These proceedings are a protracted dispute between, in substance, two individuals in connection with a company called Life Order Products Pty Ltd (Company) which has since been deregistered. Those two individuals are the first plaintiff, Mr George Dimitrovski and the first defendant, Mr Brian Boland.
The substantive dispute concerns the governance and operation of the Company after George, putting it neutrally, became involved with the Company. This judgment determines a separate question which I ordered to be heard in order to resolve the plaintiffs' standing to bring these proceedings before further money and time is spent on preparing the substantive dispute for hearing. Without any disrespect intended, I will refer to George by his given name to distinguish him from his late father, Mr Kosta Dimitrovksi, another alleged protagonist in this dispute. Without any disrespect intended, I will also refer to Kosta by his given name.
The plaintiffs are the administrators of the estate of George's late sister, Ms Susan Vasil and they sue in that capacity. The claim they wish to prosecute depends upon the proposition that 500,000 shares in the Company were at all material times held by George on trust for Ms Vasil, such that those shares and any rights of action derived from their ownership are now assets of the estate. The separate question is whether the plaintiffs are entitled to a declaration that at all material times George held the shares on trust for Ms Vasil.
The current iteration of George's case (I shall refer to it as such because he is clearly the driving force behind the litigation) is that the shares were paid for by Kosta, who on 4 August 2004 is said to have made an oral declaration settling the shares on George to hold them as trustee for Ms Vasil and later that day informed Mr Boland of that arrangement. Mr Boland denies this and contends that George was the beneficial owner of the shares and, as such, in accordance with an earlier decision of this Court concerning the effect of George having been bankrupt, that is the end of any dispute in relation to the shares.
From my observation of both George and Mr Boland giving their evidence, there is absolutely no love lost between them. That animosity coloured the evidence of both men, which evidence was directly contradictory on essential points. Faced with those contradictions, the case turns on a number of documents and the extent to which they are consistent or inconsistent with the respective narratives.
For the reasons which follow, the Court does not accept George's case. Those reasons may be summarised in three general propositions. First, the plaintiffs bore the onus of proving the alleged trust. Second, there are a number of different documents inconsistent with George's case (and consistent with Mr Boland's) and the Court has found George's attempts to explain the inconsistencies to be completely unconvincing. Third, there is one category of documents inconsistent with Mr Boland's defence (ASIC returns for the Company), but the Court accepts Mr Boland's explanation for the inconsistency, being his erroneous understanding of the concepts of beneficial and non-beneficial ownership.
It follows from these three propositions that the plaintiffs have not satisfied their onus of proof. Furthermore, this is not a case where George's evidence was of a kind that could be explained as the product of faulty recollection. The Court finds his evidence of the alleged trust must have been false to his knowledge, a concoction produced to overcome the effect of his bankruptcy in order to maintain his pursuit of Mr Boland. The Court answers the separate question: "The plaintiffs are not entitled to the declaration sought in prayer 4A of the fourth further amended statement of claim".
At the hearing of the separate question, Mr M Bennett of Counsel appeared for George and the second plaintiff, and Mr G McDonald of Counsel appeared on behalf of Mr Boland and the other defendants. At the conclusion of the evidence, both counsel requested time to prepare written closing submissions. The parties also agreed that the Court should then determine the separate question on the papers.
[2]
Procedural history
George and Ms Vasil, as first and second plaintiffs respectively, commenced these proceedings by a statement of claim filed on 4 June 2021 (the original claim). The first and second defendants were Mr Boland and his wife, Ms Helen Boland. The fourth defendant was Avid Business Pty Ltd, a company controlled by the Bolands. As initially constituted, the proceedings also involved Mr Murray Reid, who was the Company's accountant, as third defendant. The proceedings have been discontinued as against Mr Reid.
The original claim has some distinctive features, both procedural and substantive. George conceded in cross-examination that he had filed it. No solicitor is identified in the document and the contact is given as George with his mobile telephone number. However, the original claim is apparently signed by Ms Vasil "for the Plaintiffs". There is an affidavit verifying the pleading sworn by Ms Vasil as the second plaintiff. This is followed by a further affidavit verifying the pleading sworn by Ms Vasil, but commencing "I am the second plaintiff and am authorised to depose this affidavit on behalf of the first plaintiff". In other words, there is no affidavit verifying the pleading sworn by George himself.
The original claim raised a litany of allegations against the defendants including claims of misleading and deceptive conduct, unconscionable conduct, and claims for damages including an alleged tortious conspiracy. It sought relief under the Australian Consumer Law, the Corporations Act 2001 and at law and equity. Notably, the first, unparticularised averment is:
"1. At all material times between 2004 and 2016 the Plaintiffs were the owners of shares in Life Order Products Pty Ltd [the company] a company established by [Mr Boland] and at all material times controlled by him and the interest of [Ms Vasil] was by way of a declaration of trust in her favour by [George]." (emphases added)
The original claim goes on to allege (paragraph 5) that "[George] invested in the company between 2004 and 2009 with respect to shares in the company by paying $500,000 to the company for the issue of 500,000 shares…". (emphases added) The first particular of loss is that "[George] has lost his investment in the company of $500,000". (emphasis added) Other specific financial loss claims are brought only by George. Ms Vasil's damage appears to be confined to "personal injury" caused by "distress, personal shock and trauma…disappointment" (particulars 7(e) and (f)) and "physical or psychiatric damage" (paragraph 52).
From the matters set out in the preceding two paragraphs, George's case in the original claim was:
1. Both he and Ms Vasil beneficially held shares in the Company;
2. Ms Vasil's interest was through George holding shares in the Company on trust for Ms Vasil;
3. George had declared whatever trust there was; and
4. George had paid the $500,000, which investment was part of his loss.
As will become apparent, this is a materially different case to that which George now seeks to propound in support of the declaration the subject of the separate question.
On 30 July 2021, the defendants filed a notice of motion seeking orders in the alternative that the original claim be summarily dismissed pursuant to r 13.4 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) or that the proceedings be struck out pursuant to r 14.2 of the UCPR. On 22 October 2021, Justice Lindsay made orders dismissing the proceedings brought by George, and striking out the claim as it related to Ms Vasil but permitting her leave to replead her claim.
As summarised by Justice Meek in Vasil v Boland [2022] NSWSC 1534, Lindsay J dismissed George's claim because George had been made bankrupt after the dates on which the various alleged causes of actions accrued such that the property in those actions vested in his trustee in bankruptcy. George was made bankrupt on 9 December 2013 and was discharged by operation of law from that bankruptcy on 1 December 2016.
On 10 December 2021, Ms Vasil filed an amended statement of claim. The defendants filed another motion on 12 July 2022 seeking the same relief as they sought in their 30 July 2021 motion. That motion was heard by Justice Meek on 4 November 2022 and was the subject of his Honour's judgment in Vasil, delivered on 10 November 2022. In that judgment, his Honour noted that the amended claim was similar to the original claim with the only real change being that references to George were deleted and modified to refer to Ms Vasil instead.
His Honour declined to dismiss the proceedings summarily, but struck out the statement of claim because the limited "edits" failed to respond to the issues identified by Lindsay J and his Honour's observation that the claim needed to be recast. At [139] of that judgment, his Honour decided that Ms Vasil should be provided a further opportunity to replead:
"[139] I am satisfied that the dictates of justice favour an opportunity being given to Ms Vasil to further amend the pleading. Any such amendment or reformulation of the pleading should distinguish clearly between the claims brought by Ms Vasil in her own right and those brought allegedly as beneficiary of the trust. In relation to claims brought as beneficiary of the trust Ms Vasil should address who as between the trustee and herself as beneficiary are actually authorised to bring such claims within the locus standi principles."
Ms Vasil died at some time between 21 and 23 February 2023 . On 16 August 2023, Ms Nada Boceska (Ms Vasil's and George's sister) and George were appointed joint administrators of Ms Vasil's estate.
On 9 and 26 October 2023 in the Applications List, I heard a motion filed by the plaintiffs seeking leave to file a third further amended statement of claim. They were represented at that hearing by Mr N Allan of Counsel. I also heard a competing notice of motion filed by the defendants on 14 February 2023, part of which had been heard by Justice Henry, seeking a strike out or summary dismissal of what was then the second further amended statement of claim. The proposed third further amended statement of claim abandoned the claims sought in the original claim and discontinued the proceedings as against the then third defendant, Mr Reid.
It is convenient to explain what happened during the hearing of those motions by reference to the reasons I delivered (Dimitrovski v Boland [2023] NSWSC 1371):
"6. During the course of the hearing of those motions before me, the plaintiffs were given an opportunity, with the assistance of Mr Allan of Counsel, to replead the proposed third further amended statement of claim, recognising that whatever cause of action was sought to be prosecuted had to be a cause of action which belonged to Ms Vasil's estate. That has now been done, and a document described as "Proposed (Third) Statement of Claim" has been propounded.
7. What is important to note for present purposes is that all of the claims brought in previous iterations of the pleadings by George have now been abandoned. An entirely new claim has been pleaded which, if allowed to proceed, is a derivative claim proposed to be brought on behalf of the Company against the defendants (other than Mr Reid, for reasons which I will shortly explain) alleging dealings with the assets of the Company said to be in breach of fiduciary duty, or receipt of property pursuant to such alleged breaches, by the defendants (other than Mr Reid). Before those proceedings can be prosecuted, it will be necessary for an application to be brought for leave to reinstate the Company, and then to bring the proceedings on its behalf. …
10. Turning to the balance of the proposed pleading, on its face it discloses potential causes of action in relation to the affairs of the Company. However, there is a necessary anterior question before even an application to reinstate the Company can, or should be allowed to, be brought. That question is whether or not these proceedings can be brought by Ms Vasil's estate at all. There is a hotly disputed question between the parties as to whether or not George ever held shares in the Company on behalf of Ms Vasil.
11. By reason of facts alleged in paragraphs 5 to 9 of the "Proposed (Third) Statement of Claim", it is said that Mr Dimitrovski held 500,000 ordinary shares in the Company on trust for Ms Vasil. If that proposition is not accepted as a matter of fact, then Mr Allan candidly accepted that the entire repleaded claim must fail, for want of standing on behalf of the estate of Ms Vasil.
12. Because an application to reinstate the Company and for leave to bring proceedings on its behalf will be necessary, and if granted would then result in a trial of the causes of action alleged against the defendants, I came to the view that the just, quick and cheap way of dealing with these proceedings, given their long and tortured history, is that there should first be a separate question determined as to the nature of Mr Dimitrovski's ownership of shares in the Company. Mr Allan made no submission against that course, and neither did the defendants. There seems to me to be a great deal of utility in that question, which raises discrete factual matters, being determined first because if it is determined adversely to the plaintiffs, that will be the end of the proceedings."
On that occasion, I allowed the third further amended statement of claim to be filed but required George to pay the defendants' costs thrown away by reason of the amendment on the indemnity basis. I held that the complete abandonment of the claim was sufficient to engage the principle in relation to indemnity costs that the plaintiffs knew, or ought to have known, with proper advice, that the claim which they had abandoned was hopeless.
Critically for present purposes, the third further amended statement of claim at paragraph 4A seeks a declaration "that at all material times the first plaintiff [George] held 500,000 ordinary shares in the company, Life Order Products Pty Ltd, on trust for Susan Vasil". I therefore also made an order pursuant to UCPR Pt 28 r 28.2, that the plaintiffs' entitlement to the declaration sought in paragraph 4A of the relief claimed in the third further amended statement of claim be determined separately and before the determination of all other questions in the proceeding.
The separate question was initially set down for hearing on 11 March 2024, but due to a series of, in my view, avoidable procedural delays by the parties that hearing date was rescheduled to 25 July 2024. On 6 May 2024, the plaintiffs sought leave to file a fourth further amended statement of claim. I allowed that amendment but only on the basis that the amendment was limited to refining the pleading as to matters related to the separate question. That fourth further amended statement of claim was filed on 17 May 2024 (under the title "revised fourth further amended statement of claim") and was the originating process on which the separate question was heard.
The relevant parts of that pleading said to support the declaration in paragraph 4A are:
"5 On or about 19 August 2004 Mr George Dimitrovski:
5.1. became a member and shareholder in the company; and
5.2. began to hold the benefit of those shares on trust for Susan Vasil.
Particulars
vii. The company issued to Mr George Dimitrovski 500,000 ordinary shares valued at $1 each. The ASIC form providing for the issue of those shares is dated 10 August 2004. ASIC recorded the share issue as 'effective' on 19 August 2004 with 100.000 paid shares and 400,000 unpaid shares as at that date.
viii. Declaration of trust over half the (planned) shareholding on or about 4 August 2004 at the Vasil family home at Thirroul in the company of Kosta Dimitrovski, George Dimitrovski and Susan Vasil. Declaration of the balance of the shares being held on trust in about August - September 2005.
6. The trust referred to in paragraph 5 arose when Mr George Dimitrovski's and Ms Susan Vasil's father, Kosta, stated to them that:
6.1. The shares in the company that he was were to be acquired, being 250,000 500,000 ordinary shares, would instead be acquired and held in trust for Ms Susan Vasil; and
6.2. Those shares would be paid for using his half share of the value of George Vasil Pty Ltd (which he so owned) from the sale of shares owned by Kosta with the 500,000 ordinary shares to be purchased being a gift to Susan
6.3. The real estate business operated by George Vasil Pty Ltd would be sold to release its value and pay for those shares George Dimitrovski and Susan Vasil from their current employment at Bevan's Thirroul so they could be employed by the company.
6.4. Mr George Dimitrovski would be appointed trustee of the trust over the 250,000 500,000 shares which Kosta Dimitrovski otherwise himself paid for and to be held in trust for Ms Susan Vasil.
Particulars
ix. Kosta Dimistrovski co-owned George Vasil Pty Ltd with Mr Dimitrovski
7. In about August - September 2005 Mr Dimitrovski began to hold the benefit of the other half of his shareholding on trust for Susan Vasil.
8. The trust referred to in paragraph 7 arose when:
8.1. George Vasil Pty Ltd was sold in 2005 for less than its expected sale price;
8.2. Mr Dimitrovski stated to Kosta and Ms Vasil that the 250,000 ordinary shares in the company, which he had acquired in his own right, were also held in trust for Ms Vasil.
Particulars
x. Mr Dimitrovski took responsibility for the unexpectedly low sale price for George Vasil Pty Ltd, which had left his father without a return on his guarantee and shareholding in that company. The sale price had been renegotiated with the purchase, to save the sale, after an employee's embezzlement of funds was discovered. Mr Dimitrovski responded by saying his half share of the acquisition of shares in Life Order Products Pty Ltd should be held by Ms Vasil
9. The result of the two declarations of trust, referred to in paragraphs 5 to 8 6, was that Mr George Dimitrovski began to hold 500,000 ordinary shares in the company on trust for Susan Vasil.
Particulars
xi. There were no qualifications placed upon that trust relationship."
[3]
Summary of material facts and evidence
The Company was incorporated on 15 February 1996 and was initially known as 'Design Works International Pty Ltd'. The Company was set up to produce office related products which were intended to be sold world-wide. On 26 October 2001 the Company's name changed to 'West-Tec Pty Ltd' and was changed again to 'Life Order Design Pty Ltd' on 19 February 2003. The company was finally referred to as 'Life Order Products Pty Ltd' from 19 May 2006. Based upon a 2001 ASIC return for the Company, there was an original shareholding by Mr Boland and Ms Boland of one share each. These are recorded as beneficially held, there being uncontradicted evidence that the relevant entries were made by the Company's accountants based on instructions given by Mr Boland that he and his wife owned the shares personally.
Mr Boland is an entrepreneur with expertise in industrial design. His affidavit dated 22 February 2024 contained an outline of his resume:
"3 I was awarded a degree in Industrial Design in 1984, and I have built a 40 year career in new product R&D, Design & commercialisation. Highlights listed chronologically 1984 -2004:
Worked one-on-one undertaking 15 or more R&D/Design projects with much honoured, Designer Paul Martin Schremmer, OAM, founder of Paul Schemmer &Associates Pty Ltd
Designer/Projects Manager with distinguished, multi-award-winning Design & Industry Pty Ltd.
R&D/Engineering Manager - 70 employees co. Caelair-Malmet Pty Ltd.
Academic at the University of Western Sydney (UWS)…
Co-Director with Professor Trevor Cairney, UWS Pro Vice Chancellor, OAM, President NSW Business Chamber, in product R&D co. West-tech Research & future Products Pty Ltd, remained personal friends.
R&D Manager of UWS joint-venture co. West-tech Research & future Products Pty Ltd, remained personal friends.
R&D Manager of UWS joint-venture co. West-tech Research & future Products Pty Ltd.
Designed, manufactured in China, co-branded with US$1billion co. Felllowes inc. USA, sold my own product FOB China by 20' and 40' container shipments through retail chains in USA, EU and Australia and via the world's largest TV home-shopping channel QVC, USA"
Prior to his involvement with the Company, George worked as a real estate agent in Thirroul. It was while working as a real estate agent that he met Mr Boland, who at the time was looking for a property in Thirroul to rent for his family. In 2003, Mr Boland and his family became tenants of a property that George's real estate agency was managing. Throughout the course of 2003-2004 George and Mr Boland developed a professional relationship.
George alleges that on 23 July 2004, Mr Boland invited George into his home to present an office storage invention that he (Mr Boland) had developed and offered George an opportunity to invest $500,000 for a 25% stake in the Company. George purportedly informed Mr Boland that he did not have the personal funds to invest in the Company but he would speak with his father about whether he could contribute the requested funds. It is Mr Boland's contention that George came to the company's registered office unannounced and asked to see the prototype office products the Company was designing. It is unnecessary for the Court to determine this factual dispute. It is sufficient for present purposes that the parties accept that they met and discussed the Company in late July 2004.
Mr Boland says that George was the one who offered to pay the $500,000 for a 25% stake in the Company. It is again unnecessary for the Court to determine who made the offer to invest in the Company. It is sufficient that the parties accept that the agreement was that George would pay $500,000 for a 25% stake in the Company. The Heads of Agreement (HOA) signed on 4 August 2024 sets out the arrangements between them.
According to George's 29 January 2024 affidavit, between 23 July 2004 and 4 August 2004, George had several discussions with Kosta and Ms Vasil about investing $500,000 for a 25% shareholding in the Company. According to George, at some point during this period he allegedly had the following conversation with his father:
"[31] After 23 July 2004 and before 4 August 2004 I had various discussions with my father and sister Susan about an investment of $500,000 for a 25% shareholding in Mr Boland's company Life Order Design Pty Ltd.
[32] During these various discussions after 23 July 2004 and before 4 August 2004 my father and I said words to the following effect:
Kosta said, "Is this investment going to be a passive investment or are you going to work for this company".
I said, "Brian has stated I would be able to travel the world doing business for the company" .
Kosta said, "How you can you travel the world when there is our real estate business to be run."
I said, "We could sell the real estate business"
Kosta said, "What, Susie works there what would she do"
I said, "Susie could be involved in this investment"
Kosta said, "I could sells some shares over time to obtain the five hundred thousand dollars to be invested in this company.
I said, "Who would be the shareholder"
Kosta said, "I have always intended to give the girls five hundred thousand dollars each basically from my lotto win especially as I have helped you in business."
I said, "They would both appreciate that gift."
Kosta said, "The shares in this company would be a gift to Susie and you could hold the shares on trust for her."
I said, "We will need to discuss this with Susie particularly if we are going to sell the real estate business"."
According to George, on 4 August 2004, Mr Boland met with Kosta, George and Ms Vasil at Kosta's home in Thirroul to explain the investment. An agreement was reached for Kosta and George to invest in the Company. After this conversation, Mr Boland left Kosta's home to prepare the HOA. It was during this time that George alleges that Kosta said words which established that George would hold the shares on trust for Ms Vasil:
"Kosta said, "Susie, I am going to sell some of my shares and gift the proceeds to you so that you will have five hundred thousand dollars to invest in this company of Biran Boland so that you can have an investment and career, you will be the owner of the shares and George will hold them in trust for you"
Susan said, "George, are you ok with this and being a trustee for me"
I said, "Yes but we will need to sell Bevans so that we both have time to work for this company."
Susan said, "Ok I agree to be involved in the company because Mr Boland has made it sound so exciting.""
(see Affidavit, George Dimitrovksi, 29 January 2024 at [37])
George also alleges that when Mr Boland returned to Kosta's home to sign the HOA, Kosta informed Mr Boland that George would hold the shares on trust. For the reasons at [128] below, the Court is not satisfied that Kosta ever declared that George would hold the shares on trust or ever told Mr Boland that George would be holding the shares non-beneficially.
The HOA was in evidence. According to Mr Boland the HOA was signed at the Company's office and not at Kosta's home. Mr Boland denies ever visiting Kosta's home on 4 August 2004. Based on the credibility findings at [128]-[132] below, the Court prefers Mr Boland's evidence that the HOA was signed at the Company's registered office.
The HOA was a typed one page document, with the exception of the handwritten addition "OR PERHAPS SOONER BY AGREEMENT" :
"HEADS OF AGREEMENT
for
EQUITY SHARE IN LIFE ORDER DESIGN PTY LTD
This Heads of Agreement is made as of 4 August 2004 by and between Brian Boland Managing Director of Life Order Design Ply Ltd [Australian Company number 072882476] and George Dimitrovski of Thirroul NSW.
PREAMBLE
The parties have been business acquaintances over the past three years and more recently have become personal friends. The parties are therefore well acquainted and have a good general knowledge of each others business experience and business activity. The parties wish to formalise a business relationship within Life Order Design Pty Ltd.
LIFE ORDER DESIGN
Ownership: Brian Boland 80% shareholding , Prof. Craig Bremner I0% shareholding, Andrew Crick I0% shareholding.
Director: Brian Boland (Managing Director), Prof. Craig Bremner, Andrew Crick. Products: Four products off tool and 6 additional products at various stages of development
Patents: Intellectual Property for all products is 100% owned by Life Order Design Pty Ltd.
Business Objective: Creation of a unique range of Office and home products for direct sales to major retailers in Australia, USA and Europe.
EQUITY SHARE AGREEMENT
Life Order Design wishes to grant, and Dimitrovski wishes to accept 25% ownership of Life Order Design Pty for the purchase price of $500,000 Australian Dollars. It is hereby agreed:
i.) Dimitrovski will acquire 25% of Life Order shares for Aus$500,00
A first payment of $100,000 will be paid into the company account within 14 days.
The balance of $400,000 will be paid in installments to be agreed by the parties
ii.) Dimitrovski will take up a directorship with full voting rights
iii.) Dimitrovski will take up the executive position of : Director - Marketing & Sales Life Order will introduce all contacts and assist Dimitrovski work into the position
An executive salary will be paid after 12 months OR PERHAPS SOONER BY AGREEMENT [initials adjacent]
Signed in agreement:
Brian Boland
George Dimitrovski"
George also alleges that on 4 August 2004, a photograph of Ms Vasil holding a product of the Company was taken. This photo was later used in marketing material which used the 'Life Order Design' logo. Mr Boland's evidence was that the photo was taken in mid 2005 or 2006 and that he was the person that took the photo. It was explained by Mr Boland that Ms Vasil had to be used because the model George had hired for the promotional photo had 'hairy fingers' (Tscpt 29 July 2024, p. 116(15)-(31)).
It is George's case that the promotional material using the 'Life Order Design' logo establishes that the photo was taken in 2004 because the Company's name had changed on 19 May 2006 to 'Life Order Products Pty Ltd'. As such any material using a photo taken in 2006 should have used the 'Life Order Products' logo The photo being taken in 2004 at Kosta's house was submitted by Mr Bennett to establish that Kosta did declare a trust on 4 August 2004 and told Mr Boland about the trust. It was put to Mr Boland by Mr Bennett during cross-examination that the marketing material using the old 'Life Order Design Pty Ltd' logo proved the photo was taken in 2004. Mr Boland reiterated that the photo was taken around 2005-2006 and that the use of the old 'Life Order Design' logo was merely a mistake.
In my respectful view, when the photo was taken is relevant to no more than the possibility of whether or not Ms Vasil was present on 4 August 2004. Beyond that, it is of no weight on the question of whether Kosta ever declared the trust alleged by George. In any event, George's own affidavit evidence does not suggest that Ms Vasil was present when the HOA was signed and Kosta allegedly told Mr Boland about the trust arrangement.
Furthermore, George's evidence in his affidavit of what Kosta is alleged to have told Mr Boland is no more than:
"Kosta said, "Ok the shareholder will be George but not beneficially he will be holding the shares in trust"
Mr Boland said, "Ok"."
It is significant that there is no suggestion Kosta said for whom the shares would be held in trust. In my respectful view, the conversation is inherently improbable for at least two reasons, given the context of Mr Boland having returned with the HOA, to which George was the relevant party and in its terms concerned George alone. The chapeau and preamble put beyond doubt that the parties to the HOA were George and Mr Boland in their own respective rights. George holding the shares for a third party would be a materially different transaction to that set out in the HOA. First, it is inconceivable that Mr Boland would not have asked who the beneficiary was. Second, it is equally inconceivable that had he been told that George was holding the shares in trust for Ms Vasil (or anyone else), that he would not have recorded that in the HOA, even by handwritten notation, noting that there was already one other handwritten interpolation in the document.
To return to the photo, based on the matters to which I have just referred and the findings at [148-[149] below that the objective evidence demonstrates that Kosta did not declare a trust over the shares in August 2004 and the credibility findings at [128]-[132] below, the Court finds that the photo was taken around 2005-2006.
Bank statements in evidence demonstrate that between 20 August 2004 and 1 March 2007, $500,000 was paid to the 'Life Order Design Pty Ltd' bank account from a bank account named 'Kosta Dimitrovksi and George Dimitrovksi and Shano Developments Pty Ltd' (which George's affidavit evidence somewhat misleadingly refers to as the "Kosta Transaction Account"). That source is equally consistent with George or Kosta paying their money from that account. There is no documentary evidence as to whether it was George's or Kosta's money that was deposited into that account to provide the funds used to pay for the shares.
On 10 August 2004, Mr Boland signed and subsequently filed an ASIC Form 484 entitled 'Change to Company Details' which was intended to record the changes to the Company's shareholding structure. However, that document failed to specify the number of shares held by each member of the Company and whether or not they were fully paid and/or beneficially owned. On 27 August 2004, Mr Boland received a letter from ASIC requesting he amend the form dated 10 August 2004 and insert the missing details.
Mr Boland subsequently signed and filed an amended ASIC form which recorded George holding 500,000 shares in the Company 'non-beneficially' by answering "No" to the question "Beneficially held (y/n)". Significantly for present purposes, Mr Boland also recorded his own shareholding of 1,100,002 shares, the 200,000 shares of Professor Bremner and the 200,000 shares of Mr Crick as all being held non-beneficially. That remained the position on the public record until the Company was deregistered, a fact I infer from both a historical search for the Company as at 7 April 2014 which continued to show that, and the absence of any evidence of a change to the record prior to the Company's deregistration on 10 July 2016. There was no suggestion that Mr Boland's shares were in fact held other than beneficially and there was uncontested evidence in the form of a short affidavit from Mr Crick that his shares were never the subject of any trust.
Kosta made a will on 15 December 2004. After a specific gift of cash to his grandson, Kosta left the residue of his estate 25% to Ms Boceska, 50% to George and 25% to Ms Vasil. Ms Vasil's share was to be held pursuant to what was described as a "protective trust" for her maintenance, advancement and support including the provision of accommodation. The nominated executors were George, together with Kosta's accountant and solicitor.
On 19 September 2005, a meeting of the directors of the Company occurred. The meeting minutes were typed by Mr Boland. It was accepted that two of the directors, Mr Crick and Professor Bremner, were not present at that meeting, which was chaired by George (known at that time as Mr Vasil). Mr Boland explained during cross-examination that Mr Crick and Professor Bremner were not present because the meeting was called in haste.
The preamble of the minutes explained why the meeting had been called:
"The meeting was called by George Vasil following advice from his family associate 'Nick' not to proceed and invest the balance of funds required under agreement signed and dated 4 August 2004. Nick's advice to Vasil followed from an altercation between 'Nick' and Boland when Boland invited 'Nick' and his wife and their two children to a non business related/social dinner at Boland's home. This incident was articulated by 'Nick and Nick's wife' upset the Vasil family and 'they' determined that George Vasil might not invest the balance of the funds required under the agreement."
Section 3 of the minutes summarised discussions concerning 'Company Governance'. Under that heading, the following appears:
"Mr Boland stated that the directors are responsible for governance of Life Order Design Pty Ltd.. - not family, friends or associates outside the company. He urged Vasil to treat company finances and strategy as confidential to the directors."
Mr Boland rejected the proposition during cross-examination that the reason why he used the word 'they' in the sentence 'this incident was articulated by 'Nick and Nick's wife' upset the Vasil family and 'they' determined that George Vasil might not invest the balance of the funds required under the agreement' was because Mr Boland knew that George held his share on trust for Ms Vasil.
Mr Bennett also challenged Mr Boland as to whether the references to 'family' in the minutes had anything to do with Kosta and Ms Vasil. Mr Boland explained that the 'family associate' 'Nick' was the family plumber who was also George's godfather, and who had gone to Kosta with the warning that 'Boland is going to shaft you'. Mr Boland's evidence was that the references to family did not have any significance which extended beyond that and did not relate to any trust arrangement the Dimitrovski family had in relation to the shares.
The minutes then record "after a fulsome discussion of all issues" - but nowhere referring to George's alleged status as a trustee - various resolutions, including:
"3. Dividends paid
Dividends will be paid in accordance with Life Order Design Memorandum and Articles of Association [the 'constitution']. However the directors agree to assist George Vasil will [sic] external cash flow pressures and will endeavour to pay maximum dividends as soon as is practicable.
4. Ownership
It was confirmed that no change would be made to ownership and shareholding unless with the written agreement of both Brian Boland and George Vasil."
The Court accepts Mr Boland's rejection of the propositions put to him by Mr Bennett about the minutes. Furthermore, in my respectful view, both the dividends and ownership resolutions are inconsistent with George being anything other than the beneficial owner of the shares. If he was bare trustee of the shares for Ms Vasil, it would make no sense to assist George with his "cash flow pressures" by paying him dividends which would be the beneficial property of Ms Vasil. Similarly, the tenor of the ownership resolution is an agreement between absolute owners of their respective parcels of shares.
On 24 March 2009, George (or Mr Vasil as he was then known) sent this email to Mr Boland:
"Brian, will you please consider my exit from Life Order Products.
If they are acceptable to you, can you please ask David Lin or Herschel or Britt or maybe Nunzio if they would be interested in purchasing my 25% shareholding in Life Order Products.
If they ask why, tell them for health reasons." (emphases added)
In cross-examination George said that around this time he had been suffering from anxiety and depression. As the following extract from the transcript shows, George disputed that he was seeking to leave the business for "health reasons":
"Q. And the reason why you needed to exit the investment was because you had the problems and the stresses that you've just mentioned, and therefore‑‑
A. No, no, no.
Q. Sir, you had the problems and stresses that you just mentioned to his Honour?
A. But I wasn't exiting any business. I was trying to get a way out of our debt. I wasn't exiting any business. We were trying to hold onto our properties. We were trying to hold onto this company, trying to make it work. But it became obvious that Mr Boland wasn't.
Q. Now, sir, when you said, "I want to consider my exit from Life Order Products‑‑"
A. That's what I told him. That's what I told Mr Boland. But the truth of it is that $500,000, if these parties ‑ you need to read that whole email. I'm asking him to contact his friends, who he had introduced me to previously, that knew that I was involved in the company. If I was to say, "Brian, call David Lin, the Chinese manufacturer, and tell him, you know, our trust wants to exit because, you know, the business, you know, you're just not driving this business," he wouldn't have done that. But this was a way to get them involved in the company. If it was going to be so great, then they would have invested. So David Lin is a Chinese manufacturer. Hershel is a US marketing guy. Same with Brit. Nunzio was apparently a billionaire friend of Mr Boland's who came up with some satellite technology. So I asked him to be specific about contacting them so we can get some money back, and they take the shareholding. They didn't know ‑ they didn't need to know who the shareholder was. All they needed to know was George wanted to exit (Tscpt 25 July 2024, p. 89(14)-(36)."
Mr McDonald put it to George that the contents of that email were not true. I asked George what he was intending to do with the money had the shares been sold. George said that he would 'saved his father's home' because he said Kosta's home had been mortgaged in 2008, based on his cash flow that predicted 'we' (a reference to whom is unclear) were to have $32 million in sales the next year. I asked George how this proposed conduct was consistent with George's case that would have required the share sale proceeds to go to Ms Vasil. George's answer was that his father's house was pledged to his sister (Tscpt 25 July 2024, p. 90(26)-(34).
On 11 June 2009, following a meeting of directors, the Company was declared insolvent. The company ceased trading on the same day.
On 9 December 2013, George became bankrupt. His trustee was originally the Official Receiver, but the administration was transferred to Mr Daniel Cvitanovic. This was because Mr Cvitanovic was already Kosta's trustee in bankruptcy.
George completed and signed a Statement of Affairs on 16 December 2013. In response to the question 'Do you own, or are you entitled to any shares, options, rights convertible notes or other securities' George marked 'no'. George defended the veracity of that declaration in cross- examination (Tscpt, 25 July 2024, p. 72(19)). However, in response to a question 'Do you own or have you at any time during the last 5 years owned any shares in this company [Life Order Products Pty Ltd]?' George ticked 'yes' as having a 25% shareholding in the Company.
When challenged by Mr McDonald as to why he had ticked 'yes', George claimed that the answer was truthful because he was declaring that he owned the shares non-beneficially (Tcpt, 25 July 2024, p. 73(20)-(21)). When it was put to him that a trustee in bankruptcy would not be interested in knowing what assets he held on trust for someone else, George answered that interest would depend on what assets that company had (Tscpt, 25 July 2024, p. 73 (24)-(37)). These answers were not credible. In particular, I do not accept there is any other way the question 'Do you own or have you at any time during the last 5 years owned any shares in this company [Life Order Products Pty Ltd]?' can be read as anything other than referring to beneficial ownership.
On 22 January 2014, the trustee sent a letter to RM Chartered Accountants, the accountants for the Company. The letter recorded that the 'Bankrupt's Statement of Affairs and Australian Securities and Investments Commission searches discloses an interest' in the Company and requested that the accountants provide certain financial documentation for the Company. On 24 January 2014, RM Chartered Accountants produced these documents to the trustee:
"(1) Balance Sheet and Profit and Loss for the year ended 30 June 2009
(2) Correspondence dated 13 June 2012.
(3) Payment receipt re money owing to the above as per financial statements."
On 17 February 2014, Mr Boland lodged an ASIC Form 492 entitled 'Request for Correction' in relation to a company known as Biaxr Pty Ltd. Biaxr was another company in which Mr Boland was involved. Annexure A to that form was a letter Mr Boland had written to ASIC requesting that the ASIC record be corrected because he had recorded the 100 x $1 shares in that company in the wrong name. The letter explained that "The 100x$1 share were intended to be non-beneficially held, not by me Brian Boland, but by Innovation Shop Pty Ltd/ABN 72083025003". It was put to Mr Boland during cross-examination that at least by 2014, he was aware of the difference between beneficial and non-beneficial ownership of shares. Mr Boland rejected that proposition saying "I thought, Mr Bennett, that [non-beneficial ownership] was a default for anyone holding shares."
The trustee's 'First Report to Creditors' is dated 19 February 2014. That report noted that "The Bankrupt is a 25% shareholder in the Company (Life Order Products Pty Ltd) holding 500,000 Ordinary Shares."
On 8 April 2014, George sent an email to the trustee which included:
"…
Can you please assign any rights to actions in litigation or otherwise against Life Order Products Pty Ltd and/or its director and shareholder Mr Brian Boland and others, to my sister Ms Susie Vasil…."
On 27 May 2014, the trustee sent a letter to George's wife, Mrs Kurniaty Dimitrovksi. That letter had the subject line 'Assignment of Recovery Litigation Actions Against Life Order Products Pty Limited ACN 072 882 476 and Director/shareholding Brian Boland'. The letter included:
"I advise that I was appointed Trustee of the above named Bankrupt Estate on 20 January 2014.
Further to my meeting with the Bankrupt on 27 May 2014, I understand that you wish to acquire all of the rights that the Bankrupt may have against Life Order Products Pty Limited and its Director/Shareholder, Brian Boland.
The Trustee has no objection to the assignment of such recovery actions to you, provided that your Lawyer prepares all the legal documentation to effect assignment of the rights.
Should you recover any funds from any such action, the Trustee will require you to reimburse the Bankrupt Estate for all of the costs incurred, including the Trustee's Remuneration. This is the condition of the assignment to you, as this is in the interest of the creditors of the Bankrupt Estate."
…
On a date unknown but before May 2014, George sent his trustee a chronology outlining the history of the relationship between George and Mr Boland together with an unsworn affidavit of George affidavit dated 20 July 2012. I infer from the affidavit being described as in proceedings against Mr Boland and others in the "General List of the Common Law Division of the Federal Magistrates Court of Australia" that it is an affidavit prepared by George in anticipation of commencing proceedings of some kind.
The chronology begins "In August 2004, George Dimitrovski was offered the opportunity to invest in a company founded by [Mr Boland]". One of the 'key points' stated in the chronology is that 'Dimitrovski holds 500,000 shares for which he paid $500,000. Boland holds 1,500,002 shares.' The affidavit refers to "my investment" and "my $500,000 investment" in the Company (paragraphs 130, 412, 413). Neither the chronology nor the affidavit refers to the shares as being held by George for anyone, the purchase of the shares by Kosta or the declaration of any trust by Kosta. During cross-examination, George conceded that he sent these documents to the trustee to ascertain whether the trustee would allow George to run the claim against Mr Boland himself.
On 9 March 2016, George's solicitors (Donnelly Lawyers) sent a letter to the trustee. That letter included:
"We wish to advise that we act for Mr G Dimitrovski who is currently bankrupt.
An examination of M[sic] Dimitrovki's affairs reveals that it appears that he was subjected to a fraud committed by his business partner Mr Brian Boland in conjunction with the company accountant Murray Reid. Suffice to say that at a meeting of Life Order Products Pty Ltd, in which M[sic] George Dimitrovksi held 500,000 fully paid shares at $1 each, Mr Reid, who chaired the meeting found that the 1,100,000 unpaid shares of Mr Boland outvoted the shares of Mr Dimitrovksi.
A motion was then passed to sell all of the company assets to Mr Boland for $1, which was enacted. This left Mr Dimitrovksi with no income, only assets against which he had mortgages. When George could not pay the repayments, foreclosure ensued.
It is clear that Mr Dimitrovski has an action available against Mr Reid for negligence and possibly fraud. Our client wishes that an action be taken initially against Mr Reid, if not by your office then to have such right transferred to himself so that he can take action…."
On 10 March 2016, the trustee sent an 'Advice to Creditors' which recorded that the 'Bankrupt's lawyers have contacted the Trustee to request the Trustee to undertake legal action on behalf of the Bankrupt' against Mr Boland and the Company "in which the Bankrupt held 500,000 fully paid shares at $1 each". The advice noted that the trustee was without funds to further investigate the matter and invited any creditor wishing to provide funding to inform the trustee.
The Company was deregistered by ASIC pursuant to s 60A1B of the Corporations Act 2001 (Cth) on 10 July 2016.
On 7 February 2017, George sent an email to Ms Crystal Wright of the trustee's office:
"Hi Crystal,
Do you have any news?
Do I need to assign the matter or can I litigate myself?"
On 16 February 2017, Ms Wright sent an email to George attaching a letter in response to George's email. The attachment was not in evidence. Mr McDonald put it to George that he understood that any assignment would not be to him because that would be property acquired after he was a bankrupt and that the assignment needed to be to someone other than himself. George rejected this and said the basis for his question was uncertainty as to whether he could take action as the executor of Ms Vasil's estate whilst being bankrupt. Mr McDonald challenged George as to whether there was any written evidence of him asking the trustee whether he could bring an action as a non-beneficial owner of the shares. George says that he told the trustee verbally on the first time they met that he was trustee of the shares and that was the only occasion that he shared this information with the trustee.
I found the answer to which I have just referred completely implausible and conclude that it was recent invention. According to the evidence, at the time of his appointment Mr Cvitanovic was an insolvency practitioner of nearly 30 years' experience. I cannot accept that someone of his experience would have written the various reports and entertained the possibility of assignments of action that I have set out in the preceding paragraphs had he been aware that George held the shares on trust for Ms Vasil. In my respectful view, that is too simple and straightforward a matter for the trustee to have overlooked had he been told.
During George's cross-examination, I asked whether he and Ms Vasil went to Donnelly Lawyers and instructed them together and whether he informed Donnelly Laywers that he was the trustee of the shares for his sister. George said that he and Ms Vasil did go to Donnelly Lawyers together and he did inform them that he held the shares on trust for her. He told me that the first paragraph of the Donnelly Lawyers letter (see [67] above), making no mention of George holding the shares on trust for Ms Vasil, was incomplete.
Again, I found the answers to which I have just referred completely implausible and conclude that it was recent invention. I cannot accept that Mr Donnelly, had he been instructed that George held the shares on trust for Ms Vasil, would have failed to mention that in his letter. Furthermore, had he been told that, I would expect that his approach to the trustee would have been quite different insofar as any cause of action derived from the ownership of the shares would have been beneficially Ms Vasil's and outside the control of the trustee.
The original claim was filed on 4 June 2021 (see [9] above). George accepted during cross-examination that paragraph 5 of the pleading indicated that he personally invested in the Company. He also accepted that the document does not suggest that the money was invested on behalf of Ms Vasil. George sought to explain this by giving evidence that Mr Peter King of Counsel typed the original claim but he did not instruct Mr King that he personally paid $500,000 into the Company. He said that he informed Mr King that "Dimitrovski family paid $500,000 into the company. By "Dimitrovski family", it was my father who paid the money in" (Tscpt, 25 July 2024, p. 46(22)-(24)). I also found this evidence completely implausible. Who actually paid for the shares would have been a critical matter for precise instructions to whichever legal practitioner was drafting the pleading.
Ms Vasil made an affidavit in these proceedings on 17 August 2022, presumably in support of her amended statement of claim that was the subject of Meek J's judgment in Vasil (see [17] above). The defendants tendered these paragraphs of the affidavit:
"[70] I knew that from our conversations at home that when we invested in the company, Life Order Products Pty Ltd, George promised my father that these shares that we held in the company were held by George for our family and because my father was a 50% owner of the real estate business that we sold to invest in Life Order Products, my father wanted me to have his 50% shareholding in the company.
[71] My father said words to the effect of "Susie should have ownership in the company, and I want her to have my half of the shares and I want her to work in the business."
[72] I then recall my father saying, "Susie, you will be the owner of my shares and they will be held in George's name in trust for you".
[73] About a year later, the sale of the real estate business had problems regarding a fraud by the property manager and the purchaser of the business renegotiated the sale price with George and my father, and they agreed to accept a reduction in price.
[74] At this time, I recall in our kitchen at home, George said to me and my father words to the effect, "You can be the owner of my 50% shareholding in Life Order Products, because I take responsibility for accepting the sales price, and I will make up for it when we are making profits from selling Life Order products".
[75] I then recall my father saying to me, "Susie, you will own George's shares in Life Order Products, but they will also be held in trust for you by George". That means all the shares that we paid for in the company are held by you"."
It was put George by Mr McDonald that this statement reflects that Ms Vasil would have only been the beneficiary of half the shares. George rejected that proposition and sought to explain the anomaly (Tscpt, 25 July 2024, p.53 (22)-(25)):
"Q. Paragraph 71 where allegedly your father said words to the effect, "Susie, you should have ownership in the company," and I want her to have my half of the shares. I put it to you that that is a statement that Susie would have $250,000 out of the $500,000 shares?
A. No, no, he was talking about George Vasil Pty Ltd where he had half of the shares of that business that was being sold. His money was coming from ‑ supposedly ‑ it was supposed to come from the sale but he paid for it out of sales of shares."
George rejected that it was a fair interpretation that the reference to the Company in 'my father wanted me to have his 50% shareholding in the company' was a reference to the Company in these proceedings. I reject George's purported explanation as fanciful and untenable given the clear terms of Ms Vasil's affidavit.
On 2 November 2023, the plaintiffs filed their third further amended statement of claim. I set out the relevant parts of the pleading again for convenience:
"5 On or about 19 August 2004 Mr George Dimitrovski:
5.1. became a member and shareholder in the company; and
5.2. began to hold the benefit of half those shares on trust for Susan Vasil.
Particulars
vii. The company issued to Mr George Dimitrovski 500,000 ordinary shares valued at $1 each. The ASIC form providing for the issue of those shares is dated 10 August 2004. ASIC recorded the share issue as 'effective' on 19 August 2004 with 100.000 paid shares and 400,000 unpaid shares as at that date.
viii. Declaration of trust over half the (planned) shareholding on or about 4 August 2004 at the Vasil family home at Thirroul in the company of Kosta Dimitrovski, George Dimitrovski and Susan Vasil. Declaration of the balance of the shares being held on trust in about August - September 2005.
6. The trust referred to in paragraph 5 arose when Mr George Dimitrovski's and Ms Susan Vasil's father, Kosta, stated to them that:
6.1. The shares in the company that he was were to be acquired, being 250,000 500,000 ordinary shares, would instead be acquired and held in trust for Ms Susan Vasil; and
6.2. Those shares would be paid for using his half share of the value of George Vasil Pty Ltd (which he so owned) from the sale of shares owned by Kosta with the 500,000 ordinary shares to be purchased being a gift to Susan
6.3. The real estate business operated by George Vasil Pty Ltd would be sold to release its value and pay for those shares George Dimitrovski and Susan Vasil from their current employment at Bevan's Thirroul so they could be employed by the company.
6.4. Mr George Dimitrovski would be appointed trustee of the trust over the 250,000 500,000 shares which Kosta Dimitrovski otherwise himself paid for and to be held in trust for Ms Susan Vasil.
Particulars
ix. Kosta Dimistrovski co-owned George Vasil Pty Ltd with Mr Dimitrovski
7. In about August - September 2005 Mr Dimitrovski began to hold the benefit of the other half of his shareholding on trust for Susan Vasil.
8. The trust referred to in paragraph 7 arose when:
8.1. George Vasil Pty Ltd was sold in 2005 for less than its expected sale price;
8.2. Mr Dimitrovski stated to Kosta and Ms Vasil that the 250,000 ordinary shares in the company, which he had acquired in his own right, were also held in trust for Ms Vasil.
Particulars
x. Mr Dimitrovski took responsibility for the unexpectedly low sale price for George Vasil Pty Ltd, which had left his father without a return on his guarantee and shareholding in that company. The sale price had been renegotiated with the purchase, to save the sale, after an employee's embezzlement of funds was discovered. Mr Dimitrovski responded by saying his half share of the acquisition of shares in Life Order Products Pty Ltd should be held by Ms Vasil
9. The result of the two declarations of trust, referred to in paragraphs 5 to 8 6, was that Mr George Dimitrovski began to hold 500,000 ordinary shares in the company on trust for Susan Vasil.
Particulars
xi. There were no qualifications placed upon that trust relationship. "
Mr McDonald put to George that his case was now resiling from the particulars which he had sworn to be true. This statement of claim alleges that there were two declarations of trust and that George initially held at least half of the shares beneficially. George denied that he ever acquired any shares in the Company beneficially and says he signed the affidavit verifying the Third Further Amended Statement of Claim because his counsel at the time (Mr Allan) rushed him to sign it.
Before the Court were several ASIC documents relating to other companies in which Mr Boland had previously been involved. During cross-examination, it was put to Mr Boland that these documents demonstrated he was aware of the difference between beneficial and non-beneficial ownership of shares and was aware of how to fill out ASIC records accurately. It was submitted for George that evidence that Mr Boland did have such knowledge would suggest the ASIC records of the Company completed by Mr Boland (showing George held the shares non-beneficially) were persuasive evidence that Mr Boland knew that George held the shares on trust for Ms Vasil.
It is not necessary to set out the detail of the material to which Mr Boland was taken. The cross-examination was inconclusive. This is because it emerged that the relevant entries were, on Mr Boland's evidence which I accept, made by his wife or accountants, or were ASIC summaries from which it could not be discerned who had provided or certified the information about the basis on which shares were held.
In corroboration of Mr Boland's evidence that his completion of the ASIC forms in respect of the Company (see [44] above) was based on his misunderstanding that the default position was shares were held non-beneficially, the defendants relied on the evidence of Mr Ezekial Ezra, a retired chartered accountant who was the accountant to Mr Boland between 2000 to 2003. Mr Ezra's accounting firm completed annual returns to ASIC (ASIC 316 forms) in 2001 and 2002 for the Company when it was still known as West-Tec Pty Ltd. In his affidavit dated 21 May 2023, Mr Ezra deposed that at some time in July 2022, he received a phone call from Mr Boland who inquired what "beneficially held" meant in respect to a shareholding in a company. Mr Ezra said that this conversation was the first time he had spoken to Mr Boland since approximately 2002 or 2003. Mr Ezra stated that Mr Boland explained that he was asking this question because he had filed a 2004 annual return to ASIC and had submitted "no" under the heading "beneficially held" and was inquiring as to the significance of that record.
Finally, I asked Mr Boland to outline his current understanding of the difference between beneficial and non-beneficial ownership of shares:
"Q. Now again just let Mr Bennett object to this question if he wants to. Can you please now explain to me what you understand beneficial ownership of shares and not, what is the difference between beneficial and non‑beneficial ownership of shares?
A. Back then or now, your Honour?
Q. Now, what is your current understanding?
A. My current understanding now is if someone holds shares non‑beneficially it is not for their benefit, it is for the benefit of somebody else. They are holding, these shares belong to somebody else.
Q. I see, and if they are held beneficially?
A. If they held beneficially it's their asset?"
(Tscpt 25 July 2024, pp.113(41)-114(5).
[4]
Plaintiffs' submissions
Mr Bennett's submissions advanced seven reasons why the evidence demonstrates that George held the shares on trust for Ms Vasil and that Kosta had the requisite intention to establish the trust.
First, it was submitted that there was direct evidence of the declaration of trust, being Kosta's settlement and George's acceptance of the office of trustee, with no evidence contradicting it.
That evidence was outlined in George's affidavit of 29 January 2024 where he deposed that after Mr Boland went to Kosta's house to present his investment proposal, George, his father and his sister had a conversation to the following effect:
"[37] On 4 August 2004, after Mr Boland had left our home, my father, my sister Susan and myself had a conversation and words were said to the following effect:
Kosta said, "Susie, I am going to sell some of my shares and gift the proceeds to you so that you will have five hundred thousand dollars to invest in this company of Biran Boland so that you can have an investment and career, you will be the owner of the shares and George will hold them in trust for you"
Susan said, "George, are you ok with this and being a trustee for me"
I said, "Yes but we will need to sell Bevans so that we both have time to work for this company."
Susan said, "Ok I agree to be involved in the company because Mr Boland has made it sound so exciting.""
Second, Mr Bennett submitted that there is direct evidence that Mr Boland was told of the declaration of trust on the day (4 August 2004) and again at a director's meeting on 19 September 2005.
The 'direct evidence' of Mr Boland being informed of the declaration of trust is outlined at paragraph [38] of George's 29 January 2024 affidavit. I have dealt with this conversation at [40] above.
Paragraph [35] of George's 29 June 2024 affidavit outlines the purported conversation at the 19 September 2005 directors' meeting where George allegedly said to Mr Boland that "the shares I hold in the company I hold on trust for my sister Susie Vasil. My sister and father have serious concerns about the investment in the company and the record keeping of the company." I have set out extracts of the minutes at [47] - [51] above. They were prepared by Mr Boland and make no reference to George asserting he held the shares for Ms Vasil. I have no hesitation in preferring the minutes as an accurate contemporaneous account of the meeting because I am satisfied Mr Boland would undoubtedly have recorded something of that importance if it had been said. I do not accept George's evidence that he ever said the words he alleges.
Third, Mr Bennett contended there was uncontradicted evidence that Mr Boland was told at least twice that George did not have the requisite funds for the investment, but Kosta did.
The first time Mr Boland was informed about George's financial situation was said to have been between 2003-June 2004 where George said that "I have no substantial personal money the family assets are all controlled by my father" (Affidavit of George Dimitrovski dated 29 January 2024 at [20]). The second conversation was said to have occurred in Mr Boland's home office on 23 July 2004 where George said to Mr Boland "I don't have any money to invest. Let me think about it talk [sic] and I'll speak to my father, and let you know" (Affidavit of George Dimitrovski dated 29 January 2024 at [29]).
Fourth, Kosta paying the funds for shares was said to be consistent with the existence of the alleged trust. The evidence outlined in George's 29 January 2024 affidavit indicates that between 20 August 2004 and 1 March 2007, $500,000 was paid from a bank account named 'Kosta Dimitrovksi and George Dimitrovksi and Shano Developments Pty Ltd' to a bank account named 'Life Order Design Pty Ltd'. I have dealt with this submission in [42] above.
Fifth, Kosta executing a will on 15 December 2004 which included the establishment of a protective trust primarily for the benefit of Ms Vasil and her dependents around this time was said to be evidence consistent with, and in furtherance of the proposition, that Kosta intended to create arrangements to the benefit of Ms Vasil.
Sixth, Mr Bennett also relied on Mr Boland's admission that in repeated statutory lodgments to ASIC he acknowledged that the shares were being held non-beneficially. Mr Bennett put forward five reasons why the Court should not accept Mr Boland's contention that these forms were lodged in error:
1. Mr Boland has significant commercial, entrepreneurial and academic experience.
2. Mr Boland is purported to have had intimate knowledge of his various companies and scrutinized annual ASIC statements and details since 1996. The evidence for this claim was the 99-page bundle of company returns tendered in Court which demonstrated that Mr Boland has previously made written corrections on ASIC statements to correct inaccuracies when required. I have set out my conclusions about the bundle of materials in [82] above.
3. The evidence indicates the Company entrusted Mr Boland to deal with ASIC. In support of this submission, Mr Bennett relied on that part of Mr Boland's cross-examination where he recalled that he agreed to be responsible for ASIC notifications regarding the HOA as he had a great deal of experience dealing with ASIC.
4. Mr Bennett also relied on documents which showed that Mr Boland had various communications with ASIC confirming that George held the shares non-beneficially. For example, Mr Boland amended an ASIC Form 484 (initially completed on 10 August 2004) on 6 September 2004 to record that George held 500,000 shares non-beneficially in the Company.
5. Mr Boland's letter to ASIC on 17 February 2014 in relation to the registration of another of his companies, BIAXR, requesting that he be able to correct urgently the shareholding to be 'non-beneficially' held by another company was submitted as further evidence that Mr Boland was aware of the distinction between beneficial and non-beneficial ownership of shares.
Mr Bennett also relied on the minutes of the directors' meeting held on 19 September 2005 (see [47]-[51] above). He submitted that the minutes recording "'they' determined that George might not invest the balance of the funds required under the agreement" demonstrates George was not acting alone and was at the whim of his family's direction because he was holding the shares on trust for Ms Vasil.
Mr Bennett's submissions also noted that there is a relevant factual dispute as to where and how the 4 August 2004 meeting and signing of the HOA occurred. It was accepted that the resolution of this factual dispute was not critical to the Court's determination of whether the shares were being held by George on trust for Mis Vasil. However, Mr Bennett asked the Court to prefer George's recollection of this event, namely that the meeting occurred at Kosta's home in Thirroul on 4 August 2004 with both Kosta and Susie present.
Three reasons were put in support of this version of events. First, it was said to be consistent with how Mr Boland could have discussed the terms of the deal with the actual settlor, being Kosta, whom he only met the morning of 4 August 2004, then left the meeting to prepare the HOA and after returned with it for signing. Second, it was submitted to be the only reasonable explanation for the photographs of Susie that were used in the marketing material and the name Life Order Design which appeared on the brochure (Life Order Design was the name of the company in 2004). Finally, Mr Bennett contended that the defendants have led no evidence from Ms Boland to support any contrary version of events.
I have dealt with the question of the meeting of 4 August 2004 in [34] above.
Mr Bennett's submissions also urged the Court to be reluctant to rely on Mr Boland's evidence on the basis that his evidence about the existence of the trust is contradicted by the objective documentary evidence. It was contended that the defendants have led no corporate record evidence which would support the proposition that the shares were held by George beneficially. Neither was there any evidence from Ms Boland or Messrs Bremner or Crick which would support the defendants' case.
While the Court was not asked to make any findings of credibility against Mr Ezra, it was submitted by Mr Bennett that the conversations which Mr Ezra recounted with Mr Boland were based on Mr Boland misrepresenting the amount of knowledge Mr Boland had as to the difference between beneficial and non-beneficial ownership of shares. Mr Bennett relied on the various ASIC documents he had questioned Mr Boland about to indicate that Mr Boland had extensive dealings with ASIC since 1976 and would have had more knowledge than he indicated to Mr Ezra. I have dealt with this issue in [82] above.
In reply, it was contended by Mr McDonald that the errors made by Mr Boland have been honestly and adequately explained. It was also submitted that no criticism can be made against the defendants for not leading evidence from Ms Boland of events which occurred at the time of the signing of the HOA given she was not present at the meeting and therefore could not properly provide any evidence on the subject. Additionally, the absence of company record evidence did not permit the Court to draw negative inferences against Mr Boland in circumstances where the relevant company had been deregistered since 2016 and the plaintiffs had never issued a notice to produce to obtain such documentation. The Court accepts these submissions. The issue of Mr Boland's errors is dealt with in [131] below.
In response to Mr Bennett's criticism of Mr Boland's case not relying on any evidence from Messrs Bremner and Crick, Mr McDonald sought to rely on a concession made by Mr Bennett during the hearing that an affidavit of Prof Bremner was not required to be read because "at no time did anyone in the plaintiffs' interests, being George, the sister or father, disclose to Mr Bremner the existence of a trust" (Tcpt, 25 July 2024, p. 31(4)-(18)). Mr McDonald submitted that same concession should extend to Mr Crick's affidavit dated 2 May 2023 on the basis that the existence of the trust was never disclosed to Mr Crick.
Mr McDonald rejected George's allegation that it was not possible for the photo of Ms Vasil for the brochure (see [37] above) to have been taken in 2005 or 2006 because the company name "Life Order Design" was on the brochure. The name "Life Order Design" was contended to have been used up until 20 February 2006.
Finally, Mr McDonald advanced six submissions which sought to undermine the purportedly direct evidence relied on by Mr Bennett to establish that George held the shares on trust for Ms Vasil:
1. The Court cannot draw any conclusions from the absence of evidence contradicting purported conversations between Kosta and George on the basis that Mr Boland was never at those private family conversations and therefore could not lead evidence about them.
2. George's evidence that Mr Boland was told of the declaration of trust on 4 August 2004 and 19 September 2005 and that Mr Boland was told on two occasions that George did not have funds for the investment, but Kosta did, should be rejected as unbelievable.
3. George's suggestion that Kosta paying the funds for the shares is consistent with the existence of the trust was submitted to overstate the significance of this evidence. It was equally consistent with the simple proposition that Kosta was a generous person who helped his children, including George and at best part-funded George's purchase of the shares.
4. No inference can be drawn as to the existence of a trust from the evidence that Kosta created a will to provide for Susie in 2004. It is noted that Kosta provided for all of his children in his will but treated each child differently. For example, in that will Kosta gave George a 50% interest in the residue of the estate.
5. It was denied that Mr Boland has admitted that there is a trust in repeated statutory lodgments to ASIC. The Court should accept Mr Boland's evidence that he mistakenly filled in all ASIC forms which show that George held the shares non-beneficially.
6. Finally, the minutes of 19 September 2005 could not be read as confirmation that the Vasil family had an interest in the Company. Mr McDonald noted that the minutes record that 'George Vasil stated that he was under considerable pressure. Stating that family friends were concerned that company sales were taking too long….'. This was submitted to demonstrate only that George raised his family's concerns about the Company and cannot amount to an admission by Mr Boland that he was aware that the shares were held on trust for Ms Vasil or other family members.
[5]
Defendants' submissions
The defendants' primary submission is that the plaintiffs' case fails to establish their pleaded case that a trust arose when Kosta declared that the shares were to be held on trust for Ms Vasil. There were two reasons put forward as to why the plaintiffs' case must fail.
First, it was submitted that Kosta could never have declared a trust over the shares as the shares were never held by Kosta.
Second, the plaintiffs' evidence if believed by the Court, only went as far as to demonstrate that Kosta had an intention to create a trust but this was subject to the consent of Ms Vasil. Mr McDonald drew particular attention to paragraph [32] of George's affidavit of 29 January 2024 which purported to summarise the conversation that was had between Kosta, George and Ms Vasil:
"….
Kosta said, "The shares in this company would be a gift to Susie and you could hold the shares in trust for her"
I said, "We will need to discuss this with Susie particularly if we are going to sell the real estate business."
Following the discussions with my father in the above paragraph, conversations were held between my father, with my sister Susan and myself and words were said to the following effect:
I said, "We want to sell the real estate business and you and I get involved in working for this company of Brian Boland's I have talked to you about"
Susan said, "I would like to have him present his proposal to the three of us"."
Mr McDonald submitted the evidence does not demonstrate that consent was ever provided. Mr McDonald also noted George accepted during cross-examination that around July-August 2004 it was still possible that Ms Vasil may have declined the purported arrangement for the shares to be held on trust to her (Tcpt, 25 July 2024, p.64(17).
Additionally, paragraphs [70]-[74] of the affidavit of Ms Vasil dated 17 August 2022 (see [76] above), to the extent it could be believed was also contended to contradict George's case for three reasons. First, Ms Vasil's affidavit suggests there were two conversations and two tranches of trust declarations between Kosta and the rest of the family. Second, the affidavit suggests the shares were owned by George and not by Kosta. Finally, the conversations indicate that the shares were not held on trust for her but instead for the "family".
[6]
Credit
Mr McDonald further submitted that the plaintiffs had the burden to persuade the Court that the evidence of George is to be preferred over the evidence of Mr Boland to the extent of any inconsistency. It was put that George could not be accepted as a witness of truth.
Mr McDonald annexed to his closing submissions several extracts of the transcript which he submitted demonstrated that George was not a reliable witness. Mr McDonald put forward eight reasons why George's evidence could not be believed because he:
1. Admitted to swearing an affidavit to the truth of statements in a pleading despite knowing that he did not agree with or believe that the statements in that affidavit were true.
2. Admitted that pleadings prepared by him or on his instruction contained facts that he did not agree with or believe that the statements in the statement of claim were in fact true.
3. Provided contradictory evidence in cross-examination to questions which were substantially similar.
4. Denied propositions which were submitted to be obvious.
5. Provided obfuscating answers in response to clarifying questions.
6. Generally provided prevaricating and equivocating evidence.
7. Failed to provide evidence of the express words spoken at critical meetings in 2004 after having given evidence that he could remember such words.
8. Blamed two of his prior barristers for inventing and putting false pleadings in previous iterations of the claim.
By contrast, it was submitted that the evidence provided by Mr Ezra and Mr Boland is reliable and should be accepted. It was noted that no adverse credibility findings were sought against Mr Ezra.
Mr Boland was said to be a reliable witness on the basis that he:
1. Made honest admissions of his mistakes when filling in the ASIC forms.
2. Provided extensive detail when recollecting events, for example the photography session with Ms Vasil (referred to at [36] above).
3. Steadfastly denied the allegations put to him that he was aware of the true meaning and effect of "non-beneficial" in 2004.
[7]
Documentary evidence
It was next contended by Mr McDonald that the documentary evidence itself establishes that the shares were never held on trust for Ms Vasil and instead were always the beneficial property of George. These documents were relied upon:
1. The 24 March 2009 email from George to Mr Boland (see [53] above) where he asks Mr Boland to consider his exit from the Company due to health reasons. This email indicates George was acting on behalf of himself and not Ms Vasil. If he was facing issues which were affecting his ability to be trustee, the simple solution would have been to resign as trustee and not to sell the shares.
2. The chronology of involvement in the Company which George sent to the trustee so that there was "full disclosure" (see [65] above) failed to mention the shares were held on trust for anyone.
3. The Statement of Affairs signed by George on 16 December 2013 (see [58] above) which disclosed his 25% shareholding in the Company as his personal asset, and therefore available to his Bankruptcy Trustee to realise for the benefit of his creditors.
4. The trustee's First Report to Creditors dated 19 February 2014 (see [62] above) which notes that "The Bankrupt is a 25% shareholder in the Company (Life Order Products Pty Ltd) holding 500,000 Ordinary Shares."
5. The letter from the trustee to George's wife (see [64] above) which noted their understanding that she wished to acquire all of the rights that George had against the Company.
6. The letter dated 9 March 2016, from George's former lawyers, Donnelly Lawyers to the trustee (see [67] above) which stated that George held 500,000 fully paid shares at $1 each in the Company and makes no mention of Ms Vasil or any alleged trust.
7. An email from George dated 7 February 2017 to his trustee (see [70] above) inquiring whether he can litigate the matter himself or whether he is required to assign the matter.
8. An Advice to Creditors dated 10 March 2016 (see [68] above) from the trustee that George's lawyers had contacted the trustee to request the trustee to undertake legal action on his behalf in relation to the Company.
9. A letter dated 22 January 2014 from the Trustees to RM Chartered Accounts (the former accountant for the Company) noting that George's statement of affairs disclose an interest in the Company and requesting all documents relating to the financial affairs of the company (see [60] above).
10. An email dated 8 April 2014 from George to Mr Cvitanovic stating:
"Can you please assign any rights to actions in litigation or otherwise against Life Order Products Pty Ltd and/or its director and shareholder Mr Brian Boland and others, to my sister Ms Susie Vasil, c/o 25 Hoskins Avenue, Kemblawarra NSW 2505."
[8]
Plaintiffs' reply to defendants' submissions
George made six submissions in reply.
First, Mr Bennett noted that whether Kosta owned the shares at the time the Trust was declared is irrelevant on the basis that the law readily accepts that trusts can be declared over future property: Chief Commissioner of State Revenue v Platinum Investment Management Ltd (2011) 80 NSWLR 240; [2011] NSWCA 48.
Second, contrary to the submission put on behalf of Mr Boland, whether George replied to Kosta's declaration of trust is irrelevant. Nevertheless, the conversation outlined at [32] - [39] in George's 29 January 2024 affidavit was contended to be evidence of such a reply and acknowledgement of the declaration of the trust.
Third, whether George believed that the 2004 conversation actually declared a trust was submitted to be irrelevant because it is the Court's views of the words actually spoken and not a lay witnesses' interpretation of the legal effect of another person's words that is said to be dispositive of the matter.
Fourth, the complaint that there is insufficient evidence to establish that Ms Vasil was involved in discussions about the declaration of the trust or was aware of the trust should be disregarded on the basis that it is not essential that the beneficiaries are present during the settlement of trusts. In any event, George relies on paragraph [37] of his affidavit dated 29 January 2024 as evidence of Ms Vasil being involved in the conversation (see [32] above).
Fifth, Mr Bennett reiterated that the trust was created at about 12:00pm on 4 August 2024 when Kosta, George and Ms Vasil had the following conversation after Mr Boland had left the family home:
"Kosta said: Susie, I am going to sell some of my shares and gift the proceeds to you so that you will have five hundred thousand dollars to invest in this company of Brian Boland so that you can have an investment and career, you will be the owner of the shares and George will hold them in trust for you"
Susan said: "George are you ok with this and being a trustee for me"
I said: "Yes, but we will need to sell Bevans so that we both have time to work for the company.
Susan said: "Ok, I agree to be involved in the company because Mr Boland has made it sound so exciting.""
Mr Bennett again drew attention to these pieces of documentary evidence which supported the 4 August 2004 conversation being the conversation which established the trust:
1. Paragraph 1 of the original claim, verified by Ms Vasil:
"At all material times between 2004 and 2016 the Plaintiffs were the owners of shares in Life Order Products Pty ltd [the company] a company established by the 1st Defendant and at all material times controlled by him and the interest of the 2nd Plaintiff was by way of a declaration of trust in her favor by the 1st Plaintiff."
1. The bank statements (see [42] above) being evidence of a source of funds for the purchase of the shares and evidence of Kosta paying for them.
2. The Company's ASIC forms in August 2004, which represented that the shares were held non-beneficially.
3. Kosta's December 2004 will confirmed that provision for Susan was something that he wanted.
4. The September 2005 minutes which noted the Dimitrovksi family was concerned about the Company's current operations and that "the family may not invest further funds." This was submitted to show that the Dimitrovksi family had an interest in the Company.
5. Finally, George's email to the trustee dated 8 April 2014, which attaches the Company's ASIC search dated 7 April 2014 showing that George was purportedly holding the shares non-beneficially.
Finally, Mr Bennett contended that Mr Boland's repeated assertions that he accidentally incorrectly filled out the ASIC forms as recording that George held the shares non-beneficially is insufficient to overcome the extensive objective evidence which shows repeated ASIC forms representing the same.
[9]
Fact finding and credit - legal principles
In these proceedings I have applied the legal principles which I summarised in Saravinovska v Saravinovski (No 6) [2016] NSWSC 964:
"464 First, at the forefront of the Court's approach has been the oft cited statement of McClelland CJ in Equity in Watson v Foxman (1995) 49 NSWLR 315 at 318-319:
Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously described as "misleading") within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction (1995) 49 NSWLR 315 at 319 rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
Each element of the cause of action must be proved to the reasonable satisfaction of the court, which means that the court "must feel an actual persuasion of its occurrence or existence". Such satisfaction is "not … attained or established independently of the nature and consequence of the fact or facts to be proved" including the "seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding": Helton v Allen (1940) 63 CLR 691 at 712.
465 Second, the concept of actual persuasion was elucidated by Emmett J as his Honour then was) in Warner v Hung, in the matter of Bellpac Pty Ltd (Receivers and Managers appointed) (In liquidation) (No 2) [2011] FCA 1123; (2011) 297 ALR 56:
48. Under s 140(2) of the Evidence Act 1995 (Cth) (the Evidence Act), the Court must, in deciding whether it is satisfied that a case has been proved to the requisite standard, take into account:
● the nature of the cause of action or defence;
● the nature of the subject matter of the proceeding; and
● the gravity of the matters alleged.
When proof of any fact is required, the Court must feel an actual persuasion of the occurrence or existence of that fact before it can be found. Mere mechanical comparison of probabilities, independent of any belief in reality, cannot justify the finding of a fact. Actual persuasion is achieved where the affirmative of an allegation is made out to the reasonable satisfaction of the Court. However, reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequences of the fact to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, and the gravity of the consequences flowing from a particular finding are considerations that must affect whether the fact has been proved to the reasonable satisfaction of the Court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony or indirect inferences (see Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 361-2).
466 Third, there is the statutory successor of the rule in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 in s 140 of the EA:
140 Civil proceedings: standard of proof
(1) In a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities.
(2) Without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account:
(a) the nature of the cause of action or defence, and
(b) the nature of the subject-matter of the proceeding, and
(c) the gravity of the matters alleged.
467 Fourth, evidence is to be preferred which is inherently probable in the circumstances or is given by a witness against their interest.
468 Fifth, evidence of independent witnesses, i.e. persons who have no reason to be partisan, may be decisive in resolving the conflicting evidence of interested parties.
469 Sixth, where a witness has been found to be lying about one thing that does not automatically mean that they are to be disbelieved about everything else. The Court is not bound to accept or reject a witness' evidence in its entirety. This approach was expressed by O'Loughlin J in Cubillo v Commonwealth of Australia (No 2) [2000] FCA 1084; (2000) 103 FCR 1:
118 Before commencing a detailed analysis of the evidence in this case, I desire, in the first instance, to make clear the approach that I have taken to the evidence of a witness where I have found some, but not all, aspects of the evidence of that witness to be unreliable. Simply because I find against a party or a witness on one issue and reject some part of the evidence of that person, it does not mean that what remains is tainted, or otherwise lacks probative force, with the consequence that I should dismiss all the evidence of that person. The principles enunciated in the cases indicate that the trial judge is entitled to believe part of the evidence given by a witness and to reject the rest. After making an assessment of the evidence, after utilising the advantage of having seen and heard all the witnesses, and after forming an impression of each, the confidence that the judge reposes in a particular witness is assessed accordingly. Where evidence has a logical probative value, a judge will rely on it; where it contains discrepancies, displays inadequacies, is tainted or otherwise lacks probative force, the judge will, in all probability reject it or, at least, not rely on it. I mention some authorities that support those propositions.
…
121 A trial judge is not restricted in his or her assessment of a witness. By this I mean that if, on peripheral issues, the trial judge reaches conclusions adverse to the credibility of a party, it does not necessarily follow, consistently with such conclusions, that these must be findings adverse to that party on the issues that are central to the determination of the matter. There is no rule of law or practice that states that an adverse finding on any aspect in the evidence of a witness means that the whole of that witness' evidence must be rejected.
470 Seventh, and closely related to the preceding point, in Sangha v Baxter [2009] NSWCA 78 Basten JA (with whom Handley AJA agreed) cautioned against global credibility findings:
155 There are risks in making global findings about credibility of any particular witness. Because a witness has not told the truth with respect to a particular matter does not mean that other parts of his or her evidence are untruthful. Where possible, an assessment should be made of the reasons for the untruthfulness in order to see if other aspects of the evidence are likely to be infected by the same concern. Further, evidence may be rejected because it is apparently unreliable, possibly mistaken or deliberately untruthful or capable of being categorised in a variety of ways which are unlikely to be capable of clear delineation in some cases.
156 Further, findings of credibility are not usually findings with respect to factual issues in the case, but are rather subsidiary findings on the way to determination of issues. Like many aspects of the evidence in a trial, the evidence of a witness who is believed to have lied in a particular respect, will nevertheless be able to bear some weight and should be placed into a balance, with other material evidence, before a conclusion is reached in relation to a critical fact. The rejection of a witness in total, absent corroboration is likely to mean that, even where corroborated, little attention will be paid to the evidence of the witness and less to the possible consequences which might flow from the fact that particular evidence is shown to be truthful: see generally, King v Collins [2007] NSWCA 122 at [44].
471 Eighth, disbelieving a witness that "X" was the case does not mean that "not X" has been proven. The Court respectfully adopts what fell from Gibbs J (as his Honour then was) in Steinberg v Federal Commissioner of Taxation (1975) 134 CLR 640 at 694 (citations omitted):
The fact that a witness is disbelieved does not prove the opposite of what he asserted: Scott Fell v. Lloyd [1911] HCA 34, (1911) 13 CLR 230, at p 241 ; Hobbs v. Tinling (C.T.) & Co. Ltd. (1929) 2 KB 1, at p 21 . It has sometimes been said that where the story of a witness is disbelieved, the result is simply that there is no evidence on the subject (Jack v. Smail [1905] HCA 25, (1906) 2 CLR 684, at p 698 ; Malzy v. Eichholz (1916) 2 KB 308, at p 321 ; Ex parte Bear; Re Jones [1945] NSWStRp 50, (1945) 46 SR (NSW) 126, at p 128 ), but although this is no doubt true in many cases it is not correct as a universal proposition. There may be circumstances in which an inference can be drawn from the fact that the witness has told a false story, for example, that the truth would be harmful to him; and it is no doubt for this reason that false statements by an accused person may sometimes be regarded as corroboration of other evidence given in a criminal case: Eade v. The King [1924] HCA 9, (1924) 34 CLR 153, at p 158; Tripodi v. The Queen [1961] CHA 22, (1961) 104 CLR 1. Moreover, if the truth must lie between two alternative states of fact, disbelief in evidence that one of the state of facts exists may support the existence of the alternative state of facts: Lee v. Russell (1961) WAR 103, at p 109 .
472 Ninth, for reasons set out in Saravinovski (No 5) at [76] and following, the Court gave leave for certain of Chris' affidavits to be relied upon, notwithstanding that his loss of mental capacity meant that he could not be cross-examined. The way such evidence should be treated was considered by Hallen J in Fulton v Fulton [2014] NSWSC 619:
111. However, affidavit evidence, however good, which, for whatever reason, is not subject to cross-examination when cross-examination is required, will always be discounted, as appropriate, if the affidavit is used with leave without cross-examination. The degree to which it will be discounted may depend on various factors, including the circumstances that lead to cross-examination being dispensed with, the nature of the evidence and its centrality and degree of significance to the case. The degree of discount appropriate will be judged according to all the circumstances of the case: Re O'Neil, Deceased [1972] VicRp 35, [1972] VR 327, per Anderson J, at 333 - 334; Citibank Ltd v Liu; ABN Amro Bank Ltd v Liu [2002] NSWSC 86, per Hamilton J, at [5].
473 Tenth, the Court can only do the best it can on the evidence which it has. Some issues may need not be resolved or should not be resolved. It may be that they cannot be resolved given the nature of the evidence which the parties have adduced. This case has many similarities to the family dispute considered by Robb J in Aytul Ak-Tankiz v Ferat Ak & Ramazan Ak [2014] NSWSC 1044. Of the evidence in that case, his Honour said:
187. The principal evidence relating to these issues consisted of the uncorroborated evidence of the witnesses, or alternatively the only corroboration available was the testimony of other witnesses. The evidence distilled into the word of one witness against the word of one or more other witnesses. Most of the events relevant to the issues occurred many years ago. The evidence relevant to the issues generally consisted of a series of assertions, and counter-assertions by various witnesses. Evidence of the objective context was generally not available, so it has not been feasible to test the versions of events that were in contest by reference to the objective probabilities, based upon uncontroversial contemporary circumstances. Though the issues are not entirely irrelevant, their significance is limited, and their resolution has not been necessary for the purpose of determining the real issues in the case. Any attempt to resolve the issues by making judgments about the relative credibility of the individual witnesses on an issue-by-issue basis was likely to be based on illusory foundations."
To these I would respectfully add and have applied this recent summary by Leeming JA (sitting at first instance) in Dedakis v Deligiannis [2024] NSWSC 1018;
"15 All of the events occurred more than a decade ago, and many occurred more than three decades ago. Memory is fallible and malleable, especially memory concerning past beliefs. One of Lord Leggatt's first judgments contains an extensive and influential consideration of the frailties of memory, including (relevantly for present purposes) that memories of past beliefs are revised to make them more consistent with present beliefs: Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm) at [18]. It is usually desirable to start with reliable contemporaneous documents and uncontroversial facts. "Usually, the rational resolution of an issue involving the credibility of witnesses will require reference to, and analysis of, any evidence independent of the parties which is apt to cast light on the probabilities of the situation": Camden v McKenzie [2008] 1 Qd R 39; [2007] QCA 136 at [34] (Keane JA). That is not to deprecate the potential significance of testimonial evidence. In particular, as was said by Bell P in ET-China.com International Holdings Ltd v Cheung [2021] NSWCA 24; 388 ALR 128 at [27]-[29], testimonial evidence may provide valuable assistance in explaining the context of, and omissions from, the contemporaneous documents….."
[10]
Credit - consideration
Mr Ezra, George and Mr Boland were all cross-examined. The Court has not been asked to make adverse credit findings about Mr Ezra nor do I have any reason to doubt the truthfulness of Mr Ezra's evidence. Based on the Court's findings at [129] below, I reject Mr Bennett's submission that Mr Ezra's evidence was based on Mr Boland misrepresenting the true extent of his (Mr Boland's) knowledge of the difference between beneficial and non-beneficial shareholding.
For the reasons which follow, the Court has determined that where their evidence is in conflict, the evidence of Mr Boland is to be preferred over that provided by George. The Court will only accept George's evidence if it is against interest, inherently likely or independently corroborated, including by contemporaneous documents. My overall impression based on the history of the pleadings in this matter - a moveable feast of allegations in relation to the alleged trust - and George's evidence in the witness box, when weighed against the documents produced by George or on his instructions, is that George was prepared to say anything he thought was required (that is, to lie) to keep his battle with Mr Boland alive in the face of Lindsay J's decision (see [15] above).
[11]
George's credit
In relation to George's credit, the Court has found for the following reasons that he is a dishonest witness who was steadfastly determined to ensure all evidence, including evidence clearly against his interest, supported his case:
1. He provided non-responsive answers to basic questions: See for example Tcpt, 25 July 2024, p. 41(26)-42(8).
"HIS HONOUR
Q. George, did you give either a solicitor or a barrister who was acting for you at the time the instructions that are reflected in paragraphs 5 to 9 of this pleading?
A. No, they're not accurate, your Honour.
Q. That is not my question, sir. Did you give a solicitor or barrister retained in the interests of you and your sister as the executors of the estate the instructions that are reflected in paragraphs 5 to 9?
A. Well it is for one document. I can't say I didn't and I've signed it at the end, but it needs to be recorded that I'm saying it wasn't accurate.
Q. George, you understand, don't you, that lawyers act on instructions?
A. Mr Allan regarded this as a masterpiece.
Q. Stop and please answer my question. You understand that lawyers act on instructions?
A. Yes, I understand.
Q. Because without instructions they don't know what to put in the document, correct?
A. I have emails I sent him.
Q. George, answer my question?
A. What is the question?
Q. The question is that without those instructions they wouldn't know what to put in a document, would they?
A. Can you explain "instructions", your Honour, I had one meeting with Mr Allan and‑‑
Q. If there is a story to be told to a lawyer, those are instructions. Do you follow that?
A. And I did tell him a story but he misinterpreted that story."
1. He failed to accept obvious propositions. For example, he refused to accept that he adduced evidence that he had not been served with a notice under s 129AA of the Bankruptcy Act 1966 (Cth) to demonstrate that the Company's shares may revest in him personally (See Tcpt, 25 July 2024, p. 75(46)-p.76(15):
"Q. Sir if you could go to page 150. You have raised the fact at paragraph 7 that you have not been served with a notice under s 129AA of the Bankruptcy Act. That is your evidence?
A. That's right.
Q. And s 129AA of the Bankruptcy Act says that a trustee in bankruptcy has to serve a certain notice to extend a period of time in which he can realise assets. Do you understand that?
A. Yes.
Q. If he didn't serve that notice the assets revest in the bankrupt?
A. Yes.
Q. The asset we're talking which is of any relevance here is the shares in Life Order Products or the shares in the company. That's the asset that is of relevance to you leading this evidence?
A. I don't necessarily agree with that. It could be something else that was.
Q. How relevant could something else be to these proceedings sir?
A. Well, you'd need to explain your question."
1. He twisted the plain and obvious meaning of words in documents in an attempt to suit his case. For example, he suggested that the 'reference' to Dimitrovksi in the 'Equity Share Agreement' section of the HOA (see [35] above) could have been a reference to another member of the Dimitrovski family (see Tcpt, 25 July 2024, p. 70(32)-71(12)):
"Q. Sir the heads of agreement document, if I could take you to page 68, you'll see the heading "equity share agreement". You'll see paragraph (ii) "Dimitrovski will take up a directorship with full voting rights". Do you see that?
A. Hmm.
Q. That is a reference to you, isn't it?
A. Well, I'm not sure. Could have been Dimitrovski family and that's why we thought he left Dimitrovski just covering it as covering everyone in the family as regards to equity share.
Q. I'm talking about the directorship?
A. The directorship, I was always going to be the director, not my sister.
Q. So the reference to Dimitrovski in (ii) is a reference to you?
A. Well, I may have nominated my father but Dimitrovski is broad.
Q. You think that is a reference to you having the ability to nominate someone else in your family?
A. Possibly.
Q. I'm not asking a possibility. Is that what you are putting to his Honour?
A. Yes.
Q. Paragraph 2 gave you the right to nominate any member of the Dimitrovski family to be a director of this company. Is that your serious evidence?
A. Well, the money hadn't been paid yesterday. This was just a preliminary document.
Q. I'm talking about (ii). Look please, just focus. That is a reference and only a reference to you personally George Dimitrovski, do you agree?
A. Well, the way it's written there if you take (iii) regarding to marketing and sales, he wanted me in marketing and sales.
Q. So do you accept what I put that is a reference to you and only to you George Dimitrovski?
A. Okay, well.
HIS HONOUR
Q. Do you accept that?
A. No, I don't accept it."
1. George also did not accept that the letter sent from Donnelly's Lawyers to his trustee was sent on his instructions. Instead, he claimed that his sister might have given instructions to send the letter despite Donnelly's Lawyers noting in the first line of that letter (see [67] above) that they were acting for George (see Tcpt, 25 July 2024, p. 83(35)-84(29)):
"McDonald
Q. Can I take you to page 201, please. Do you recall instructing Donnelly Lawyers in around March 2016?
A. I had discussions with Donnelly Lawyers, yes.
Q. And in those discussions you told them the story of what had happened to you?
A. What had happened to us, yes; my sister went with me also.
Q. You see the letter on page 201, the first line where Donnelly Lawyers expressed that they were acting just for you and not for your sister?
A. Okay. I see that.
Q. Yes. At that time they were not acting for your sister?
A. Well, he's writing to Worrells, so I don't know why he should include my sister.
Q. Well, that's not the question. As far as you're aware, at that time Donnelly Lawyers were not acting for your sister. Do you agree? I don't know; you tell me.
A. No, I disagree.
Q. Okay. And you said that they've had a meeting with your sister?
A. That's right. They liked her.
Q. And you gave them instructions to send this letter?
A. (No verbal reply.)
Q. Did you give instructions to Donnelly Lawyers to send this letter?
A. Maybe it was my sister that instructed him. She was dealing with him also.
Q. Your sister might have instructed this letter to be issued when they were acting on your behalf, according to the first paragraph. Is that your evidence?
A. First paragraph, "We wish" ‑ "Re George Dimitrovski"?
Q. No. "We wish to advise that we act for Mr G Dimitrovski, who is currently bankrupt."
A. Right.
Q. You say that your sister might have given instructions to send this letter, not you?
A. Um.
Q. I'm just not understanding your evidence sir. I'm just giving you the opportunity to clarify.
A. Right. Well, he sent it on my behalf."
1. When he claimed he could exactly recall critical conversations and was asked to exhaust that memory, George recounted superfluous details and recalled few facts of relevance. For example, he claimed that Mr Boland met with him in June or July 2004 on the pretense that he liked a salad George had once made for him at his home (see Tcpt, 25 July 2024, p. 58(47)- 60(22)).
2. George provided answers which contradicted his case and he subsequently tried to ameliorate the effect of those answers. See, for example, (Tcpt, 25 July 2024, P.90 (20)-(33):
His Honour
Q. If you had sold this 25% shareholding, what were you intending to do with the money that would have been realised?
A. Save my father's home, your Honour. We mortgaged my father's home in 2008, based on his cash flow that we were to have $32 million in sales the next year.
Q. But I don't understand how you can say that to me when, as I understand your case, if the money had been realised, you would have had to have given it to your sister.
A. We needed to ‑ my father's house was pledged to my sister. We needed to live somewhere first. After we were evicted from my father's house, that's when she went into PTSD. And she died alone in a Housing Commission trust, which we should never have been in if not for these people, okay? They need to understand that.
1. I also rely on the findings about particular conversations and documents set out in paragraphs [40], [52], [59], [72], [74], [75], [78] and [90] above.
[12]
Mr Boland's credit
I do not accept Mr Bennett's submissions attacking Mr Boland's credit. While the manner and tone of his evidence was, as I have already observed, coloured by his anger towards George, it was given in a straightforward way without obfuscation. I accept him as a witness of truth.
The critical attack on Mr Boland's credit on the essential issue of his alleged knowledge of the trust was based upon his completion of the ASIC form in 2004 (see [44] above) stating that George held the shares non-beneficially. The subsequent iterations of the information in ASIC records are irrelevant, because they do no more than reflect the information originally provided by Mr Boland.
The Court accepts Mr Boland's explanation that he misunderstood the meaning of beneficial and non-beneficial ownership such that it led him to record George's ownership of the shares as non-beneficial when he understood George to be the personal owner of the shares. The principal reason for that acceptance is that Mr Boland's misunderstanding is corroborated by the fact, which I have noted in [44] above, that in the same form he described all the other shareholdings (including his own) as non-beneficial when there is no suggestion that they were owned other than absolutely by the relevant shareholder (including himself). In my respectful view, that circumstance makes acceptance of Mr Boland's explanation irresistible.
To the extent further corroboration that it is an error is required, the Court also takes into account the various documents identified above which state that George held the shares absolutely and make no mention of any trust, notwithstanding George's evidence (which the Court does not accept given its view of his credibility) that he told the author (be it Mr Cvitanovic or Mr Donnelly) of the alleged trust arrangement.
[13]
Intention to create a trust - legal principles
George's case fails on the facts because the Court does not accept George's evidence that Kosta ever said the words alleged to settle the trust pleaded in the fourth further amended statement of claim. George has abandoned any suggestion that he was the settlor of the trust. Nevertheless, out of deference to the attention given to the principles by counsel, I will set these out and the relevant submissions.
It is trite law that there are three requirements which must be established to prove the existence of a valid trust. Generally known as the 'three certainties' these requirements are first, that there must be certainty of intention to create a trust; second, there must be certainty of subject matter of the trust; finally, there must be certainty of objects or persons intended to benefit from the trust.
The ultimate and singular question to be determined in this case is whether there is adequate evidence to demonstrate that there was a sufficient intention on behalf of Kosta (as the settlor of the trust) for 500,000 ordinary shares in the Company to be held on trust by George for Ms Vasil. If certainty of intention is established, there is no doubt that the remaining requirements are established. Certainty of subject is satisfied as the trust property is the 500,000 ordinary shares in the Company. Certainty of object is satisfied because the shares would be held for the benefit of Ms Vasil.
The principles applicable to determining the sufficiency of the intention to create a trust were recently summarised by the Full Court of the Federal Court of Australia in Frigger v Trenfield (No 3) [2023] FCAFC 49 (Allsop CJ, Anderson and Feutrill JJ agreeing at [247]-[255]:
[247] The primary judge approached the question of intention to contribute property to an existing trust in reliance on principles applicable to ascertaining whether intention to create a trust was present: see paragraph [105] of the Liability Judgment. This approach is sensible given that, as noted by the primary judge, in Australian law when property is 'contributed' to an existing trust what in fact occurs is that a new trust is created over the property on the same terms as the pre-existing trust, with the result that the property is to be dealt with in the same manner as any property already constituting the fund: Atwill v Cmr of Stamp Duties (NSW) (1970) 72 SR (NSW) 415 at 426 (Mason JA); Kennon v Spry [2008] HCA 56; 238 CLR 366 at [229] (Kiefel J); Aussiegolfa Pty Ltd (Trustee) v Cmr of Taxation [2018] FCAFC 122; 264 FCR 587 at [195] (Steward J); see also, W A Lee et al, The Law of Trusts (Thomson Reuters, 2022) at [2-501].
[248] In general, the onus of proving an intention to create a trust lies with the person who claims that the trust was created: see Re Armstrong (1960) VR 202 at 206 ; Herdegen v FCT (1988) 84 ALR 271 at 277 (Gummow J). This is a matter which is to be assessed objectively, without having regard to the subjective intention of that person: Byrnes v Kendle (2011) 243 CLR 253 (Byrnes v Kendle ) at [17]-[18] (French CJ), [94], [104]-[105] and [114]-[116] (Heydon and Crennan JJ).
[249] As Millett LJ put it in Twinsectra Ltd v Yardley [2002] 2 AC 164 (at 185) (which was cited with approval in Byrnes v Kendle by Gummow and Hayne JJ at [55]):
A settlor must, of course, possess the necessary intention to create a trust, but his subjective intentions are irrelevant. If he enters into arrangements which have the effect of creating a trust, it is not necessary that he should appreciate that they do so; it is sufficient that he intends to enter them.
[250] Consequently, where it is apparent from the circumstances that a person has objectively intended for property to be held on trust, that intention cannot be negated by an assertion that the person did not intend to bring about that result: see for example, Re Courtenay House Capital Trading Group Pty Ltd (in liq) [2018] NSWSC 404 (Re Courtenay House) at [23]-[26] and Markopoulos v Marco [2020] WASC 79 . The same may be said where a person asserts that they intended to create a trust, but such an intention cannot be discerned from the surrounding circumstances. In each case, it is a person's intention, as it appears objectively, which will prevail. Thus, as Professor Scott observed in the first edition of his treatise, The Law of Trusts (1st ed, 1939, volume 1) (Scott on Trusts) at s23:
An express trust, unlike a constructive trust, is created only if the settlor properly manifests an intention to create a trust. It is not enough that he secretly intends to create a trust; there must be an outward expression of his intention.
[251] To speak of a certainty of intention is therefore to speak of the intention which is to be discerned from a person's words or conduct. For this reason, later editions of Scott on Trusts speak of a "manifestation of intention" - that is, a person's intention as it is expressed outwardly: see, for example: Scott, The Law of Trusts (5th ed, 2006, volume 1) at s4.1; and see also, Jacobs' Law of Trusts at [5-02]. This terminology has also been adopted by the courts. In Re Kayford Ltd (in liq) [1975] 1 All ER 604 , for example, Megarry J observed (at 607) that the relevant question is "whether in substance a sufficient intention to create a trust has been manifested". Similarly, in Legal Services Board v Gillespie-Jones (2013) 249 CLR 493 , Bell, Gageler and Keane JJ said (at [119]):
Whether or not parties intend to create in a third party that is appropriate to be created by a trust relationship falls in each case to be determined by reference to the outward manifestation of the intentions of the parties within the totality of the circumstances.
(Emphasis added.)
See also, more recently: Bosanac v Cmr of Taxation [2022] HCA 34 at [44] (Gageler J) and [93] (Gordon and Edelman JJ).
[252] As Gummow and Hayne JJ observed in Byrnes v Kendle (at [56]), there is good sense in such a rule. Issues of the construction to be placed on the words or actions of alleged settlors are apt to arise long after the event and, as is the case here, trusts may give rise to proprietary interests which engage third parties who are strangers to the original actors.
[253] These concerns are especially apt in circumstances where the acceptance of an assertion that assets are held on trust may defeat the interests of creditors of the putative trustee: Korda v Australian Executor Trustees (SA) Ltd (2015) 255 CLR 62 (Korda) at [205] (Keane J); see also: Re Courtenay House at [19]-[20]. Therefore, although the Court may infer an intention to create a trust if this is warranted by the circumstances, it will not infer this intention readily. This approach coheres with that which was said by Mason CJ and Dawson J in Bahr v Nicolay (No 2) (1988) 164 CLR 604 , where their Honours observed (at 618) that, unless an intention to create a trust is clearly to be collected from the language used and the circumstances of the case, the Court ought not to be astute to discover indications of that intention: see also, Byrnes v Kendle at [272] (Gummow and Hayne JJ).
[254] In undertaking this inquiry, the Court may have regard to "all of the relevant circumstances", including the language used by the parties, the nature of the transaction, and the circumstances attending the relationship between them: Associated Alloys at 605; Kauter v Hilton at 100 (which was cited with approval in Byrnes v Kendle at [54] by Gummow and Hayne JJ). This can include conduct which has occurred after the disposition of property and, in a commercial context, may also include commercial necessity: see, for conduct occurring after the disposition of property: Trustee of the Property of Cummins (a bankrupt) v Cummins [2006] HCA 6; 227 CLR 278 (Cummins v Cummins ); In the matter of Tresdar Pty Ltd [2019] NSWSC 179 at [149] -[151] ; see, for commercial necessity: Eslea Holdings Ltd v Butts (1986) 6 NSWLR 175 at 189 -90 ; Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 121 ( Mason CJ and Wilson J); Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491 at 503 (Gummow J) and Korda at [10] (French CJ).
[255] Importantly, however, the mere fact of commercial necessity or the convenience which may result from a finding that property is held on trust will, absent other circumstances, generally be insufficient to evidence an intention to create a trust. As the Court observed in Korda (at [11] (French CJ) and [204]-[208] (Keane J)), the context in which a legal arrangement is made is not a substitute for examining the precise language employed by the parties. That a trust structure may be commercially beneficial or indeed, necessary, does not displace the need to establish an intention to create a trust. The relevant inquiry remains whether, having regard to all of the circumstances, that intention has manifested itself outwardly.
It is pertinent to draw attention to certain principles raised by their Honours in light of the issues raised by the particular facts of this case. First, as the persons who are claiming that the shares are being held on trust for Ms Vasil, it is the plaintiffs who bear the onus of establishing the requisite intention to create a trust.
Second, whether the necessary intention exists must be established on the objective evidence before the Court. Whether George believes that there was an intention to create a trust is irrelevant.
Third, the Court needs to be satisfied that the settlor had the requisite intention to create a trust. As pleaded in the fourth further amended statement of claim (see [25] above), George contends that Kosta is the settlor of the trust. On this case, the Court would need to be satisfied that Kosta had the requisite intention to create a trust.
Fourth, the Court can only find that a settlor had the requisite intention if the settlor 'properly manifests' that intention by outwardly expressing the requisite intention. George contends the conversation establishing the trust was the 4 August 2004 conversation, between Kosta, George and Ms Vasil at their family home. If this evidence is accepted, on its face, the conversation appears to show an outward manifestation of intention to create a trust. However, for the reasons at [128] above, the Court does not accept George's uncorroborated evidence of the alleged conversation.
Fifth, as noted at [254] in Frigger (No 3), the Court may take into account "'all of the relevant circumstances', including the language used by the parties, the nature of the transaction, and the circumstances attending the relationship between them…. This can include conduct which has occurred after the disposition of property" (emphasis added). Before the Court is a variety of documentary evidence dated after the purported establishment of the trust in 2004. This includes (but is not limited to) meeting minutes of the directors of the Company, ASIC records of the Company and documents from George's trustee and solicitor. To the extent the Court can ascertain whether the requisite intention to establish a trust is present from documentation after the purported creation of the trust, there is no doubt that the Court is empowered to take this material into account.
As part of his closing submissions provided on behalf of George, Mr Bennett also sought to emphasise the following principles in relation to how the Court may determine whether the requisite intention to create a trust exists:
1. A court may more readily find that an informal oral declaration of trust has passed an equitable interest to a beneficiary when it is "dealing with simple people, unaware of the subtleties of equity" (Harpur v Levy (2007) 16 VR 587; [2007] VSCA 128 at [70] (Neave JA) citing Paul v Constance [1976] EWCA Civ 2; [1977] 1 WLR 527 at 530 (Scarman LJ);
2. No precise formal or technical words are required and any apt expression of intention is sufficient (Re Armstrong (dec'd) [1960] VicRp 34; [1960] VR 202 at 205 (Herring CJ); JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VicRp 88; [1985] VR 891; Registrar, Accident Compensation Tribunal v Commissioner of Taxation (1993) 178 CLR 145at 165-166; [1993] HCA 1);
3. If the inference to be drawn is that the parties intended to create or protect an interest in a third party and the trust relationship is the appropriate means of creating or protecting that interest or of giving effect to the intention, then there is no reason why in a given case an intention to create a trust should not be inferred (Bahr v Nicolay [No 2] [1988] HCA 16; (1988) 164 CLR 604 at 618-619; [1988] HCA 16.)
There is no doubt that these propositions are correct as a matter of law. However, as was noted by Jackson J in Frigger v Trenfield (No 10) (2021) 397 ALR 24 at [3]; [2021] FCA 1500 "while the standard of proof remains the civil one of balance of probabilities, and while the manifestation of the necessary intention can be established by inference, that inference must be clear." The Court accepts that the Dimitrovksi family, with no disrespect intended, are individuals from a non-legal background and the Court may in this case draw inferences to determine whether Kosta had the requisite intention to create a trust. However, such circumstances do not permit the Court to draw inferences without being confident the objective evidence and surrounding circumstances make pellucidly clear that the inferences to be drawn are available.
Finally, two of the three parties to the 4 August 2004 conversation, being Kosta and Ms Vasil, are unavailable to provide corroborating evidence as to whether that conversation did occur in the terms now alleged. The Court did have in evidence paragraphs [70]-[75] of Ms Vasil's affidavit in these proceedings dated 17 August 2022 (see [76] above). However, those paragraphs, assuming they are truthful, are of no assistance to George. They suggest a quite different sequence of events to that for which George now contends. Given they present a version different from that advanced in the original claim and that now pleaded, they only serve to cast further doubt on George's case. Putting it rhetorically, which, if any, of the versions George has variously pleaded is true? There is no evidence from George seeking to offer any explanation for the variations beyond seeking to blame it on others, an explanation that is both implausible and does George no credit.
[14]
Determination
For the following reasons, the Court finds that the plaintiffs have not proven that George ever held the shares on trust for Ms Vasil. To the extent it is necessary to make a positive finding, the Court finds that at all material times the shares were beneficially owned by George.
Based on the credibility findings at [128] above, the Court does not accept George's evidence that the 4 August 2004 conversation between Kosta, George and Ms Vasil ever occurred. Having regard to the totality of the evidence, the Court finds George's evidence on this topic was a deliberate lie.
By reference to the same credibility findings, the Court also rejects any contention by George that Mr Boland was told about the existence of the trust on the day the HOA was signed and that the HOA was signed at Kosta's house. This proposition was directly put to Mr Boland by Mr Bennett and was denied (Tcpt, 29 July 2024, p. 115(35)-(41)). Consistent with its acceptance of Mr Boland as a witness of truth, the Court prefers Mr Boland's version of events over George's version of events in relation to the circumstances surrounding the execution of the HOA.
Next, other than Mr Boland's erroneous completion of the ASIC form, the documentary evidence before the Court (as opposed to pleadings) is consistent with George being the beneficial owner of the shares and inconsistent with George ever having held any of the shares on trust for Ms Vasil:
1. George accepted during cross-examination that he wrote and sent the document 'Chronology - Investment in Life Order Products Pty Ltd' to the trustee (see [65] - [66] above) to help inform the trustee as to whether the rights to the litigation should be sold or transferred to someone else (Tcpt, 25 July 2024, p.80(40) - 81(1)). One of the 'key points' stated in that chronology was that 'Dimitrovski holds 500,00 shares for which he paid $500,000. Boland holds 150,002 shares.' There was no suggestion in this document prepared by George that any of the shares were held on trust for anyone else.
2. George prepared and signed his 'Statement of Affairs' dated 16 December 2013 (see [58] above). As part of that form George declared that he held a 25% shareholding in the Company as a personal asset
3. The trustee's First Report to Creditors dated 19 February 2014 (see [62] above) which records that George had 500,000 shares in the Company, a statement presumably based on information from George. The shares could not be relevant or available to creditors if they were held on trust for Ms Vasil.
4. On 8 April 2014, George sent an email to the trustee (see [63] above) requesting that any rights to act against the Company be transferred to Ms Vasil. This request is self-evidently inconsistent with the proposition that the shares were held on trust for Ms Vasil. As trustee for Ms Vasil, George would have had a right to take action, if properly maintainable, against the Company. In limited circumstances, Ms Vasil herself would also be able to take action against the Company if George was unwilling or unable to do so (See Alexander v Perpetual Trustees WA Ltd (2004) ALR 417, 429 at [55] (Gleeson CJ, Gummow and Hayne JJ).
5. The letter from Donnelly's Lawyers, George's lawyers at the time, to the trustee dated 9 March 2016 (see [67] above), which requests that the trustees take action against the Company or that the rights to take action be transferred to George. The letter also states that 'M[sic] George Dimitrovski held 500,000 fully paid shares at $1 each.' The letter does not indicate that the shares were held on trust for anyone and does not mention Ms Vasil. I refer to what I have set out in [73] - [74] above concerning George's attempts to explain away this letter. The Court infers that the letter reflects George's instructions to Mr Donnelly and finds by reason of the inference that George knew he owned the shares beneficially and that he could not take action unless the trustee transferred the rights to take action to him.
6. The email from George dated 7 February 2017 to the trustee (see [70] above) asking whether he (George) can litigate the matter himself or whether the trustee had to assign the rights to someone else further establishes George's awareness that any rights to take action lay with the trustee because George knew that the shares were his beneficially and not held on trust for anyone.
Third, I reject the submission that the following pieces of documentary evidence supported the Court finding that Kosta had settled the shares on George to be held for Ms Vasil:
1. The bank statements (see [42] above) do no more than demonstrate that funds in which Kosta had an interest were used to purchase the shares. However, that takes the matter nowhere in circumstances where George and Shano Developments Pty Ltd were joint holders of the account with Kosta.
2. George's reliance on the first paragraph of the original claim (see [11] above) is misconceived because, assuming it to be true, it asserts that the trust was declared by George.
3. While clauses 9.4 - 9.14 of Kosta's will dated 15 December 2004 establish a protective trust in favor of Ms Vasil, that circumstance is too remote to support the case that Kosta created a trust over the shares for Ms Vasil's benefit.
4. For the reasons set out in [49] - [52] above, the minutes of the directors' meeting on 19 September 2005 do not support the case that the shares were held on trust for Ms Vasil.
Finally, for the reasons set out in [131] above, I also reject any reliance by George on the ASIC record completed by Mr Boland which records that George held the shares non-beneficially (and subsequent ASIC iterations of that information) as evidence that the shares were in fact held on trust for Ms Vasil.
[15]
Conclusion
The answer to the separate question is: "The plaintiffs are not entitled to the declaration sought in paragraph 4A of the fourth further amended statement of claim".
Given the concession recorded in [21] above, it follows that, subject to anything further the plaintiffs may wish to say, the proceedings should be dismissed with costs. I will hear the parties on that, the question of costs (including any special costs order that may be sought) and, given the findings I have made concerning George's evidence, the extent to which (if at all) the plaintiffs should be entitled to indemnity from the estate for the costs of the proceedings, including costs to be paid to the defendants. I will make directions for how these, and any other consequential issues identified by the parties, are to be dealt with.
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Decision last updated: 06 February 2025