EQUITY - trusts - Black v S Freedman & Co trust - where companies were operating a Ponzi scheme - where scheme fraudulent in character - whether funds held on Black v S Freedman & Co trust.

Judgment

1. By Originating Process filed on 5 September 2017, the Plaintiffs, Messrs Jahani and McInerney as liquidators ("Liquidators") of Courtenay House Capital Trading Group Pty Limited (in liq) and of Courtenay House Pty Limited (in liq) (together "Companies") seek orders and directions as to the manner in which they should distribute funds held in certain bank accounts to former clients of the Companies. An earlier question whether funds held in an account with the National Australia Bank Limited ("NAB-1 Account") should be distributed to Brexit Investors (as defined) was determined by Brereton J as a separate question in Re Courtenay House Capital Trading Group Pty Limited (in liq) and Courtenay House Pty Limited (in liq) [2018] NSWSC 404; (2018) 125 ACSR 149. I will refer to his Honour's judgment in respect of that question below, since it has significant relevance to the issues that I now have to determine.
2. By an Interlocutory Process dated 31 October 2018, the Liquidators and the Companies sought directions as to these issues under s 90-15 of the Insolvency Practice Schedule (Corporations) being Sch 2 to the Corporations Act 2001 (Cth) and s 63 of the Trustee Act 1925 (NSW). I will refer below to the several directions sought, and will also deal below with other interlocutory applications filed by other parties. The Liquidators take a neutral approach in respect of the controversial issues in this hearing, consistent with the proper approach in a trust dispute where the case is being properly presented by the beneficiaries: Sons of Gwalia Ltd (subject to deed of company arrangement) v Margaretic [2006] FCAFC 92; (2006) 232 ALR 119 at [6]; Re MF Global Australia Ltd (in liq) [2012] NSWSC 994; (2012) 267 FLR 27 at [2]. The Liquidators' submissions also refer to alternative scenarios by which a dividend could be calculated if the monies in the Westpac Accounts (as defined) are found to be held on trust for the Westpac Investors (as defined), including an approach which has reference to capital only or an approach which has regard to the returns received by an investor on their capital, by reference to equitable principles of "hotchpot": see Australian Securities and Investments Commission v Idylic Solutions Ltd [2009] NSWSC 1306; (2009) 76 ACSR 129 at [77]. The Liquidators do not seek to have that question determined in this application.
3. Several parties were joined, in their own right and as representatives of classes of creditors, for the determination of those issues. The First Defendant, J P Melocco Pty Ltd ("JPM"), represents itself and persons who deposited funds into the Companies' Westpac Accounts to participate in investment opportunities other than the "Brexit Special" product, with the exclusion of several categories of persons who are largely separately represented. LifeSmart Trading Pty Ltd ("LifeSmart"), for itself and representing some of the Westpac Investors, contends for the position that the funds deposited into the Westpac Accounts are not held on trust for the Westpac Investors. That finding may be to the advantage of those investors if it has the result that amounts already paid to them cannot be taken into account by the application of "hotchpot" principles in equity, in calculating their returns in the liquidation. The Third Defendants, Peter Caron and Anke Seidlitz, and those represented by them ("Post 21 April 2017 Westpac Investors") are investors who deposited funds after a freezing order took effect over the monies in the Westpac Accounts on 21 April 2017. The Fourth Defendant, Ralph Del Vecchio, and those represented by him ("Mistaken Investors") are persons who sought to invest in the Brexit Special product but mistakenly deposited funds into the Companies' Westpac 2 Account, rather than the NAB-1 Account nominated by the Companies for that product.

Factual background and Liquidators' affidavit evidence

1. The factual background to this application is uncontroversial, and has been addressed in earlier judgments of the Court, including Brereton J's judgment in Re Courtenay House Capital Trading Group Pty Limited (in liq) above. I have drawn on those judgments and the parties' submissions as to the background facts in the summary which follows.
2. The Companies were promoted by Mr Iervasi and later, other individuals, as conducting a foreign exchange trading business (Ex L1, [68]-[84]). The Companies offered several forms of investments to investors, namely "standard products", which comprised three different types of trading strategies described as "Swing", "Extreme" and "Elite" (Ex L1, [93]-[100]), and "special products" which were offered to existing investors based upon current affairs around the world, including the Brexit Special product (Ex L1, at [101]-[107]). It is common ground that the Companies in fact operated as a Ponzi scheme (Ex L1, [1]). Capital deposits from newer investors were used to pay purported returns on investment and purported returns of capital to earlier investors (Ex L1, [171]). Over the life of the scheme between $213 million and $248 million of funds was deposited by investors into the bank accounts of the Companies (Ex L1, [172]). Little foreign exchange trading was done; only about $4 million in payments were made by the Companies into foreign exchange trading accounts; and the Liquidators estimate the Companies incurred an overall loss of $1.2 million from FX trading (Ex L2, [3.32]-[3.34]).
3. It appears that investors who decided to invest in the Companies were generally provided with an application form for the relevant investment strategy which they were asked to complete and return to the Companies (Ex L1, [137]). The Companies did not provide consistent information and documents to investors; it is unclear which investors received what documentation (Ex L1, [125]); and the Liquidators have not located a signed application form for every investor (Ex L1, [138]). The Liquidators have identified several template application forms and trading agreements in the Companies' records (Ex L6, Tabs 2-40). Some of the template application forms for standard products state that the funds deposited by the individual investor are held in the Companies' "trading account held in trust" and others do not expressly make that statement. The Liquidators are unable to confirm that the documents they have located are all the application forms and trading agreements used by the Companies, given the state of the Companies' records (Hedge 7.2.19 [11]).
4. The funds that are in issue in this application were contained in three bank accounts of the Companies. The first bank account, the NAB-1 Account (or Brexit NAB Account) was used to receive investor funds for the special products including, relevantly, the Brexit Special product (Ex L1 [181]). The Liquidators were able to trace substantially all of the funds deposited for the Brexit Special product to the investors who deposited them, and the position in respect of those funds was determined by Brereton J's judgment in Re Courtenay House Capital Trading Group Pty Limited (in liq) above and orders made by his Honour on 22 June 2018. A second account, the "Westpac 1 Account" was used by the Companies to pay returns to investors and to return capital to investors, primarily using funds transferred from a third account, the "Westpac 2 Account" (Ex L1, [300]-[303]) and had an almost nil balance on the Liquidators' appointment (Ex L2, [2.19]). The "Westpac 2 Account" was, from about August 2012, the primary bank account used by the Companies to receive capital deposits from investors in standard products (Ex L1, [304]). Approximately $185 million had been deposited to that account in the period since it was opened and it had a balance of approximately $21 million on the Liquidators' appointment (Ex L2, [2.19]). The Liquidators have prepared summaries of the nature and amounts of the deposits and withdrawals from the NAB-1 Account (Ex L1, [36]) and the Westpac Accounts (Ex L2, [2.19]). The Liquidators also prepared a summary of deposits made by the Post 21 April 2017 Westpac Investors (also referred to as the "Category E" and "Category F" investors) (Ex L2, Appendix F) and a summary of the deposits made by the investors represented by the Fourth Defendant (referred to as the "Mistaken Investors" or the "Category G" and "Category H" investors) (Ex L2, [4.51]-[4.56]).
5. The Australian Securities and Investments Commission ("ASIC") obtained freezing orders over the Companies' bank accounts on 21 April 2017 (MFI 2). The Liquidators note that, on that date, before the freezing orders were made by the Court, a deposit of $100,000 was made by one investor; after the freezing orders were made, three deposits totalling $375,000 were made by three investors; a withdrawal of $60,000 was then made from the Westpac 2 Account, despite the freezing orders; and, after 21 April 2017, five further deposits totalling $300,000 were made into the Westpac 2 Account.
6. Turning now to the affidavit evidence, the Liquidators read Mr Jahani's affidavit dated 13 June 2018, which referred to the separate question determined by Brereton J in Re Courtenay House Capital Trading Group Pty Limited (in liq) above; the steps subsequently taken by the Liquidators to prepare for payment of a distribution to the Brexit Investors; to other issues in respect of the Brexit Investors and to a claim by Mr Kyle Sheridan. Mr Jahani also there referred to the position in respect of the Mistaken Investors, being investors in the Brexit Special product who mistakenly deposited funds into the Westpac 2 Account, and to the position in respect of several potential claimants who will largely no longer press their claims in the liquidation.
7. Mr Jahani's second affidavit dated 7 December 2018 again referred to the background to the liquidation; the separate question heard by Brereton J in respect of the Brexit Investors; and also identified several classes of investors who would be differently affected depending upon the approach adopted to a distribution of the monies held in the Westpac Accounts. That affidavit identified the issues that are now to be addressed in this application, namely whether or not the Westpac Investors are the beneficial owners of the funds deposited by those investors into the Westpac Accounts and the position of the Mistaken Investors and the Post 21 April 2017 Westpac Investors; and also addressed the identification of representatives of those classes and a proposed regime for payment of their costs in respect of this application. Mr Jahani's further affidavit dated 15 May 2019 addressed the potential outcomes for investors of different approaches in a distribution.
8. The Liquidators also read the affidavit dated 21 June 2018 of their solicitor, Mr Hedge, which referred to service of their Interlocutory Process and supporting affidavit on investors; the steps taken in respect of the Mistaken Investors; and the position in respect of several investors who, as noted above, will largely no longer lodge claims in the liquidation. Mr Hedge's second affidavit also dated 21 June 2018 provided further information as to matters addressed in his first affidavit of that date. Mr Hedge's affidavit dated 12 November 2018 dealt with the giving of notice of the Interlocutory Process and evidence in support to creditors of the Companies; and referred to further correspondence with several investors and to several scenarios for distribution of the funds of the Companies addressed in the Liquidators' reports; and to meetings of the committee of inspection.
9. Mr Hedge's affidavit dated 10 December 2018 referred to orders made by Brereton J in respect of a regime for approval and payment of the representative creditors' legal fees and the Liquidators' remuneration, costs and expenses and legal costs. Mr Hedge's further affidavit dated 7 February 2019 identified the trading agreements which had been located by the Liquidators in the Companies' documents, which included additional forms of agreements that had been identified since the Liquidators' first report, and also referred to documents which were provided to investors prior to investing funds with the Companies, including an "Investor Pack", "Corporate Profile" and other documents. By his affidavit dated 23 July 2019, Mr McKenzie, a solicitor acting for the Liquidators, addressed the position in respect of claims by related parties to the Companies, several of which will not be pressed by reason of other developments in the liquidation.
10. The Liquidators also tendered, without objection, their first report to the Court dated 27 October 2017 (Ex L1) and their second report to the Court dated 1 November 2018 (Ex L2). I will also refer below to several affidavits on which representative Defendants rely in dealing with the relevant issues.

Distribution of funds in respect of the Westpac Investors

1. The first direction or order sought by the Liquidators and Companies is directed to the question whether they are justified in distributing the funds deposited by the Westpac Investors (as defined) to those investors, and not to other creditors of the Companies, on the basis that those investors are the beneficial owners of the funds deposited by them into the Westpac Accounts. The term "Westpac Investors" is there defined as: "[T]he investors who deposited funds into the Westpac Accounts (or any of them) to participate in investment opportunities other than the investment identified by the Companies as the "Brexit Investment", excluding: (a) the Non-Brexit Post 21 April 2017 Investors (referred to in Category E of the Liquidators' Second Report); (b) the Non-Brexit Post Final Withdrawal Investors (referred to in Category F of the Liquidators' Second Report); (c) David Sipina and related entities (referred to in Category J of the Liquidators' Second Report); (d) Athan Papoulias and related entities (referred to in Category J of the Liquidators' Second Report)."
2. As matters developed in the hearing, neither the Liquidators or any other party contended that the Non-Brexit Post 21 April 2017 Investors (as defined) or the Non-Brexit Post Final Withdrawal Investors (as defined) should be treated differently from the Westpac Investors, in respect of the existence of a trust over funds in the Westpac Accounts, although those parties contended that they could establish a beneficial interest in funds in the NAB-1 Account. I will address that matter below. No question arises in respect of claims by Mr Sipina and Mr Papoulias and their related entities, because other events in the proceedings have had the result that no such claims would be made.
3. As I noted above, the Liquidators point out that they are unable to confirm that the several forms of agreements that are in evidence are all of the agreements that existed for the Companies, by reason of the difficulties with the manner in which the Companies held their documents. They point out that the two main documents provided to potential investors were a "client information booklet" (Ex L1, [127]) and an "investor pack" (Ex L1, [133]) and point out that the frequently asked questions section of the client information booklet referred to funds being traded in "pools" (Ex L1, [130]). Some investors also received a corporate profile document which referred to losses being "paid out of the trust account" (Hedge 7.2.19 [12]; Ex L6, 259-260). The Liquidators also refer to a practice by which investors were provided with investment application forms for the relevant investment (Ex L1, Annexures H and I; Hedge 7.2.19 [11]). They note that at least the newer investment application forms for the standard products and the special products state that funds deposited by individual investors are held in the Companies' "trading account held in trust" and that multiple accounts from an investor would be "treated separately". They note that earlier investment application forms for standard products state that funds are held in the Companies' "trading account" without any reference to their being held in trust. It appears, from the detailed analysis undertaken by the parties in submissions, that not all later documents referred to funds being held in trust in respect of standard products.
4. Turing now to the position advanced by JPM and LifeSmart; JPM's Interlocutory Process dated 29 January 2019 [1] and LifeSmart's Interlocutory Process also dated 29 June 2019 also address the question whether the Westpac Investors are the beneficial owners of the monies held in the Westpac Accounts. As I noted above, JPM and LifeSmart are in opposed interests in respect of that question. JPM relied on the affidavit dated 5 March 2019 of its director, Mr Melocco, which referred to its investment in several investment products offered by the Companies, and to the deposit of funds to, inter alia, the Westpac 2 Account. Whether an express trust is established
5. Mr Izzo, with whom Ms Michael appears for JPM, submits that the funds paid into the Westpac Accounts were held on trust on several bases. First, he submits that deposits into the Westpac Accounts are subject to an express trust by reason of the language of the forms which accompanied the deposits. JPM submits that, even where the words "in trust" are not used, each relevant form refers to trades being managed "on behalf of" the investor and to "your capital" being returned. Mr Izzo submits that, in the relevant circumstances, an intention to create a trust can be seen from the language used by the parties and from the relevant circumstances. He points out that the more recent standard product investor application forms stated that funds deposited would be "held in trust" and submits that that demonstrates an express intention to create a trust, consistent with the reasoning of Brereton J in Re Courtenay House Capital Trading Group Pty Limited (in liq) above. He submits, and I accept, that there is no evidence which would rebut the stated intention to create a trust in respect of more recent investor application forms for standard products, where pooling of the relevant funds does not do so for the reasons noted below.
6. Mr Izzo also submits that the Court may infer the relevant intention to create the trust in respect of earlier standard product investor application forms which did not expressly refer to a trust, and the nature of the transaction and the circumstances attending the relationship between the parties: Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) [2000] HCA 25; (2000) 202 CLR 588 at [34]. Mr Izzo relies on similar statements to those which Brereton J referred in Re Courtenay House Capital Trading Group Pty Limited (in liq) above as supporting the existence of a trust, including that funds would be "treated separately" where investors had multiple accounts, and that investors' capital would be returned to them and was "your capital". He submits, consistently with the reasoning of Brereton J in Re Courtenay House Capital Trading Group Pty Ltd (in liq) above, and the case law to which his Honour had referred, the fact that funds were pooled and the reference to a trading account in some investor application forms does not exclude a trust.
7. LifeSmart conversely submits that there is no proper basis on which the Court can find or impose a trust where, it contends, the relationship between the Companies and investors is a purely commercial contractual arrangement, by which an investor gives money to the Companies, which they invest in large part at its discretion and, in return, the Companies pay a set return to the investor at a certain time. LifeSmart also submits that the Court should not find that there was an express declaration of trust by the Companies in favour of each investor in the Companies' standard products because the Court cannot be satisfied on the available evidence that the Companies had the requisite clear, explicit and express intention to create a trust in favour of each investor over that investor's funds in its standard products. It submits that, where the relevant forms do not use the words "held in trust" but state that "trades are being managed on behalf of investors" or "capital is returned to investors", those words are insufficient to elevate a debtor and creditor relationship in a commercial context to that of trustee and beneficiary. LifeSmart contends that on the available evidence, the Court also should not impute a trust in favour of each investor in the Companies' standard products.
8. The primary question in determining whether an express trust is established is whether the Companies' and investors' agreement involved an intention (objectively assessed) to create a trust, and a trust may be implied, inferred or imputed on the basis of an assumed intent. In Korda v Australian Executor Trustees (SA) Ltd [2015] HCA 6; (2015) 225 CLR 62, French CJ (at [5]) referred to a summary of the requirements for an express trust in J D Heydon and M J Leeming, Jacobs' Law of Trusts in Australia (7th ed, LexisNexis Butterworths, 2006,) at [306], where the learned authors note that an intention to create a trust may be found based on language which expressly or impliedly expresses that intention, or from the conduct of the parties concerned, but that no trust will be established if there is any uncertainty as to that intention. Hayne and Kiefel JJ also there noted (at [72]) that whether a trust should be found to exist depends on the proper construction of the documents which record the parties' intention, and Gageler J observed (at [109]) that whether recognition and enforcement of a trust is appropriate is to be determined according to ordinary principles of contractual construction.
9. In Re Courtenay House Capital Trading Group Pty Limited (in liq) above, Brereton J (at [19]-[22]) summarised the circumstances in which an express trust will be found, based on an intention to create a trust. His Honour there recognised, with reference to the case law, to the fact that references to intention to create a trust are to be understood as references to the intention imputed to the parties by the objective manifestations of the words they use in their context; that, where the indicia are finely balanced, the necessary certainty of intention will less readily be found, particularly in a commercial context, where the imposition of trust relationships may defeat the interests and expectations of creditors; and that the use of such words as "upon trust" will manifest such an intention.
10. His Honour also observed (at [23]-[27]), with reference to the documents provided to the Brexit Investors, to several matters, in the context of the Brexit Investors, which indicated the existence of an express trust. The first, and to my mind the most significant, was that the formal documents by which the Brexit Investors agreed to the terms of the investment described it as being "held in trust". By contrast, the parties' comprehensive review of the documents available to the Liquidators indicate inconsistencies as to whether the documents relating to the standard products described the monies as held in trust, with some documents containing such a reference and others, including some documents in the later period, not doing so. His Honour there also referred to other aspects of the documents relating to the Brexit Special product which were "less explicit" but which his Honour considered favoured the view that the investments were held in trust, namely that the Companies were to place and manage trades "on behalf of the investor"; it was said that the initial capital and returns would be returned to the investors; the investment was described as "your capital" and there was reference to not mixing funds with other accounts. Here, references to trading "on behalf of the investor" were more common in documents relating to standard products than references to the monies being "held in trust". The other matters to which Brereton J referred are also present in some documents, and seem to me to be consistent with the existence of a trust, but not sufficient to support a finding of a trust, without any clearer reference to the monies being "held in trust", where they are also consistent with a relationship of debtor and creditor.
11. I accept that, as Brereton J observed in Re Courtenay House Capital Trading Group Pty Limited (in liq) above, the reference to a "trading account" and the references to funds being deposited being pooled with those of other investors to trade are not inconsistent with an intention to create a trust. His Honour noted (at [26]) that: "Nor is the reference to a "trading account", or the notion that funds deposited would be pooled with those of other investors to "live trade", inconsistent with an intention to create a trust. Receipt of funds from multiple beneficiaries into a single account is not inconsistent with a trust; the paradigm case is a solicitor's trust account. Segregation of funds, while an indicium of a trust, is not essential, and a trustee is not always obliged to keep the trust funds separate. An agreement that money be paid into a general account does not defeat a trust that would otherwise exist. Particularly in the context of managed investment schemes, the idea of trust money being "pooled" for the purposes of trading, and even being used to meet certain obligations of the trustee, even in connection with other clients, is established. Moreover, a trust may be recognised over the funds when first received, and over any returns from trading in them."
12. By contrast with the position in respect of the Brexit Investors, the documents governing investments in standard products that are in issue in this application did not consistently refer to the investments being held in trust, although some did as I noted above. On balance, it seems to me that neither the declaration or direction sought by the Liquidators or JPM, nor the contrary direction sought by LifeSmart, could be made on the basis of an express trust. Whether an express trust existed would depend on an inquiry of the terms on which a particular investor had invested and, in my view, such a trust would not be established unless at least a reference to the funds being "held in trust" was contained in the relevant documents. It will not be necessary to undertake that detailed inquiry given the findings that I reach on other grounds below. Whether a Quistclose trust is established
13. Alternatively, JPM submits that deposits into the Westpac Accounts are subject to a Quistclose trust. That submission refers to the principles recognised in Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567, where a company declared a dividend and sent a cheque to the appellant bank under the cover of a letter requesting, among other things, that the amount of that dividend be banked into a new account and confirming that the amount would only be used to meet the dividend due on a specified date. The company was later wound up and the bank sought to apply the funds by way of set off against other indebtedness of the company to it.
14. In the House of Lords, Lord Wilberforce (Lord Reid, Lord Morris of Borth-y-Gest, Lord Guest and Lord Pearce agreeing) observed (at 580) that the "mutual intention" of the company and the bank and "the essence of the bargain" between them was that the money advanced would not become part of the assets of the company but that it should have been applied exclusively to the payment of the dividend, disbursing the money to the particular class of creditors so entitled, namely the shareholders. His Lordship distinguished cases where payments were made on the unqualified basis that they should be included in a company's assets and observed (at 581-582) that: "… when the money is advanced, the lender acquires an equitable right to see that it is applied for the primary designated purpose …: when the purpose has been carried out (i.e., the debt paid) the lender has his remedy against the borrower in debt: if the primary purpose cannot be carried out, the question arises if a secondary purpose (i.e., repayment to the lender) has been agreed, expressly or by implication: if it has, the remedies of equity may be invoked to give effect to it, if it has not (and the money is intended to fall within the general fund of the debtor's assets) then there is the appropriate remedy for recovery of a loan. I can appreciate no reason why the flexible interplay of law and equity cannot let in these practical arrangements, and other variations if desired: it would be to the discredit of both systems if they could not … [T]he intention to create a secondary trust for the benefit of the lender, to arise if the primary trust, to pay the dividend, could not be carried out, is clear and I can find no reason why the law should not give effect to it." The House of Lords there found that the money was held on trust by the company as trustee for the shareholders as beneficiaries until such a time that the dividend was paid. When it was impossible to pay the dividend when the company went into liquidation, the money was held on trust for the lender.
15. These principles were noted by the High Court in Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (in liq) [1978] HCA 45; (1978) 141 CLR 335, where Gibbs ACJ (Jacobs and Murphy JJ agreeing) noted (at 353) that Quistclose: "… is authority for the proposition that where money is advanced by A to B, with the mutual intention that it should not become part of the assets of B, but should be used exclusively for a specific purpose, there will be implied (at least in the absence of an indication of a contrary intention) a stipulation that if the purpose fails the money will be repaid, and the arrangement will give rise to a relationship of a fiduciary character, or trust."
16. These principles have been applied in many subsequent cases, including Salvo v New Tel Ltd [2005] NSWCA 281 at [45]-[46], where a trust was found in respect of monies applied by investors to a deposit for the acquisition of a company, and in Raulfs v Fishy Bite Pty Ltd [2012] NSWCA 135, where Campbell JA (Meagher and Barrett JJA agreeing) observed that (at [51]): "Quistclose recognises that sometimes there can be a trust whose terms are that the trust property is to be paid to particular people, and if it is not paid to those people, it is to be held for someone else. That is a matter arising from analysis of the facts of the particular case in accordance with well established principles for identifying when there is a trust, not because there is any separate legal institution known as a "Quistclose trust"."
17. In Re Courtenay House Capital Trading Group Pty Limited (in liq) above, Brereton J found that funds deposited into the NAB-1 Account by the Brexit Investors were held subject to a Quistclose trust. His Honour summarised the requirements to establish such a trust (at [28]) as follows: "Where funds are transferred from one party to another with the intention that they not become part of the general assets of the transferee and are to be used by the transferee for a specific purpose, then - absent contrary stipulation - it is implied that if the purpose cannot be effectuated, the money is held upon trust for the transferor. This involves the application of established trust principles to particular facts." [footnotes omitted] His Honour also observed that, in respect of the Brexit Investors, that: "In the present case, it is abundantly clear that the funds were not intended to become part of the general assets of Courtenay House, but were to be used by the companies to trade on behalf of investors. They were never used for that purpose, and the freezing orders made it impossible that they be so used. This provides an alternative basis for the conclusion that they are held on trust for the Brexit Investors."
18. Turning now to the position in this case, the Liquidators note that, even where documents issued by the Companies to investors did not use the word "trust", language was used on some occasions that was suggestive of funds being used for a particular purpose consistent with the existence of a trust, such as "managing the trades on behalf of the investor". JPM in turn submits that a Quistclose trust should be found because the funds were paid by investors for the exclusive purpose of foreign exchange trading and it was not intended that they form part of the Companies' general assets. They emphasise that each relevant form contained language to the effect that the funds were to be used by the Companies to place trades "on behalf of" the investor. JPM submits that the circumstance that orders have been made winding up the Companies and appointing liquidators (as distinct from the freezing orders, on which it had initially relied) means the funds can no longer be used for the specified purpose and they must be returned to investors.
19. LifeSmart responds that, if the Court accepts its principal contention that the arrangement is a commercial contractual one, and is not satisfied that there was an express trust on an explicit or imputed basis, then there was also no Quistclose trust of each investor's funds. I do not accept that submission, since the factors that may establish a Quistclose trust, including that funds were not intended to become part of the general assets of the Companies and were to be used by the Companies to trade on behalf of investors, may be established even if an express trust would not be established for all purposes.
20. It seems to me that Brereton J's reasoning in Re Courtenay House Capital Trading Group Pty Limited (in liq) above, in respect of the Brexit Investors, is equally applicable in respect of the Westpac Investors. The numerous documents provided to the Westpac Investors, notwithstanding their inconsistencies, emphasise that funds were to be used by the Companies to trade "on behalf of" investors in respect of the standard products, although they were in fact not applied for that purpose in the relevant circumstances. The freezing orders made by the Court on 21 April 2017 (MFI 2), either on that date or when continued, made it practically impossible for the Companies to continue the limited foreign exchange trading that they had previously undertaken, by, inter alia, restraining dealings with funds in the relevant bank accounts and restraining their carrying on an unregistered managed investment scheme, dealing in financial products or making available financial products including trading in foreign exchange on behalf of investors. The appointment of the Liquidators confirmed that impossibility. At least from that time, the purpose for which funds had been made available by the Westpac Investors to the Companies could not be implemented, and it seems to me that the funds were held on trust for those investors. Whether a trust is established under the principles in Black v S Freedman & Co
21. JPM also submits that the funds deposited by the Westpac Investors with the Companies were procured by fraud and are held on trust under the principle in Black v S Freedman & Co [1910] HCA 58; (1910) 12 CLR 105. In that case, the High Court held that money given by a thief to a third party who received that money as a volunteer could be recovered by the victim of the theft although the third party had not participated in the theft. In Wambo Coal Pty Ltd v Ariff [2007] NSWSC 589; (2007) 63 ACSR 429 at [40]-[41], White J (as his Honour then was) summarised the relevant principles as follows: "Where property is stolen, the property is trust property in the hands of the thief … The property is trust property in the hands of the thief because the thief is bound in conscience to hold the property on behalf of its true owner. Whether the trust is characterised as a resulting trust (Robb Evans of Robb Evans & Associates v The European Bank Ltd (2004) 61 NSWLR 75 (at 100-101), or as a constructive trust (Westdeutsche Landesbank v Islington London Borough Council per Lord Browne-Wilkinson at 716), the trust is of an institutional rather than a remedial character. It arises because the conscience of the thief is bound. In the same way, where property is acquired by fraud and there is a complete failure of consideration, the trust arises immediately on the receipt of the property: (Orix Australia Corporation Ltd v Moody Kiddell & Partners Pty Ltd [2005] NSWSC 1209 at [155]-[156] and cases cited). So, in Neste Oy v Lloyds Bank plc [1983] 2 Lloyd's Rep 658, referred to with apparent approval in Re Goldcorp Exchange Ltd [1995] 1 AC 74 at 104; where the payee received payment from its principal of moneys which were not impressed with an express trust, but which were to be used in performance of a contract which the payee knew could not take place, the payee held the payment on trust for the payer from the time of its receipt. The circumstances which created the trust in Neste Oy were that the payee knew (as was the fact) that there could be no performance under its contract, so that there was a total failure of consideration for the payment, and the payment could not in conscience be retained. The trust was an institutional trust which attached to the moneys from the time of receipt."
22. In Re Courtenay House Capital Trading Group Pty Limited (in liq) above, Brereton J similarly observed at [30] that: "Where money has been stolen, or obtained by fraud, it is held on trust by the recipient. Here, contrary to what was represented to investors, funds were procured by the companies, not for the purpose of undertaking foreign exchange trading, but to return capital and return on investment to earlier investors, in the course of a Ponzi scheme. While the non-Brexit investors submitted that whether a trust arose must depend on the facts of each individual case, and that - as the Brexit Investors were all existing clients with an established relationship with the companies - there may well be more to the relationship, in my view it is inconceivable that any would have invested had they understood that their funds were to be used not for foreign exchange trading, but to pay out earlier investors, and that repayment to them would be dependent upon the survival of the scheme. Accordingly, this is a further alternative basis for concluding that the funds invested with Courtenay House were held on trust for the investors." [footnotes omitted]
23. JPM relies, as the factual basis for this submission, on the circumstances that deposits into the Westpac Accounts were procured by the Companies, not for the purpose of undertaking foreign exchange trading, but to return funds to earlier investors in the course of a Ponzi scheme (Ex L1, [171]-[174]). That submission is supported by the Liquidators' observation that the Companies did not carry on the business that the documentation provided to investors informed them was being carried out, and that very little foreign exchange trading was carried on (Ex L1, [6], [51]-[52], [401]-[408]). The correctness of that proposition is starkly illustrated by the Liquidators' observation that between $213 million and $248 million was deposited by investors into the Companies' bank accounts, but only $4 million in payments were made by the Companies into foreign exchange trading accounts, as to which the Liquidators estimate an overall loss of $1.2 million was incurred from foreign exchange trading (Ex L1, [172]; Ex L2, [3.33]-[3.34]). The relevance of the loss for present purposes is not to demonstrate the lack of success of the foreign exchange trading, but instead to emphasise its relatively small scale against the size of the funds raised by the Companies. The Liquidators point out that investors were not repaid funds out of profits generated by trading, but rather out of capital deposited by other investors.
24. LifeSmart responds that the Court cannot be satisfied that an investor's money was stolen or a fraud was committed in relation to that investor such that it operated against the conscience of the Companies and cannot impose a trust under the principle in Black v S Freedman & Co above with respect to any one investor who invested in the Companies' standard products. LifeSmart also submits that there was some trading of investors' funds, and with respect to those investors whose funds were traded, no such trust should be imposed over those funds. LifeSmart submits that those funds (consistently with the statements in the investor pack, client information booklet and correspondence with some investors) were traded in pools where investors' funds were mixed together; there is no evidence before the Court as to which investors had their funds traded by the Companies or in what amount; and, from the point of view of the individual investor whose funds had been traded, there was a foreign exchange trading business. I am not persuaded by these valiant, but hopeless, submissions, for the reasons noted below.
25. It seems to me that such a trust is available to the Westpac Investors in the relevant circumstances. The fact that the Companies conducted some minimal foreign exchange trading, whether in their own names or in the name of one of their directors, Mr Tony Iervasi, is insufficient to displace the essentially fraudulent character of a Ponzi scheme, or the fraud involved in their representation to investors that monies would be used for trading purposes, whereas they were in fact used to pay the returns to investors, exposing all investors in the scheme, and especially later investors, to the substantial risk of its ultimate collapse. It seems to me that the funds invested with the Companies by the Westpac Investors were held in trust for those investors on that basis.

Post 21 April 2017 Westpac Investors

1. By an Interlocutory Process dated 12 February 2019, Mr Caron and Ms Seidlitz, for themselves and represented persons, sought a declaration that the Post 21 April 2017 Westpac Investors are the beneficial owners of the funds deposited by them into the Westpac Accounts on or after 21 April 2017 and an order that the amount of $60,000 withdrawn from the Westpac 2 Account on 21 April 2017 be deducted pro rata across all investor deposits in that account on 21 April 2017. Nine investors fall within the category of "Post 21 April 2017 Westpac Investors". Funds of four of those investors (referred to by the Liquidators as the "Category E" investors) totalling $475,000, were deposited to the Westpac 2 Account on 21 April 2017, the same day as a freezing order was made by the Court on ASIC's application, but before a withdrawal of $60,000 from that account on that day. Funds of five of those investors (referred to by the Liquidators as the "Category F" investors) totalling $300,000 were deposited into the Westpac 2 Account after 21 April 2017.
2. Ms Beechey, who appears for the Post 21 April 2017 Westpac Investors, adopts JPM's submissions as to the existence of separate trusts for each investment, and contends that funds are similarly held on trust for the Post 21 April 2017 Westpac Investors under an express trust, a Quistclose trust or a Black v S Freedman & Co trust. Consistently with that position, the Third Defendants accept that the funds in the Westpac Accounts are also held on trust for the Westpac Investors. Ms Beechey also identifies two additional reasons why the Post 21 April 2017 Westpac Investors submit that the funds they deposited are held on trust. She submits that application forms were updated around May 2015, and that it is highly likely that investments made in late April 2017 were made on the basis of the new application form which stated that the funds were "held in trust", and that the freezing orders made by the Court on 21 April 2017 on ASIC's application made it impossible for the funds deposited on or after that day to be used, supporting the contention that a Quistclose trust operated in respect of them. These matters would be significant if a trust had not been established in respect of the Westpac Investors generally, but do not distinguish the position of the Post 21 April 2017 Westpac Investors where a trust was established in respect of the Westpac Investors generally.
3. All parties now seem to accept that funds held in the Westpac Accounts would be held on trust for the Post 21 April 2017 Westpac Investors if they are held on trust for the Westpac Investors generally, and the Post 21 April 2017 Westpac Investors no longer press a claim that any distribution should be made to them immediately without regard to "hotchpot" principles. LifeSmart contends that the Post 21 April 2017 Westpac Investors are not the beneficial owners of those funds, but by reference to the same matters by which it contends that the Westpac Investors are not the beneficial owners of that fund, and I have not accepted that submission above.
4. It appears that there is still a contested issue as to whether the Post 21 April 2017 Westpac Investors should share in the amounts held in the Westpac Accounts pro rata with the Westpac Investors and I should address that question. Ms Beechey points out that their funds can be separately identified as part of the remaining funds in the Westpac Accounts, subject to the withdrawal of $60,000 to which I referred above. She points out that, by contrast, the Liquidators cannot separately identify the funds deposited by the Westpac Investors generally within the funds in the Westpac Accounts at the commencement of the winding up, due to the numerous withdrawals from those accounts.
5. Ms Beechey submits that the Post 21 April 2017 Westpac Investors should not be subject to a pari passu distribution with the earlier Westpac Investors because that would ignore their relatively clear property interests in particular property by reference to a notion of common misfortune, using the language adopted in Re MF Global Australia Ltd (in liq) above at [78]; because equity does not require that available funds be divided between all people who can establish a claim on a mixed bank account, and the Court is able to give a remedy founded on tracing some individual claims where evidence is available which enables that property to be more specifically traced, relying on Re French Caledonia Travel Service Pty Ltd (in liq) [2003] NSWSC 1008; (2003) 59 NSWLR 361 at [176], [189]; that it would be inequitable for Post 21 April 2017 Westpac Investors to be required to bear losses that were incurred over the seven years before they placed their monies on trust, relying on Re Magarey Farlam Lawyers Trust Accounts (No 3) [2007] SASC 9; (2007) 96 SASR 337 at [119]-[120]; and that the deposits of the Post 21 April 2017 Westpac Investors have not become so intertwined with earlier investments that it is reasonable to regard each investor as having a rateably equal interest in the mixed fund; and a pari passu distribution would extend the effect of the Ponzi scheme to investors who invested after the Ponzi scheme had ceased to operate, by reason of the freezing orders.
6. JPM and LifeSmart are in a partly opposing interest to the Post 21 April 2017 Westpac Investors. JPM submits that the Post 21 April 2017 Westpac Investors are in the same position as the Westpac Investors; their deposits into the Westpac Accounts are held on trust for the same reasons as funds deposited by other investors to the Westpac Accounts; and the Post 21 April 2017 Westpac Investors cannot receive repayment of their investments in full. JPM submits that each deposit into the Westpac Accounts gives rise to a separate trust (relying on Re Courtenay House Capital Trading Group Pty Limited (in liq) above at [36]) and those trusts have become mixed in a fund which is now deficient. JPM also submits that it is not practicable to determine by tracing the entitlements of each investor to that fund, and the trusts should be pooled and directions given to the Liquidators to distribute the fund on the basis that (subject to the operation of the doctrine of hotchpot) each investor has a rateable equal interest in it: Re BBY Ltd (recs and mgrs apptd) (in liq) (No 2) [2018] NSWSC 346; (2018) 363 ALR 492 at [38]-[83]. LifeSmart also submits that the Post 21 April 2017 Westpac Investors are in no different position to the Westpac Investors. It submits that, if the Court finds that there is a trust on any one of the three bases advanced by JPM, it adopts JPM's submissions that the Post 21 April 2017 Westpac Investors are not entitled to a distribution from the Westpac Accounts where those investors receive the full amount of their investment.
7. It seems to me that Ms Beechey's submissions, to which I referred in paragraph 43 above, have real force but, with hesitation, I am ultimately not able to accept them. The only significance of 21 April 2017 is that the Court made a freezing order on ASIC's application on that date, and that does not seem to me to provide a principled basis for distinguishing the position of the Post 21 April 2017 Westpac Investors from that of other Westpac Investors on the immediately preceding days. Other than for that matter, the position of the Post 21 April 2017 Westpac Investors is little different from that of investors on 20 April 2017, or 19 April 2017, or possibly 21 March or 21 February or 21 January 2017. Where that difference is ultimately only a matter of degree, it does not seem to me to be sufficient to support a different treatment of those investors from the other Westpac Investors.
8. I note, for completeness, that the Category E investors accepted that they should share proportionately in the loss of $60,000 to the single withdrawal on that date, spread across all investments made on or before 21 April 2017 in respect of which claims are made (that is, all investors other than the Category F investors). That question does not arise given the finding that I reached above. As I noted above, Ms Beechey did not press a further contention that a distribution to the Post 21 April 2017 Westpac Investors should be ordered at this stage and acknowledged that questions of whether hotchpot should apply to the Post 21 April 2017 Westpac Investors will need to be determined at a subsequent hearing.
9. For these reasons, it seems to me that the Westpac Investors and the Post 21 April 2017 Westpac Investors fall in the same class, and each has the benefit of a separate trust or trusts in respect of their monies, over the funds in the Westpac Accounts which are, regrettably, insufficient to meet their claims in full. The Post 21 April 2017 Westpac Investors would be treated the same way as the Westpac Investors in respect of a distribution and, as Ms Beechey fairly accepted, that distribution would need to be deferred in respect of them until it can be determined whether "hotchpot" principles are applicable, where several of those investors were also investors at earlier times.

Mistaken Investors

1. By an Interlocutory Process dated 30 January 2019, Mr Ralph Del Vecchio, on behalf of the Mistaken Investors sought an order that they are the beneficial owners of the funds initially deposited by them into the Westpac Accounts for the purpose of investing in the Brexit Special product offered by the Companies. As I noted above, the Mistaken Investors are persons who sought to invest in the Brexit Special product, as to which investors were generally required to deposit their funds to the NAB-1 Account, who mistakenly deposited funds to the Westpac 2 Account (Ex L2, [4.46]). The effect of the decision of Brereton J in Re Courtenay House Capital Trading Group Pty Limited (in liq) above is that, if those funds had been deposited to the NAB-1 Account, then the Mistaken Investors would have had the benefit of a trust over the monies held in that account and received payment of all or a substantial portion of those funds.
2. In submissions, the Liquidators note that the Mistaken Investors comprise four investors (in "Category G" in the Liquidators' report) who deposited an amount for the purposes of investment in the Brexit Special product into the Westpac 2 Account rather than the NAB-1 Account, where equivalent amounts were transferred from the Westpac 1 Account into the NAB-1 Account; and five investors (in "Category H" in the Liquidators' report) who deposited funds into the Westpac 2 Account rather than the NAB-1 Account, where no equivalent transfers were made into the NAB-1 Account. The Liquidators recognise, and it is common ground, that at least some of the Category G investors were told by representatives of the Companies that they would arrange transfers of funds deposited into the Westpac 2 Account to the NAB-1 Account, as to which funds ought to have been initially deposited.
3. Mr Del Vecchio read the affidavit of Ms Riordan dated 21 November 2018. Ms Riordan referred to her involvement in investments with the Companies from October 2016 and to her transfer of $100,000 into the Westpac 2 Account in respect of the proposed Brexit Special product. She referred to further correspondence with the Companies, including an email indicating that the funds had been deposited into an incorrect account, a proposal for transfer of the funds to the correct account and a confirmation that the investment had been received. An affidavit dated 22 November 2018 of Mr Del Vecchio's solicitor, Mr Mazzone, annexed correspondence with the Liquidators in respect of the Mistaken Investors' claim that the funds deposited to the Westpac Accounts could be traced to the NAB-1 Account, and banking details relating to the relevant transactions.
4. Mr Del Vecchio also read an affidavit dated 23 July 2019 of Ms Timberg, who is a "Category H" investor. She had sought to deposit funds in the NAB-1 Account, but was not able to do so when she arrived too late at the bank; she then met with an employee of the Companies and left a cheque with her; she later discovered the monies had been deposited to the Westpac Accounts; and an employee of the Companies then explained that he had not known that her cheque had been deposited to the wrong account, and would ensure the cheque was deposited into the correct account. That did not occur. An affidavit dated 4 June 2019 of Mr Peter Teklic, who is also a "Category H" investor, referred to his and his wife having made an investment in the week of 10 April 2017 in the Brexit Special and in the Extreme trading products. Mr Teklic's evidence is that he was not informed of a need to deposit funds to the NAB-1 Account for the Brexit Special product until after he had made the investment when, on 19 or 20 April 2017, he was advised that he should have put the money into a separate account and that the Companies would undertake the transfer internally. That also did not occur.
5. There appears to be no contest as to the proposition raised by Mr Del Vecchio's Interlocutory Process that the Mistaken Investors are the beneficial owners of funds deposited by them into the Westpac Accounts for the purpose of investing in the Brexit Special product. LifeSmart did not press the contrary position in respect of the Westpac Accounts, having regard to the judgment of Brereton J in Courtenay House Capital Trading Group Pty Limited (in liq) above. There does appear to be a contest, not raised by that Interlocutory Process, as to whether the Mistaken Investors have a claim in respect of amounts held in the NAB-1 Account. I will address that contest for completeness.
6. Mr Barlin, who appears for Mr Del Vecchio, submitted that the findings of Brereton J in Re Courtenay House Capital Trading Group Pty Ltd (in liq) applied with equal force to the position where the Mistaken Investors deposited funds to the Westpac 2 Account rather than the NAB-1 Account. As I noted above, no party contended to the contrary and that proposition seems to me that submission is plainly correct. However, the consequence of that proposition in the present circumstances is that funds in the Westpac 2 Account are held on trust, inter alia, for the Mistaken Investors and that does not, without more, establish any claim of the Mistaken Investors to a trust over the NAB-1 Account.
7. Mr Barlin fairly recognised that, in respect of Mr Del Vecchio and others where amounts could be identified as transferred to the NAB-1 Account, and a fortiori in respect of other Mistaken Investors where there was no evidence of such a transfer, any such transfer would take place from the Westpac 2 Account, where funds held on trust for the Mistaken Investors were mixed with funds held on trust for the Westpac Investors generally. However, he refers to Brady v Stapleton [1952] HCA 62; (1952) 88 CLR 322 as authority that equity permits tracing into an "indistinguishable mass", and extending to money paid into a bank account, and also submits that equity allows for tracing intermixed accounts, and equity may grant or recognise a charge over such a fund in order to preserve an equitable interest arising from an addition or contribution to it: Russell Gould Pty Ltd v Ramangkura [2014] NSWCA 310. It seems to me that that submission is not to the point, where the difficulty facing the Mistaken Investors is not merely that their funds were transferred into a mixed fund to which they and the Westpac Investors had claims, but also that that fund was then insufficient to meet the claims against it. The difficulty with that submission seems to me that, while the Companies treated amounts transferred from the Westpac Accounts to the NAB-1 Account as referable to Mr Del Vecchio and several other Mistaken Investors, those investors did not have a sufficient interest in the Westpac Accounts to support that treatment, because their funds had been paid into an account which was then in deficiency, having regard to the claims of the other Westpac Investors against that account.
8. Mr Barlin in turn submits that the transfer from the Westpac 2 Account to the Westpac 1 Account, and then to the NAB-1 Account, which the Companies treated as referrable to Mr Del Vecchio, was a "re-instatement of trust funds" by the Companies to the order of Mr Del Vecchio and other Mistaken Investors. The difficulty with that proposition is that any such reinstatement was not made by the Companies from assets which they owned beneficially, but from the Westpac Accounts which were, as I have found above, then held on trust for the Westpac Investors, and was insufficient to meet their then claims. The position is a fortiori in respect of those Mistaken Investors where no transfer can be identified.
9. JPM submits that the Mistaken Investors are in the same position as the Post 21 April 2017 Westpac Investors and the Westpac Investors; that their deposits into the Westpac Accounts are held on trust for the same reasons as funds deposited by other investors to the Westpac Accounts; and that the Mistaken Investors cannot receive repayment of their investments in full. Mr Izzo submits that, so far as the Mistaken Investors' claim a trust over funds held in the Westpac Accounts, they stand in no better position than the Westpac Investors, and there is no basis for a separate trust different to the trust or trusts that exist in favour of each of the Westpac Investors. Mr Izzo also submits that, while it is accepted that the Mistaken Investors are the beneficial owners of funds they deposited to the Westpac 2 Account, it does not follow that they are entitled to return of those funds in full.
10. Mr Izzo also points out that, so far as the Mistaken Investors seek to assert a trust over the NAB-1 Account, that proposition appears to depend on an inference that the Companies moved amounts paid by the "Category G" Mistaken Investors from the Westpac 2 Account to the Westpac 1 Account and then to the NAB-1 Account. Mr Izzo points out that that inference has the difficulty that there were numerous transfers in and out of the Westpac 2 Account during the period between the initial deposit by each of the "Category G" Mistaken Investors into the Westpac 2 Account and the date of the subsequent transfer from the Westpac 1 Account to the NAB-1 Account referring to that investor. Mr Izzo also submits that there is no means to determine whether the Companies moved the "Category G" Mistaken Investors' funds from the Westpac 2 Account to the Westpac 1 Account prior to the transfer from the Westpac 1 Account to the NAB-1 Account. Mr Izzo also submits, and I accept, that no inference that the Companies acted in accordance with their representations to several Category G Investors that they would transfer their funds to the NAB-1 Account can be drawn, where this application arises from the wider fraud undertaken by the Companies upon their investors. Mr Izzo also submits that there is no basis for an inference that capital relating to the "Category H" Mistaken Investors was moved to the NAB-1 Account, where they cannot point to any earlier transfer between the Westpac 2 Account and the Westpac 1 Account, or between the Westpac 1 Account and the NAB-1 Account, in sums equivalent to their deposits or with narrations linking such transfers to them.
11. LifeSmart accepts that, in accordance with Brereton J's findings in Re Courtenay House Capital Trading Group Pty Limited (in liq) above, the Court should find that there was a trust in relation to the Mistaken Investors. It otherwise adopts the submissions of JPM that the trust on behalf of the Mistaken Investors is a trust over the funds in the Westpac Accounts and that they are not entitled to a distribution from the Westpac Accounts by which they receive the full amount of their investment. The Third Defendants also adopted JPM's submissions in relation to the Mistaken Investors.
12. For the reasons that I have set out above in addressing Mr Barlin's submissions, and for the reasons pointed out by Mr Izzo in submissions, it seems to me that the Mistaken Investors are in the same category as the Westpac Investors, with a beneficial interest in the Westpac Accounts but no entitlement to a beneficial interest in the NAB-1 Account. That result is consistent with the terms of the order sought by the Mistaken Investors in their Interlocutory Process dated 30 January 2019 which did not, in terms, seek an order extending beyond the Westpac Accounts to the NAB-1 Account, notwithstanding the submissions made by Mr Barlin in that respect.

Excluded Defendants

1. The Interlocutory Processes filed by JPM and LifeSmart each excluded, inter alia, Ms Nina Girsa and her mother, Ms Zoja Gromova from the definition of "Westpac Investors". Ms Girsa and Ms Gromova had submitted proofs of debt to the Liquidators in which they claim they invested, in the case of Ms Girsa, $50,000 in the Brexit Special product and $100,000 in standard products and, in the case of Ms Gromova, $100,000 in standard products (McKenzie 23.7.19 [14] and Annexure A). Ms Girsa was the partner of Mr Iervasi at the time of the investment and the Liquidators have identified a concern that funds of the Companies may have been used as the source of the funds for Ms Girsa and Ms Gromova's investment, but have not yet formed a final view (McKenzie 23.7.19 [16]). Ms Girsa and Ms Gromova were not party to these proceedings and were not included in the classes of investors represented by the Defendants. The orders initially proposed in JPM's Interlocutory Process were amended to preserve Ms Girsa's and Ms Gromova's position for future determination if necessary.

Orders

1. For these reasons, I order that: The beneficial owners of the funds deposited in the Westpac Accounts are: (a) the Westpac Investors; (b) the Post 21 April 2017 Westpac Investors; (c) the Mistaken Investors; and (d) Nina Girsa and Zoja Gromova, if they satisfy the Liquidators or the Court that the source of their deposits into the Westpac Accounts was not the Companies' funds. In these orders, defined terms have the meanings in Annexure A below. ANNEXURE A Definitions Companies means, collectively, the Second and Third Plaintiffs Liquidators' Second Report means the Liquidators' Report to Court dated 1 November 2018. Liquidators means Said Jahani and John McInerney in their capacity as joint and several liquidators of the Companies. Mistaken Investors means the investors referred to in categories G and H of the Liquidators' Second Report. Post 21 April 2017 Westpac Investors means the investors referred to in Categories E and F of the Liquidators' Second Report. Westpac Accounts means Westpac account number 265692, Westpac Account number 490253 and Westpac account number 819577 (or any of them). means the investors who deposited funds into the Westpac Accounts (or any of them) to participate in investment opportunities other than the investment identified by the Companies as the "Brexit Investment" product, excluding: (a) the Post 21 April 2017 Westpac Investors; Westpac Investors (b) the Mistaken Investors; (c) Mr David Sipina and related entities (referred to in Category J of the Liquidators' Second Report); (d) Mr Athan Papoulias and related entities (referred to in Category J of the Liquidators' Second Report); (e) Vanessa and Bozo Relja and Nina Girsa (referred to in Category I of the Liquidators' Second Report) and Zoja Gromova.

Endnote

1. The term "Westpac Investors" was defined in JPM's Interlocutory Process in somewhat different terms from the definition in the Liquidators' application, so as also to exclude four other persons. Two of those persons will not now be pressing claims in the liquidation. The position in respect of the third and fourth of those persons will not be determined by this application, since they have not been joined as party to it and have not sought to intervene in it. I will return to their position below. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 02 September 2019