captured his half-share of Aurora's performance fee as at the date of his email and also additional units added in respect of future performance fees earned and reinvested in the Fund. Of course, both present and future property may be the subject of an equitable charge.
8. Mr Driver offered to provide this security "up until the loans are repaid in full". It is not necessary for an equitable charge to secure debt payable at a defined time. Rather, "the essential characteristic of an equitable charge [is] that the owner of the property assume[s] an obligation to deal with the specific property for the benefit of the creditor, so that the creditor ha[s] a security interest in the property, and can require that, when sold, the proceeds of sale [are] to be appropriated to the payment of the debt [owed] to the creditor": Amari Lifestyle Ltd (trading as Amari Super Cars) v Warnes [2017] EWHC 1891 (Ch); [2018] Ch 161 at [32] (Jourdan QC), quoted in Fisher and Lightwood's Law of Mortgage (15th ed, 2019, LexisNexis) at 83. As Atkin LJ stated in National Provincial and Union Bank of England v Charnley [1924] 1 KB 431, "there is a 'charge', even though the present legal right which is contemplated can only be enforced [at some future date]": at 449-450.
9. Mr Driver's intention is clearly expressed in his email. Mr Driver offered to "pledge", that is, to provide as security for the payment of the loans, his shares in Aurora and units in the Fund, which could be realised by Mr Hartley should the loans not be repaid. In cross examination Mr Driver said he was offering some things to try and give Mr Hartley some comfort, where the inference was that he was running away from his obligations, but that was not the case. Rather, Mr Driver said, "It's always been that I would repay Mr Hartley at the conclusion of the Court matter." Whilst Mr Driver might have had that understanding from the Loan Agreement, as earlier mentioned, that was not what Mr Driver had represented in his previous emails in respect of the first, second and third loans, nor what I have found he said to Mr de Wit when requesting the fourth loan. More likely, Mr Driver offered this security as he well knew that he had represented to Mr Hartley that the loans would be repaid by the end of July 2023, on the basis of which assurance Mr Hartley advanced him a further $1 million. Where that assurance could not be fulfilled, and to provide his creditor with a measure of comfort, Mr Driver offered his shares in Aurora and his units in the Fund as security for the repayment of the loans.
10. When examining the document said to create an equitable charge, it may be relevant to consider whether the document contemplated that another instrument would be executed in order to create the charge or whether, by executing the document, the chargor has done everything needed to confer rights on the chargee, such as the obligation to execute a further document in a form chosen by the chargee: Re Roberts; ex parte Australian Telecom Employees Credit Cooperative Ltd v Taylor (1982) 84 FLR 88 at [91] (Sweeney J). In his email, Mr Driver offered that the pledges "can be formally placed in a document drafted by a lawyer". In cross examination, Mr Driver agreed that he was talking about recording something between the parties to reflect his intention. As I read Mr Driver's email, he represented that his email alone amounted to a pledge but was also amenable to executing a further document if required to do so by Mr Hartley.
11. There was agreement between the parties that Mr Driver's shares in Aurora would be given as security for repayment of the loans. The only point of difference between the parties was how the security would be held, that is, whether Mr Driver's email of 14 July 2023 sufficed, potentially supplemented by a formal document, or whether the shares would be held by AMHP until the loans were repaid in full. Mr Hartley's response to Mr Driver's offered pledges was to propose that the Aurora shares be transferred to AMHP "for security", with "relocation of the shares [to] be determined in consultation once the debt is paid in full". Share transfer forms and a notice of resignation were provided to effect this proposal. Mr de Wit's action in forwarding Mr Driver's email of 14 July 2023 to the trustee on 1 August 2023 may be consistent with an acceptance that Mr Driver was not going to sign the share transfer forms or resign as a director of Aurora and thus informing the trustee that Mr Driver had pledged his shares in Aurora, and his interest in the Fund, to Mr Hartley.
12. I accept that the parties did not agree that the units in Certificate No 3 would also be security for repayment of the loans where - from Mr Hartley's perspective - Mr Driver had already agreed that those funds would be distributed to AMHP in compensation for another failed investment undertaken by Mr Hartley on Mr Driver's advice. Rather than take a charge over Mr Driver's units in Certificate No 3, Mr Hartley simply proposed to transfer those units to AMHP "in compensation as previously agreed" for the earlier failed investment.
13. The question remains whether, by his email of 14 July 2023, Mr Driver intended to create a charge over his units in the Fund. Did he make those units liable, or specifically appropriate those units, to the discharge of the loans and confer on Mr Hartley a right of realisation of that asset by judicial process: Swiss Bank at 594. I consider that the requirements of an equitable charge have been met. Mr Driver's email stated an express intention to do so. The equitable charge is recorded in writing, being the email. By his email, Mr Driver identified definite ascertainable property, including future property, over which the charge would exist. It is not clear whether consideration was necessary in the circumstances but presumably Mr Driver, an experienced businessperson, thought there was something to be gained by offering a wide package of securities, of which an equitable charge over his units in the Fund was but one. The language of Mr Driver's email was clear "To provide security against your loans and up until the loans are repaid in full, I offer you … [to] Pledge my share of the current retained profits and future profits held in Aurora under my name to you, currently $2 Million. …I genuinely want to give you comfort and security over the loaned amount …" I do not consider that it was necessary for Mr Driver's offer to be accepted for an equitable charge to arise, where Mr Driver was not then asking Mr Hartley for anything in return. As such, Mr Hartley is entitled to the relief sought in respect of the equitable charge.

WHAT TO DO WITH THE REDEMPTION REQUEST

1. Mr Driver contends that the trustee is obliged to redeem the units in Certificate No 3 in the amount of $1,696,472.17. An order is sought that the trustee do all things necessary to facilitate the payment to Aurora of the amount payable by the trustee to Aurora consequent upon Aurora having made the redemption request dated 29 November 2023 in respect of Unit 3 in the Fund. Further, Mr Driver contended that the redemption proceeds were payable to or at his direction, as the parties had agreed at the outset that the units in Certificate No 3 were those of Mr Driver whilst the units in Certificate No 4 were those of Mr Hartley. Mr Driver, as director of the plaintiff, issued a redemption notice in respect the units in Certificate No 3 only, and not those in Certificate No 4, consistently with this. The redemption proceeds for those units are those of Mr Driver. Alternatively, if all units were those of Aurora, then 50% of the redemption proceeds were payable to Mr Driver, presumably by dint of his status as a 50% shareholder in the company.
2. Mr Driver submitted that Aurora holds the units in Certificate No 3. Mr Driver is Aurora's sole director. Mr Driver submitted the redemption request to the trustee on behalf of Aurora and requested prompt processing. Mr Hartley's allegations to the contrary were ill-founded. Under cl 8.2 of the trust deed, the price payable on redemption falls to be determined at the next Withdrawal Date after the trustee receives the redemption notice, that is, the last business day of the month in which the notice was given (cl 1.1, definition of Withdrawal Date). As the redemption notice was served in November 2023, the relevant date for calculation of the withdrawal price is 30 November 2023. The withdrawal price calculated as at 30 November 2023 is $1,696,472.17. Under cl 7.2 of the trust deed, as from that date, the plaintiff is a creditor of the Fund in respect of that sum. In these circumstances, the appropriate order was for payment by the trustee of $1,696,472.17.
3. Mr Hartley contended that the trustee was not obliged to redeem the units in Certificate No 3. Mr Hartley sought an order that the trustee be permanently restrained from paying to Aurora any redemption entitlements attaching to Certificate No 3, together with a declaration that Aurora had no entitlement to receive the redemption proceeds. Mr Hartley contended that the redemption proceeds were not payable to or at the direction of Mr Driver.
4. The trustee did not take any position on this issue, save that it wished to be heard on the form of relief to make it clear what the trustee's obligations were, if any, following the trial.

Consideration

1. As to the procedures to be followed by unit holders and the trustee in redeeming units in the Fund, cl 7.1 of the trust deed provides that a Unit Holder may only withdraw from the Fund in accordance with cl 7 "and terms contained in any Offer Document." The Withdrawal Price of units is calculated in accordance with a formula set out in cl 8.1 of the trust deed. Clause 8.2 of the trust deed provides: "8.2 Determination of Withdrawal Price Each of the variables in clause 8.1 must be determined as at the next Withdrawal Date after the Trustee received (or is taken to have received) a withdrawal request."
2. Withdrawal Date is defined as the last Business Day of each month unless otherwise determined by the Trustee: cl 1.1. Beyond this, the trust deed says little on the subject of redeeming Units. The procedure for withdrawing from the Fund is largely set out in the Information Memorandum.
3. The Information Memorandum advised that redemptions were processed quarterly; requests must be received at least ten business days before the end of the quarter to be eligible for processing. The Information Memorandum advised that the redemption process was subject to notice periods, restrictions and suspension, with the risk of any decline in the Net Asset Value of Units during the period from the date of notice of redemption until the redemption day being borne by the Unit Holder. Further, there was no assurance that redemption proceeds would be distributed in a timely manner, as the Fund may be restricted in its ability to realise its investments to meet redemption requests, which may result in the late repayment of proceeds to Unit Holders: [5.10].
4. The Information Memorandum warned, "redemptions may be suspended or deferred in certain circumstances." Redemption risk was further detailed in [5.11]: "Where substantial Fund investments must be realised to fund a redemption request, the Redemption Price will generally be calculated on the value of the actual proceeds received from those realised investments. This value may differ from the estimated value of Units. … Where the Fund cannot sell its investments in a timely manner, there may be substantial delays in the payment of redemption proceeds, or in certain circumstances, the Fund may suspend redemption. In particular, the Fund's liquidity will be adversely affected where a counterparty to the Fund's investments defaults on its payment obligations to the Fund. Insolvency of such a counterparty may inhibit the ability of the Fund to pay redemption proceeds or may cause significant delays in doing so. The Fund may delay redemptions for a variety of reasons (see Section 8.5). Including where there is a circumstance outside the Custodian's control which it considers impacts on its ability to properly or fairly calculate the Unit price, the total redemption monies which would be payable pursuant to the redemption request(s) represent more than 25% of the Net Asset Value of the Fund, otherwise as the Trust Deed may contemplate, or such other circumstance as the Trustee determines to be appropriate in its absolute discretion having regard to the best Interests of Unitholders as a whole."
5. Clause 8.4 of the Information Memorandum provided that the trustee may take up to 25 days to pay redemption proceeds from the Valuation Date but, in unusual circumstances, payment may take longer. The payment of redemptions could be suspended by the trustee or delayed if the trustee considered it appropriate in the circumstances. Where Fund investments must be realised to fund a redemption request, the Redemption Price will generally be calculated on the basis of the value of the actual proceeds received from those realised investments: at [8.5].
6. There was no evidence that redemption of the units in Certificate No 3 posed any particular difficulty to the trustee, such as the need to realise substantial Fund investments, which may delay the payment of the redemption proceeds to the unit holder. But nor does it necessarily follow that the Withdrawal Price is the amount contended by Mr Driver of $1,696,472.17, where the trustee may "otherwise determine" the Withdrawal Date: cl 1.1, Trust Deed. The Information Memorandum states that the risk of any decline in the value of units between a redemption notice and the redemption day is borne by the unit holder: at [5.6]. Whether the trustee calculates the Withdrawal Price as at 30 November 2023 or when the units are ultimately redeemed is a matter for the trustee.
7. As to whom the trustee should pay the redemption proceeds, cl 20.3 of the trust deed provides: "20.3 Register conclusive Except where this Trust Deed or the law requires otherwise, the Trustee is entitled to treat the registered Unit Holder as absolute owner of the relevant Unit for all purposes. … the Trustee is not bound to recognise (notwithstanding receipt of any notice …) any equitable, contingent, future or partial interest attaching to any Unit."
8. Clause 4.7(c) of the trust deed provides that a Unit Holder may not create any Security Interest over a Unit without the consent of the Trustee, where Security Interest includes a charge. As such, the trustee is entitled to treat Aurora as the registered Unit Holder of Certificate No 3, notwithstanding the informal arrangement of treating that certificate as one to which Mr Driver is personally entitled.
9. Further, the fact that the trustee was notified that Mr Driver had granted an equitable charge over the units in Certificate No 3 in favour of Mr Hartley does not compel the trustee to recognise Mr Hartley's proprietary interest. Whilst the payment of redemptions can be suspended or delayed by the trustee if considered appropriate in a range of circumstances, none of those circumstances include the fact that redeeming the units will frustrate an equitable charge conferred by the unit holder on a third party.
10. There is nothing to prevent the trustee from paying the Withdrawal Price to Aurora in accordance with Mr Driver's request. The fact that, in doing so, Mr Driver will thereby circumvent the equitable charge which he has granted to Mr Hartley over the Units the subject of Certificate No 3 is no obstacle to the trustee proceeding down that path. But Mr Hartley has sought relief from the Court to prevent that eventuality. For the reasons already given, I am satisfied that Mr Hartley is entitled to such relief, to prevent the trustee processing the withdrawal request and thereby defeating his equitable interest in the units.

ORDERS

1. I am concerned that Aurora is apparently not registered for GST and has not prepared invoices or accounts to ensure compliance with its obligations to collect and remit GST or pay income tax. Where the shareholders of Aurora are deadlocked and the sole director of the company, Mr Driver, may not have access to the relevant documents to attend to these responsibilities, nor appears inclined to do so, I would be assisted by submissions as to why the Court should not appoint a liquidator to Aurora under s 461(1)(k) of the Corporations Act 2001 (Cth) and, in that event, who that liquidator ought be.
2. Where Mr Driver commenced these proceedings in Aurora's name, but apparently for his own interests, I would also be assisted by submissions as to whether Mr Driver should indemnify the company for the costs incurred in these proceedings.
3. For these reasons, I make the following orders: 1. Declare that the third cross-defendant, David Driver, is the beneficial owner of the Units in the Aurora Australasia Investment Fund Unit Trust (the Fund) described in Certificate No 3 (the Units). 2. Declare that Mr Driver has conferred an equitable charge over the Units in favour of the cross-claimants, Adam Hartley and AMHP Pty Ltd. 3. Order that the first defendant, Hunt Prosperity Pty Ltd trading as trustee of the Fund, be restrained, by itself, its servants or agents from processing the Redemption Request dated 29 November 2023, or any redemption request by or at the direction of Mr Driver in respect of Certificate No 3 in the Fund, absent the consent of the cross-claimants or order of the Court. 4. Parties to notify any errors or omissions within 7 days. 5. Parties to file and serve any submissions (limited to three pages) and affidavits as to costs within 14 days, such issue to be determined on the papers. 6. Parties to file and serve any submissions and affidavits within 14 days as to whether the Court should appoint a liquidator to the plaintiff, Aurora Australasia Pty Ltd, under s 461(1)(k) of the Corporations Act 2001 (Cth), together with any consents signed by a proposed liquidator. 7. Liberty to apply in respect of Order 3 and Order 6.

Amendments 23 August 2024 - [155]: Order 6 to include "within 14 days" 26 August 2024 - [1]: Businessman amended to businessmen. 26 August 2024 - Coversheet: AL Connolly DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 26 August 2024