A. Certainly not a fabrication."
53 I should note here that my impressions of all the main witnesses was unfavourable. It may be that the serious illness from which Mr Chapple is suffering affected his evidence. I would discard an alternative view, and that is that he was not careful enough in making his affidavits and did not check dates etc before he swore them, because (a) he is a chartered accountant whose nature is to be cautious; and (b) his evidence is contrary to the documents.
54 It may also be that language difficulties affected the evidence of Messrs Ishida and Hamasaki. Mr Ishida did not give evidence through an interpreter, but I felt from time to time that he did not act responsively to cross examination but that may be because of his imperfect English. Mr Hamasaki could speak better English than he made out. He had the advantage of an interpreter (though the interpreter on the last day was of much more assistance than the previous interpreter), and had the advantage of a little more time to think about the question than the other witnesses. His evidence came out so naively in parts that it was difficult to relate that to a successful Japanese businessman.
55 It may be that I am jumping to a conclusion here as the evidence really did not make it clear whether Mr Hamasaki's wealth was inherited or earned through his own efforts. The Court just does not know exactly what Mr Hamasaki's activities were before his private company in Japan was sold. It may well be that the value of the company was made by his parents rather than himself.
56 However, even if Mr Hamasaki was an experienced businessman in Japanese surroundings, he was clearly not familiar with the Australian scene. I accept his evidence that concepts such as trusts and companies as they are administered in Australia were not familiar to him.
57 Because of my concern about the accuracy of the oral evidence, it is necessary to look closely at the documentary evidence. The plaintiffs relied very heavily on this.
58 It is true that the documentary evidence supports the plaintiffs' position to a great degree and there is no documentary evidence supporting the defendants' case. However, on the defendants' case all the documents were prepared by Mr Hamasaki's accountant who was in a fiduciary position. Over and over again in cross examination Mr Hamasaki said "I trusted him". It almost became a mantra. However, the fact remains that on any story, Mr Chapple was entrusted by Mr Hamasaki to prepare the documents. I was not at all impressed by his response that he, Chapple, was preparing the documents on behalf of the three people. It was all Hamasaki's money and Hamasaki was the principal in the transaction. I will come back to this point. However, for the moment I need to deal with the documentary evidence, and then consider how subsequent dealings of the parties, particularly what occurred in July 1997 when Messrs Chapple and Ishida resigned as directors of Rising Sun Holdings.
59 A trust deed was prepared by Goldsmiths, Solicitors, which deed is dated in typescript 23 November 1994. The settlor was Richard Voo, who was an accountant in association with Mr Chapple. The deed sets up a unit trust and there is no need to go into details on this aspect of it. The schedule sets out that the trustee is Rising Sun Holdings Pty Ltd, ACN 066 150 669, and that the original unit holders are 60 units for Linsel Pty Ltd (ACN 065 894 644) as trustee for the Hamasaki Family Trust, 20 units for Devlon Pty Ltd (ACN 066 776 869) as trustee for the Ishida Family Trust and 20 units for Chapple & Co Pty Ltd as trustee for the Chapple Family Trust. Chapple & Co Pty Ltd was later renamed Evalena Pty Ltd and is the first plaintiff in these proceedings.
60 Mr Voo gave evidence that he could remember handing over two $50 notes in his office and knows that the deed was signed on 23 November. He was not shaken in cross examination but the other evidence made it improbable that this evidence was correct. Mr Conolly, solicitor, gave evidence that from 1992 until 1996 he was an employed solicitor with Goldsmiths. He says that he received instructions from Mr Chapple. He caused trustee companies on behalf of the Ishida and Hamasaki Family Trusts to be established by purchasing shelf companies, and he also prepared and drafted the unit trust deed.
61 He says that on either 30 October 1994 or 30 November 1994 he had a conference at which Mr Ishida, Mr Chapple and Mr Barrie Goldsmith, the principal solicitor of the firm, were present. He says that on 24 November 1994, the contracts for the sale of land were exchanged for the purchase of the Hotel between Rising Sun Holdings Pty Ltd and Axtean Pty Ltd, the then proprietor. He said that he was never told that Rising Sun Holdings was going to borrow money from Mr Hamasaki or any other person, and he was not instructed to prepare any loan agreements. Had he been told that there was a loan he would have advised Mr Hamasaki to retain separate and independent lawyers. He never remembers seeing Mr Hamasaki face to face.
62 At T32 Mr Douglas QC cross examined Mr Chapple on whether the $100 was ever paid by Mr Voo. He said yes it was paid and was paid in cash, but he agreed he never deposited it in the bank account of the company. It possibly went into petty cash of Rising Sun Holdings. Again, this is not the way in which an accountant would normally deal with a trust fund.
63 Mr Tonking cross examined Mr Conolly. Mr Conolly said he surmised that the relevant meeting must have taken place on 30 October and that the date of his note of it, 30 November, was an error. This belief was reinforced by his conclusion that the meeting must have been before the contract for the purchase of the Hotel was exchanged because he knew the stamp duty implications if the trust deed was not executed before that date with the minimal amount in the trust fund. However, having been reminded that 30 October 1994 was a Sunday, and knowing that he never held such meetings in his office on a Sunday, he conceded that the meeting must have taken place on 30 November.
64 Mr Conolly dealt with a provider of shelf companies known as Access Company Planners. On 30 November 1994, at 3.26 pm, Access Company Planners faxed Mr Conolly, notifying him that there were 11 companies on the shelf ready for purchase, including Devlon Pty Ltd and Linsel Pty Ltd. Mr Conolly was asked what explanation he could suggest for the Devlon and Linsel companies still being in the Access Company Planners stable on 30 November when he had already named them in the trust deed signed sealed and delivered on 23 November. He was unable to give a convincing explanation.
65 This evidence, together with the fact that it is very unusual to have a date typed in a pre-prepared document by solicitors makes me find that the trust deed was not signed on 23 November, but rather was signed after 30 November and that accordingly, Mr Voo's evidence cannot be correct.
66 It is now necessary to look at the documentation which followed this initial trust deed.
67 The next relevant piece of paper is a document which purports to be minutes of a meeting of 28 November 1994 of Rising Sun Holdings. The minutes say that the meeting was held at 11 am at 52 Atchison Street, St Leonards and Messrs Chapple and Ishida were present in person, and Mr Hamasaki by telephone link. The minutes record that Chapple proposed that in order to provide the required funding the trust should issue an additional 5,999,900 units of $1 each, that this proposal was agreed to so that in future the Hamasaki Family Trust would hold 3.6 million units, the Ishida Family Trust 1.2 million units and the Chapple Family Trust 1.2 million units. It is significant that the names of the trustees of these Trusts were not included in the minutes as this suggests those names were not known at that date.
68 Mr Hamasaki denied that he was ever told anything about trusts until 8 December. He denies that he ever saw anyone at Arthur Andersen with Messrs Ishida and Chapple. Mr Chapple was not sure which officers of Arthur Andersen he in fact saw.
69 Mr Ishida also says that there was a meeting with Arthur Andersen in mid-November 1994. He also agrees that during that conversation it was openly discussed that there would be a trust which would be buying the Hotel. He also says that at the meeting of 28 November 1994, he communicated with Mr Hamasaki by telephone link and translated what Mr Chapple had said, namely :"Now we have bought the Colosseum Hotel for $6 million. This hotel will be owned by the Trust. That means we need additional units so that they are increased to 6 million units altogether. Therefore automatically, Mr Hamasaki you get 60% of the units and Yuki and I get 20% each. Mr Hamasaki you're here for the Hamasaki Family Trust and Yuki is here for the Ishida Family Trust. I'm here for Evalena."
70 Of course, that could not have been right because Evalena did not come into existence for some months afterwards, but putting aside that as a mere anachronism, he corroborates what Mr Chapple says.
71 In cross examination it was put to Mr Ishida that it was rather uncanny that the conversations he had in his affidavit were almost word for word what was in Mr Chapple's affidavit as if some solicitor had put them in both. Mr Ishida could not explain how this occurred. It was not directly put to him that he had not put the November conversation to Mr Hamasaki, but the way the case was being conducted at that stage was that matters wholly at issue between the parties need not be specifically "Browne and Dunned".
72 I should interpolate here that the failure of Mr Chapple to remember details, such as whom he consulted at Arthur Andersen, his failure to take or keep notes, his obvious reconstruction of many events and apparent corroboration by Mr Ishida in affidavits using almost the identical words used by Mr Chapple in corresponding passages of his affidavit, all tell against me accepting Mr Chapple's evidence. Counsel endeavoured to take the blame for some of this. Whether that confession is accepted or not, the point remains good as a witness must swear on oath as to the conversation he actually had.
73 On 7 December 1994, Goldsmiths wrote to Mr Hamasaki in English and Japanese, reporting the completion of the purchase of the Hotel. On 8 December 1994, Goldsmiths also wrote a similar letter enclosing a discretionary trust deed signed by Mr Chapple as the founder, indicating "This deed remains to be executed by your family company, Devlon Pty Limited on page 26".
74 A third letter, also dated 8 December 1994 was sent by Goldsmiths to Mr Hamasaki, indicating that "As instructed by Brett Chapple, we have arranged the incorporation of an Australian company as your family company. The company is to be the trustee of the Hamasaki Family Trust. Both the company and the Trust have been established as part of the purchase structure for the Colosseum Hotel. If you have any questions in relation to this, would you please contact Brett Chapple or Christopher of our office. The name of the new company is Linsel Pty Ltd." The letter then asked for various forms to be signed and returned including consents to act as director. The documents were received back by Goldsmiths shortly before 20 December 1994 as that is when they were passed on to Mr Chapple.
75 Mr Hamasaki was cross examined on these documents. He said he did not understand the meaning of family company so he rang Mr Ishida and asked him. Mr Hamasaki stuck to his story that the money that he paid was a loan to Rising Sun Holdings.
76 Mr Gye thoroughly cross examined Mr Hamasaki as to whether, if it was a loan, why wasn't he paid interest and why wasn't the interest earned on the loan returned for tax purposes. All Mr Hamasaki would say was that his entitlement was to 6% on 7 and a half million and it was written down somewhere.
77 I now need to digress slightly.
78 Mr Ishida was purchasing a home and had no funds. Mr Hamasaki lent Mr Ishida the money and a document was generated to evidence the loan. I will need to refer to this document later when dealing with a collateral issue. The document is as follows:
"LOAN AGREEMENT
Mr Kaoru Hamasaki agrees to loan an amount of $830,000-00 to Mr Yuki Ishida on 01 December 1994 on the following terms:
Interest rate: Nil % pa.
Repayment terms: Principal to be repaid within 10 years of the date of this agreement.
Dated 14 November 1994."