EVIDENCE - whether Panopus' Scheme Claim inadmissible on grounds of hearsay - whether portfolio statements, correspondence and an Assignment deed admissible as business records - failure to call director of Panopus to give evidence - Jones v Dunkel inference - onus of proving an exception applies

OPES PRIME STOCKBROKING LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 086 294 028)

LEVERAGED CAPITAL PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 097 720 495)

HAWKSWOOD INVESTMENTS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 098 040 683)

OPES PRIME GROUP LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 120 372 223)

JUDGE: GORDON J DATE: 1 MARCH 2012 PLACE: MELBOURNE

INTRODUCTION 1 This is the next in a series of cases dealing with the Opes Prime group of companies (Opes Prime Group). 2 The First to Fourth Plaintiffs (the Scheme Companies) were part of the Opes Prime Group. The group was controlled by Mr Laurie (Lirim) Emini (Mr Emini), Mr Julian Smith (Mr Smith) and Mr Anthony Blumberg (Mr Blumberg). All the Scheme Companies (except Leveraged Capital Pty Ltd (Leveraged Capital)) were majority owned (directly or indirectly) by Messrs Emini, Smith and Blumberg, each of whom was also a director. Mr Blumberg was not formally involved in Leveraged Capital. Hawkswood Investments Pty Ltd (Hawkswood), previously named Leveraged Venture Capital, was the main private investment vehicle for Messrs Smith, Blumberg and Emini. 3 On 4 August 2009, the Court approved Schemes of Arrangement in order to deal with the respective rights of the creditors: Re Opes Prime Stockbroking Ltd (No 2) (2009) 73 ACSR 411. Under the Schemes:

1. the Fifth to Seventh Plaintiffs were appointed Scheme Administrators: cl 2.l(a);
2. certain property was transferred by third parties into the Schemes in consideration for releases given to those third parties: cl 2.1(c);
3. a person with a claim or cause of action against a Scheme Company (Scheme Creditor) could give notice of that claim (Scheme Claim): cl 8.1;
4. the property so transferred was to be distributed to Scheme Creditors with "Established Scheme Claims" in accordance with the Schemes: cl 2.2(g); and
5. the Scheme Administrators were to determine Scheme Claims in accordance with the Schemes and the rules in Schedule 8 of the Schemes: c1 7.1. 4 The Applicant, Panopus Plc (Panopus), held an account with Opes Prime Stockbroking Limited (OPSL) bearing account number 5925 (the Panopus Account). On or about 14 September 2009, Panopus submitted a Final Scheme Proof Form to the Scheme Administrators in which it sought to be admitted as a Scheme Creditor for $5,580,001.64 (Panopus' Scheme Claim). 5 Panopus' Scheme Claim made two claims. First, a claim on the Plaintiffs' Costs Fund in respect of Panopus' costs of proceedings in the Supreme Court of Victoria. That claim was met. Second, a monetary claim for the value, as at 27 March 2008, of 23,250,000 shares in Admiralty Resources NL (the ADY Shares) held in the Panopus Account. The value of the ADY Shares was $5,580,001.64. 6 The Scheme Administrators denied Panopus' Scheme Claim on three grounds: 1. the ADY Shares were, in truth and substance, the shares of Scheme Companies. They were not Panopus' "Deposited Securities" for the purposes of cl 7.2(a) of the Schemes; 2. Panopus was "otherwise associated" with a Scheme Company or the director of a Scheme Company within the meaning of cl 7.2(b) of the Schemes; and 3. even if Panopus had an automatically "Established Securities Claim", the amount of that claim must be reduced to nil, or less than nil, because the Scheme Companies would have claims against Panopus which were greater in value than the value of the ADY Shares. 7 By an interlocutory process dated 3 December 2010, Panopus sought review of the Scheme Administrators' decision to reject Panopus' Scheme Claim in relation to the ADY Shares. For the reasons that follow, I would uphold Panopus' Scheme Claim and direct the Scheme Administrators to accept the Scheme Claim.

RELEVANT PROVISIONS 8 Clause 13.4(a) of the Schemes entitled "Payments to Scheme Creditors" reads: Without limitation to clause 13.4(b), on and from the Release Date the Scheme Administrators will distribute the proceeds of the Scheme Assets and re-deliver the Scheme Securities to Scheme Creditors in accordance with the Schemes only once each Scheme Creditor's Total Established Scheme Claim Amount has been determined. (Emphasis added.) 9 Clause 7.2 of the Schemes, entitled "Automatically Established Securities Claims" relevantly reads: (a) Subject to clauses 7.2(b) and 7.2(c), the Account Holder of a Client Account or, where the Client Account is held by more than one person, the Account Holders together, will have an Established Securities Claim in respect of their Deposited Securities for that account. (b) If an Account Holder of a Client Account is a Related Entity of or is otherwise associated with: (i) a Scheme Company; or (ii) a director or officer (or former director or officer) of a Scheme Company or of a Related Entity of a Scheme Company, the Account Holder and any other Scheme Creditor who asserts any right or interest in a Scheme Claim in respect of that Client Account will not have an Established Securities Claim under clause 7.2(a) or clause 7.2(c) and will not qualify for a distribution of Scheme Assets under the Schemes unless the Scheme Administrators agree or the Panel determines that the claim by the Scheme Creditor is a Scheme Claim, in accordance with the Schemes. … (Emphasis added.) 10 Clause 7.4 of the Schemes, entitled "Matters open for determination", provides that if a Scheme Creditor has an Established Securities Claim under c1 7.2(a), a number of matters are to be determined by agreement of the Scheme Creditor and the Scheme Administrators. These include the Established Securities Claim Amount (cl 7.4(a)) and the Scheme Creditor's Total Established Scheme Claim Amount (cl 7.4(f)). 11 A Total Established Scheme Claim Amount must be determined in accordance with cl 4 of the rules in Schedule 8 to the Schemes: see the definition in cl 1.1. The definition states that a Total Established Scheme Claim Amount may be zero or less than zero. 12 Schedule 8 to the Schemes is entitled "Calculation Rules". Clause 4 of Schedule 8 (Calculation Rule 4) provides as follows: Calculation of Total Established Scheme Claim Amount (a) Subject to clause 4(b) of this Schedule 8, a Scheme Creditor's Total Established Scheme Claim Amount will be the amount equal to the difference between: (i) the aggregate of the Scheme Creditor's Established Securities Claim Amounts and other Established Scheme Claim Amounts; and (ii) the aggregate value of any liabilities of the Scheme Creditor to the Scheme Companies (or any of them) which would have been set-off in reduction of the Scheme Creditors' claim against the Scheme Company in its Winding Up ("Set-Off Amount"), to the extent not taken into account in the calculation of the amount to be calculated under clause 4(a)(i) of this Schedule 8. (b) The Total Established Scheme Claim Amount of each Scheme Creditor with an Established Proprietary Claim will be subject to adjustment in accordance with clause 11.2.

Evidence relied upon 13 The Scheme Administrators relied upon two affidavits sworn by Mr Lindholm, one of the Scheme Administrators. Mr Lindholm was cross examined. The Scheme Administrators also called Mr Emini to give evidence. He was also cross examined. It will be necessary to address the substance of Mr Emini's evidence in outlining the facts giving rise to this dispute. For present purposes it is sufficient to record that Mr Emini is currently incarcerated for offences in relation to the Opes Prime Group. 14 Panopus relied upon three affidavits sworn by its solicitor, Mr Nurse. The Scheme Administrators objected to parts of those affidavits. The next section addresses those objections. Panopus did not call Mr Thomas, the sole director of Panopus.

Nurse Affidavits and the Rulings on Objections 15 First, the affidavit sworn by Mr Nurse on 3 December 2011 (the First Nurse Affidavit). Paragraph 11 and exhibit "MAN-3" contained Panopus' Scheme Claim. The Scheme Administrators submitted that it was inadmissible on the grounds of hearsay: s 59 of the Evidence Act 1995 (Cth) (the Evidence Act). In particular, the Scheme Administrators submitted that Mr Nurse could not give direct evidence of Panopus' Scheme Claim because he did not complete the document and did not state who posted or sent the document to the Scheme Administrators. During the course of trial, the Scheme Administrators' objection was dismissed. These are the reasons for that decision. 16 It was common ground between the parties that these proceedings were final, not interlocutory: cf De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) (2011) 281 ALR 454 at [39]. Accordingly, s 75 of the Evidence Act may be put to one side. 17 To understand the significance of exhibit "MAN-3" it is necessary to consider what transpired in April 2011. At that time, Panopus' Scheme Claim had been lodged but not determined by the Scheme Administrators. On 15 April 2011, Mr Lindholm, for and on behalf of the Scheme Administrators, filed an affidavit in support of an application to have the substantive proceeding adjourned for a period of time so that certain named individuals could be the subject of public examination under ss 596A and 596B of the Corporations Act 2001 (Cth) (the Corporations Act). One of those individuals was Mr Thomas, the sole director of Panopus. Mr Lindholm's April 2011 affidavit was read. Mr Lindholm was not cross examined on that affidavit. Mr Lindholm's April 2011 affidavit stated: 1. Mr Lindholm had read the affidavits of Mr Nurse sworn on 3 December 2010 and 7 March 2011; 2. on 28 February 2011, Mr Adrian Brown, previously a Scheme Administrator, had given notice of his intention to resign as a Scheme Administrator from 4 March 2011; 3. until 4 March 2011, Mr Brown was responsible for conducting the enquiries and investigations "in respect of the Final Scheme Proof Forms submitted by Panopus and another alleged creditor of the Scheme Companies, Felicitas Inc (Felicitas), a Panamanian entity"; 4. since Mr Brown's retirement, Mr Lindholm was responsible for the continuing enquiries and investigations regarding the Panopus and Felicitas' Scheme Claims; 5. the Scheme Administrators received Panopus' Scheme Claim on about 14 September 2009 and identified that a copy of the claim was exhibit "MAN-3" to the First Nurse Affidavit. 18 Mr Lindholm described Panopus' Scheme Claim as follows: [7] The first claim in the Scheme Claim is a claim on the "Plaintiffs' Costs Fund" that was established under the Schemes. This claim was resolved by the Scheme Administrators agreeing to pay Panopus its Plaintiffs' Costs Fund Amount, subject to a reservation of the Scheme Administrators' rights in respect of the other claim made by Panopus in its Scheme Claim. Now produced and shown to me and marked "JRL-2" is a copy of a letter from [the Scheme Administrators' solicitors] to [Panopus' Solicitors] that set out the basis upon which the Scheme Administrators paid Panopus' Costs Fund claim. [8] By marking the "Yes" box in Step 3 of its Scheme Claim, Panopus also seeks to be admitted as a creditor in the Schemes for an amount of $5,580,001.64, in respect of account number 5925 with OPSL. [9] As at the date of swearing this affidavit, the Scheme Administrators have not determined whether Panopus should be accepted as a Scheme Creditor in respect of its Scheme Claim. 19 After setting out the dividends paid to Scheme Creditors, Mr Lindholm stated that on each of the four occasions that dividends were paid, they set aside the amount of the dividend payment that would be due to Panopus if its Scheme Claim was admitted and that would remain the case until Panopus' Scheme Claim was determined, including any determination by the Court. Mr Lindholm then stated that the Scheme Administrators had been unable to make a determination of Panopus' Scheme Claim because they had not concluded the enquiries and investigations that they believed were necessary to gather all of the material facts and circumstances relevant to Panopus' Scheme Claim. 20 Other aspects of the affidavit should be noted. First, Mr Lindholm stated that the investigations in relation to the Panopus' Scheme Claim were connected with the investigations that the Scheme Administrators were conducting in relation to a Scheme Claim submitted by Felicitas. Second, the steps that the Scheme Administrators had taken to date to determine whether the Panopus and Felicitas' Scheme Claims should be accepted were outlined. Those steps included correspondence between the Scheme Administrators' solicitors and Panopus' solicitors, obtaining transcripts of examinations conducted by the Australian Securities and Investments Commission under s 19 of the Australian Securities and Investments Commission Act 2001 (Cth) and meeting with both Mr Emini and Mr Smith. Third, Mr Lindholm stated that given the investigations undertaken at that time, the Scheme Administrators believed that either Hawkswood or Leveraged Capital were likely to be the beneficial owners of the ADY Shares and that the Scheme Administrators were therefore likely to have a claim against Panopus in relation to those shares. Fourth, to complete their investigations regarding Panopus' Scheme Claim, the Scheme Administrators believed it was necessary to conduct public examinations of at least Mr Thomas and the directors of the Scheme Companies. At that time, it was anticipated that the public examinations would inform the Scheme Administrators of the true beneficial ownership of the ADY Shares, the strength of the claim against Panopus in respect of the ADY Shares and the links between Mr Thomas and Panopus on the one hand and the staff and directors of the Scheme Companies on the other hand. 21 The substantive hearing was adjourned. The public examinations were held in July and September 2011. The substantive trial was adjourned to 15 February 2012. 22 As is readily apparent, the existence of the Panopus' Scheme Claim was never a fact in dispute. It was the reason for these proceedings being issued by Panopus and was the basis of the Scheme Administrators' application for adjournment of the substantive hearing. The Scheme Administrators' objection at trial to the tender of Panopus' Scheme Claim was a fundamental change in the conduct of their case. Such a change should not be and cannot be entertained at this late stage: see, by way of example, s 37M of the Federal Court of Australia Act 1976 (Cth). There was no dispute that Panopus' Scheme Claim was lodged with the Scheme Administrators, considered by them and ultimately rejected. The existence of Panopus' Scheme Claim and its treatment by the Scheme Administrators was not in dispute. For those reasons, the Scheme Administrators' objection to the tender of Panopus' Scheme Claim was dismissed. 23 A second affidavit was sworn by Mr Nurse on 7 March 2011 (the Second Nurse Affidavit). The Scheme Administrators objected to paragraphs 7 and 8 and exhibits "MAN-12" and "MAN-23". No objection was taken to the documents being admitted for the purpose of proving that the documents were sent. Objection was taken if Panopus sought to rely on the documents for any other purpose. The documents comprised a letter dated 23 December 2009, addressed to the Scheme Administrator's solicitors (23 December 2009 Letter) and the attachments to that letter. Paragraph 8 of the affidavit was in the following terms: I believe that the attachments to the 23 December 2009 Letter, relevant to the instant application, which are now produced and shown to me marked "MAN-23", are as follows: (a) Opes Prime Portfolio Statements between 31 July 2007 and 31 March 2008; (b) Opes Prime Portfolio Statement (1 November 2007 to 30 November 2007); (c) Opes Prime Portfolio Statement (1 August 2007 to 31 August 2007); (d) Opes Prime Portfolio Statement (1 July 2007 to 31 July 2007); (e) Email from Lirim Kamberi of Opes Prime to Phillip Thomas, dated 8 June 2007; (f) Document entitled "Assignment Deed", dated 12 November 2007; (g) Email to Anthony Blurnberg, dated 25 March 2008; and (h) Letter from Highfields Capital to Hawkswood Investments Pty Ltd, dated 2 April 2007. 24 The documents fall into a number of categories - portfolio statements, correspondence and an Assignment Deed. 25 First, the portfolio statements. There is no dispute that the documents are relevant. On their face, the portfolio statements (documents (a)-(d)) appear to form part of the records belonging to or kept by the Opes Prime Group in the course of or for the purpose of its business: s 183 of the Evidence Act. Each document is on the letter head of Opes Prime. Each contains a previous representation made in the course of that business about the state of account number 5925: s 69(1)(b) of the Evidence Act. Each is addressed to Panopus in respect of an identified account and covers an identified period. The portfolio statements for account number 5925 are admissible: s 69(2) of the Evidence Act. 26 The documents bearing the paginated numbers 000171 - 000178 (inclusive) are not admissible. There is nothing on the face of each document or elsewhere from which an inference may properly be drawn that the document is a business record of a company in the Opes Prime Group. The remaining pages (paginated 000179 - 000182 (inclusive)) are admissible on the same grounds as the portfolio statements. They comprise a string of emails between Mr Thomas (the sole director of Panopus) and an Opes Prime employee in relation to the opening of the Panopus Account with Opes Prime.

Entities and Person 27 As noted above, the Scheme Companies were part of the Opes Prime Group. The group was controlled by Messrs Emini, Smith and Blumberg. All the Scheme Companies (except Leveraged Capital) were majority owned (directly or indirectly) by Messrs Ernini, Smith and Blumberg, each of whom was also a director. Mr Blumberg was not formally involved in Leveraged Capital. Hawkswood was the main private investment vehicle for Messrs Smith, Blumberg and Emini. 28 Admiralty Resources NL (ADY) is a publicly listed mining company. Mr Philip Thomas (Mr Thomas) was the former chief executive officer of ADY. Mr Thomas was also a director of ADY from 22 April 2003 until 27 November 2008. Mr Blumberg was a director of ADY from 15 December 2006 until 3 March 2008. 29 Felicitas is a Panamanian company. Mr Blumberg's father (Basil Blumberg) was a director of Felicitas. On 9 February 2005, Felicitas and Hawkswood entered into an Australian Master Securities Lending Agreement (AMSLA). Under the AMSLA, Felicitas agreed to lodge securities (in this case the A$10 Notes, paid to A$5.10, in ADY) with Hawkswood. Under the AMSLA, Hawkswood became the legal and beneficial owner of all the securities and was at liberty to do with them as it wished. 30 Riqueza Holdings Ltd (Riqueza) was a private British Virgin Islands company owned by Mr Jay Moghe, the manager of OPSL's operations in Singapore. It was not part of the Opes Prime Group. Riqueza had various accounts with OPSL. Messrs Smith, Blumberg and Emini were authorised representatives on a number of Riqueza's accounts with OPSL.

ADY Shares 31 In February 2005, Leveraged Capital purchased 87,500,000 ADY options from MTM Holdings (Australia) Pty Ltd (MTM). The ADY options were exercisable at 10 cents per share and expired on 10 December 2007.

12.5 Million ADY Shares 32 On 1 March 2007, Leveraged Capital transferred 22.5 million ADY options to Hawkswood. 33 On 23 April 2007, Amanda Roberts of the Opes Prime Group emailed Mr Thomas. All email communications with Mr Thomas were to his email address at ADY. A copy of the email was provided to Mr Blumberg. The email was entitled "Announcement to market". In the email, Ms Roberts wrote: Phil, a favour if you will, can you complete the form that we need to submit to the ASX with regards to Ant transferring 10 mill ADY shares, and scan and email to us, much obliged! It was common ground that the reference to "Ant" was a reference to Mr Blumberg. Twenty five minutes later, Mr Thomas responded "Will do". Later that day, Ms Roberts provided the ABN for Hawkswood to Mr Thomas. 34 The next recorded communications between Ms Roberts and Mr Thomas took place on 2 May 2007. At 11:13am, Ms Roberts replied to the above emails stating "hi Phil, is this all ok?". At 12:47pm, Mr Thomas replied by asking: Did the $2,250,000 go yesterday to [ADY] - to exercise the hawkeswood (sic) options? 35 Ms Roberts then emailed Mr Blumberg and Elizabeth Bauer asking "hi, did this occur yesterday? …". There was no evidence of Ms Bauer's role or who was her employer. Mr Blumberg then responded saying: sorry - my fault I was meant to set up this as it was 10 mil for Hawkswood and 12.5 mil for Phil… 36 Ms Bauer then sent an email to Mr Blumberg and Ms Roberts as follows: One question do we need to pay any money, if so how much and to whom.......just so I can get the funds that are needed. 37 Mr Blumberg explained the position as follows: We should have AU$1.4 mil in from the US and the idea is for us to convert 10 mil options (10 cents) a mil in consideration and to fund Phil to convert the balance of 12.5 mil options (AU$1.25mil). I think this is the 2.25 that Phil is referring to … So in summary: AU$1 mil from Hawkswood AU$1.25 mil from Opes in Phil's margin account … 38 By 4:00pm on 2 May 2007, Ms Roberts had responded to Mr Thomas and Mr Blumberg as follows: right-o, we are sorted, OMT form has gone express post to computershare, done, funds are being sought for the below deposit, done, RTGS payment done tomorrow once funds received, sorted…gosh im (sic) good to you 39 Indeed, the corporate register for ADY maintained by Computershare Investors Services Pty Ltd (Computershare) records Hawkswood having converted 10 million options to shares on 1 May 2007 and the transfer of 12.5 million options on 4 May 2007. 40 On 7 June 2007, Ms Rose Thring, Operations Risk Manager for OPSL, emailed Mr Blumberg. The subject matter of the email read "Pls ask Phil for the SRN re 12,500,000 ADY - Thanks Rose". Mr Blumberg forwarded the email to Mr Thomas and asked him: Please could you arrange to transfer the 12,500,000 ADY as per Rose's email attached. (Conversion of the options)… 41 Mr Thomas replied as follows: Hi See below: Company Name: ADMIRALTY RESOURCES NL Holder Name: PANOPUS PLC Holder Identifier: I0030039491 Today's Date: 07 Jun 2007 … Balances as of 07 Jun 2007 … Security Class Register Balance Price Value UNL OPTS 30/11/07 EX @ $0.10 QLD 0 FULLY PAID ORDINARY SHARES QLD 12,500,000 AU$0.21 AU$2,625,000.00 … Regards Phil Thomas 42 On 7 June 2007, Mr Blumberg forwarded the email chain to Ms Thring. Ms Thring forwarded the email to Amber Matthews. Ms Matthews' role and employer also was not disclosed. Ms Thring told Ms Matthews that the shares were to be transferred to Panopus and that "we paid to exercise the options". Ms Matthews questioned Ms Thring about whether they had signed instructions from the client. A copy of the email was sent to a Lirim Kamberi. Ms Thring responded stating that: [Mr Blumberg] requested us to pay for these options to be exercised and he sent me the SRN from the Client. Please send the client the collateral lodgement form if that is what you need. 43 The only response tendered in evidence was a query from Lirim Kamberi to Mr Blumberg in the following terms: What exactly is required with this Panopus share holding in SRN? Apparently, we have paid for the option exercise, but everyone seems vague and unsure how to proceed with it. Please advise. No response was in evidence. 44 Panopus' Portfolio Statement issued by Opes Prime records that on 15 June 2007 12.5 million ADY "units" were transferred into Panopus' account with Opes Prime. The entry recorded, in part: Long Transactions Trade Date Settle Date Transaction Details Units ASX Code 15/06/07 15/06/07 L - Stock Transfer in from SRN I0030039491 12,500,000 ADY 08/08/07 08/08/07 L - Adjust interest rate From 9.25% to 9.50% 0 AUD … (Transaction Key: L=Long …

Mr Emini's evidence was that the notation "L" for "Long" meant that the shares were held as security for a stock loan. The Portfolio Statement does not describe the "units". It was common ground that the reference to "units" was in fact a reference to shares in ADY. 45 As noted above, Mr Emini was called to give evidence as part of the Scheme Administrators' case. Mr Emini was a founder and director of the Scheme Companies. 46 The evidence Mr Emini gave in a witness statement in relation to the 12.5 million ADY options and shares is substantially irrelevant. Much of the evidence given was in answer to a factual scenario that was expected to be advanced by Mr Thomas but which was not the subject of evidence at trial. That evidence may be put to one side. 47 At its highest, Mr Emini's evidence was that he could not recall why Leveraged Capital transferred the 12.5 million options to Panopus. Indeed, Mr Emini's evidence during cross examination was that he had no direct knowledge of, or involvement in, the transfer of the options from Leveraged Capital to Panopus. He could not tell the Court whether the transfer was recorded in the books of the Opes Prime Group. Mr Emini's evidence was that he did not believe that Leveraged Capital received any consideration for the transfer but that the transfer was not a gift. In relation to the funds necessary for exercising the options, Mr Emini's evidence was that he recalled that funds were advanced or loaned for that purpose but could not recall whether the borrower was Mr Thomas or Panopus. No documentary evidence was tendered by the Scheme Administrators in relation to these matters. Finally, Mr Emini gave evidence during cross examination that Mr Smith was able to transfer options from Leveraged Capital on his own authority without consulting Mr Emini. 48 Mr Emini's evidence was unsatisfactory. It was largely based on conjecture. He had no direct knowledge of the facts in dispute. Moreover, his evidence was inconsistent with the Portfolio Statement issued by Opes Prime in the name of Panopus. 49 Mr Emini has been convicted of breaches of directors' duties in relation to the Opes Prime Group and is currently serving a two year sentence with release on a recognisance after one year. He pleaded guilty to charges of using his position as director of Leveraged Capital dishonestly with the intention of gaining an advantage contrary to s 184(2)(a) of the Corporations Act and being reckless and failing to exercise powers and discharge duties as director in good faith in the best interests of OPSL contrary to s 184(1) of the Corporations Act. 50 Mr Emini gave evidence before this Court willingly on the proviso that the Court issued him a certificate under s 128 of the Evidence Act. Indeed since the collapse of the Opes Prime Group, it appears that Mr Emini has cooperated with and made full disclosure to, the Australian Securities and Investments Commission and the Crown. His cooperation and disclosure has been described as being "at the highest level": R v Emini & Blumberg [2011] VSC 336 at [31]-[32]. 51 Panopus did not call Mr Thomas to give evidence. No explanation was given for not calling Mr Thomas. The Scheme Administrators submitted that the Court should draw the inferences referred to in Jones v Dunkel (1959) 101 CLR 298. That submission hides more than it reveals. 52 As Dixon CJ said in Jones v Dunkel at 304-305: … [W]e are not concerned with a choice among rival conjectures. In an action of negligence for death or personal injuries the plaintiff must fail unless he offers evidence supporting some positive inference implying negligence and it must be an inference which arises as an affirmative conclusion from the circumstances proved in evidence and one which they establish to the reasonable satisfaction of a judicial mind. It is true that "you need only circumstances raising a more probable than inference in favour of what is alleged". But "they must do more than give rise to conflicting inferences of equal degree of probability so that the choice between them is mere matter of conjecture". … "All that is necessary is that according to the course of common experience the more probable inference from the circumstances that sufficiently appear by evidence or admission, left unexplained, should be that the injury arose from the defendant's negligence. By more probable is meant no more than that upon a balance of probabilities such an inference might reasonably be considered to have some greater degree of likelihood." But the law which this passage attempts to explain does not authorise a court to choose between guesses, where the possibilities are not unlimited, on the ground that one guess seems more likely than another or the others. The facts proved must form a reasonable basis for a definite conclusion affirmatively drawn of the truth of which the tribunal of fact may reasonably be satisfied. (Emphasis added and footnotes omitted.) 53 What then is the position in relation to the ownership of the 12.5 million ADY Shares? In my view, none of the facts set out above provide any or any sufficient factual foundation to support an inference that the 12.5 million "units" in ADY recorded in the Portfolio Statement issued by the Opes Prime Group in the name of Panopus were held beneficially for the Opes Prime Group or a member of that group: Jones v Dunkel at 304-305. Indeed, the evidence taken at its highest does not raise (even if it were permissible) the possibility of a choice between guesses.

20 Million ADY Shares 54 On 17 October 2007, Mr Thomas sent an email to Mr Blumberg entitled "Panopus Plc - transfer of shares" which stated: I can not tell if you have transferred the 25 million shares I am holding for you beneficially. Can you advise so that i (sic) can transfer them if this is ok? 55 On 17 October 2007, Panopus' Portfolio Statement maintained by OPSL recorded only the entries set out at [44] above. 56 A Portfolio Statement for the period 28 June 2006 to 27 March 2008 recorded subsequent entries which included: Long Transactions Trade Date Settle Date Transaction Details Units ASX Code … 31/10/07 31/10/07 L - Stock Transfer in Stock moved from Riqueza Holdings (No 2 Account) to Panopus PLC 20,000,000 ADY … 17/12/07 17/12/07 L - Stock Transfer Out 9,250,000 ADY Off-market transfer Forest Nominees - transfer via HSBC Australia 17/12/07 17/12/07 L - Fees for Off-market transfer 50 AUD 31/12/07 31/12/07 L - Interest 0.2 AUD 31/01/08 31/01/08 L - Interest 0.42 AUD … 25/03/08 25/03/08 L - Fund Deposit 53 AUD … (Transaction Key: L=Long …

Portfolio Valuation Long Summary ASX Code Total Units Market Price Total Market Value LVR% Available Margin ADY 23,250,000 0.240 $5,580,000.00 65.00% $3,627,000.00

57 The Scheme Administrators submitted that Panopus held the 20,000,000 ADY shares transferred to it on 31 October 2007 beneficially for an entity associated with Mr Blumberg. I reject that submission. First, the facts establish that the 20,000,000 ADY shares transferred to Panopus on 17 October came from the Riqueza No 2 account. Riqueza was not part of the Opes Prime Group. It was a company owned by Mr Moghe: see [30] above. Mr Moghe was not called to give evidence. Even if I were to accept Mr Emini's evidence that the Riqueza No 2 account was controlled by Mr Smith, Mr Blumberg and Mr Emini, that evidence does not support an inference that the ADY shares in the Panopus Account were beneficially held by Panopus for the Opes Prime Group or a member of that group. What "control" means and the extent of the control was never explained. The established facts do not prove and provide no basis for inferring that the 20 million ADY Shares transferred to Panopus were transferred on condition or subject to some arrangement that the shares were held beneficially for the Opes Prime Group or a member of that group. 58 As Counsel for the Scheme Administrators properly conceded, the Scheme Administrators' claim to the 20 million ADY Shares depended on the terms of the 17 October email: see [54] above. The Scheme Administrators placed considerable reliance upon the contents of the email. But the terms of the email are less than clear. First, the email does not identify the shares being referred to. Next, it refers to 25 million shares. There is no recorded transaction in relation to 25 million shares. Finally, the last sentence concerns a transfer by Panopus with the apparent consent of Mr Blumberg. No evidence was adduced as to the nature or identity of the transfer being referred to. Indeed, when Counsel for the Scheme Administrators was asked to explain the significance of that last line, he responded "[w]e don't know, and there's no evidence about it, and if Mr Thomas had deigned to give evidence, you would know about it." Panopus did not call Mr Thomas, the author of the email. So much is true. But what is also true is that the Scheme Administrators did not call Mr Blumberg, the recipient of the email. In April 2011, the Scheme Administrators informed the Court that they intended to seek to examine Mr Blumberg and to do so in the context of ascertaining the true ownership of these ADY shares and the relationship if any between Panopus, Mr Thomas and the Opes Prime Group. On 11 November 2011, Mr Lindholm informed the Court that: The Scheme Administrators had intended examining Mr Anthony Blumberg, but on 30 November (sic) 2011, they reached a confidential settlement with Mr Blumberg (and his associated interests) and no longer intend examining him. On 3 November 2011, the Scheme Administrators indicated to Panopus that they had rejected its Scheme Claim. Details of the "confidential settlement" were not in evidence. Why Mr Blumberg was not called to give evidence was not explained. 59 The other evidence referred to by the Scheme Administrators may also be put to one side. It included: 1. In February 2005, Felicitas purchased $20 million worth of converting notes in ADY. Funding for the purchase came from a loan from Leveraged Capital. That loan to Felicitas was subsequently transferred to Hawkswood. 2. On 16 February 2006, Hawkswood loaned $500,000 to ADY. That loan was recorded in Hawkswood's books and records as "Loan to Felicitas Inc. In regard to ADY". 3. On 31 March 2007, ADY reduced its loan from Hawkswood by $7,107,841. Also on that date, Felicitas increased its loan from Hawkswood by the same amount. 4. On 27 April 2007, Felicitas sold 7,107,840 ADY convertible notes to Riqueza for $18,124,992. Mr Emini gave evidence that between the date of that sale and September 2007, the notes were converted to shares in ADY. Riqueza then sold most of those ADY shares. Those facts, taken at their highest, do not fill the evidentiary void identified above.

FIRST ISSUE - WAS PANOPUS THE TRUE OWNER OF THE SECURITIES? 60 Clause 7.2(a) of the Schemes provides that "the Account Holder of a Client Account ... will have an Established Securities Claim in respect of their Deposited Securities for that account" (emphasis added). As noted at [9] above, that clause is expressly subject to cll 7.2(b) and 7.2(c). 61 The term "Account Holder" is defined in cl 1.1 as being a "Scheme Creditor that is a holder of a Client Account as at the Record Date". A Client Account is one that is "listed in Schedule 9": see the cl 1.1 definition of "Client Accounts". 62 Panopus' account is listed in Schedule 9 at page 124 of the Schemes. There is no dispute that Panopus was the Account Holder of a Client Account and that, consistent with cl 7.2(a), Panopus has an Established Securities Claim in respect of "their Deposited Securities" (emphasis added). ("Deposited Securities" is defined in the Schemes (cl 1.1) and includes the ADY Shares on Panopus' Portfolio Statement for the period 28 June 2006 to 27 March 2008). At issue is whether the ADY Shares were "their" (that is, Panopus') shares. The Scheme Administrators submitted that the ADY Shares were not "their" shares. Panopus submitted that they were. 63 For the reasons given at [47]-[53] and [57]-[59] above, I reject the Scheme Administrators' contention that the 12.5 million "units" in ADY held in the name of Panopus were not "their" (i.e. Panopus') Securities.

SECOND ISSUE - WAS PANOPUS "OTHERWISE ASSOCIATED" WITH THE SCHEME COMPANIES OR THEIR DIRECTORS? 64 As noted at [9] above, clause 7.2(a) was expressly subject to cll 7.2(b) and 7.2(c). Clause 7.2(c) is not relevant for present purposes. Clause 7.2(b) provided that: If an Account Holder of a Client Account is a Related Entity of or is otherwise associated with: (i) a Scheme Company; or (ii) a director or officer (or former director or officer) of a Scheme Company or of a Related Entity of a Scheme Company, the Account Holder and any other Scheme Creditor who asserts any right or interest in a Scheme Claim in respect of that Client Account will not have an Established Securities Claim under clause 7.2(a) or clause 7.2(c) and will not qualify for a distribution of Scheme Assets under the Schemes unless the Scheme Administrators agree or the Panel determines that the claim by the Scheme Creditor is a Scheme Claim, in accordance with the Schemes. (Emphasis added.) 65 "Related Entity" was defined in cl 1.1 of the Schemes as being any Related Body Corporate, as well as any partner, past or present officer, employee or agent of the person or of its Related Body Corporate. "Related Body Corporate" had the same meaning as in the Corporations Act: cl 1.1 of the Schemes. In essence, the Corporations Act provides that bodies corporate are "related" when they are in the relationship of holding company and subsidiary company or share same holding company: ss 9 and 50 of the Corporations Act. It was common ground that Panopus was not a Related Entity in the requisite sense for the purposes of cl 7.2(b). 66 "Otherwise associated" was not defined in the Schemes. The Scheme Administrators submitted that the facts set out above (see [27]-[59]) demonstrate why Panopus was "otherwise associated" with a Scheme Company or a director of a Scheme Company. Specifically, the Scheme Administrators submitted that the role of Panopus in holding shares at the directions of the directors of the Scheme Companies, the significant investment by the Scheme Companies in ADY, a company managed by Panopus' owner and director, and the fact that Messrs Thomas and Blumberg both sat on the board of ADY placed Panopus in the category of "otherwise associated" with a Scheme Company or a director of a Scheme Company. 67 For the reasons set out at [47]-[53] and [57]-[59] above, I reject the submission that Panopus "held" shares at the "direction" of the directors of the Scheme Companies. That being the case, the facts that Panopus and ADY shared a common director (Mr Thomas), ADY and the Scheme Companies shared a common director (Mr Blumberg) and that the Scheme Companies invested in ADY, are insufficient bases for concluding that Panopus was "otherwise associated" with a Scheme Company or a director of a Scheme Company. 68 In relation to cl 7.2(b) of the Schemes, the Scheme Administrators submitted that: Panopus [had] the ultimate onus of establishing that it [was] not "otherwise associated with a Scheme Company or a director or officer (or former director or officer) of a Scheme Company or of a Related Entity of a Scheme Company" such that it does not fall within cl 7.2(b) of the Schemes because the intention of the Schemes was for a prospective Scheme Creditor (such as Panopus) to come under that obligation if the Scheme Administrators identify circumstances giving rise to the exception being enlivened. In support of that contention, the Scheme Administrators referred to Chugg v Pacific Dunlop Limited (1990) 170 CLR 249. I reject that submission. 69 First, the Scheme Administrators did not identify any circumstances to give rise to the exception: see [27]-[59] above. Secondly, the decision in Chugg does not assist. It was a statutory interpretation case concerned with the onus of proof in a criminal case and which, unsurprisingly, held that the where some matter is said to be an exception to an offence, the question is whether a legislative intention "to impose upon the accused the ultimate burden of bringing himself within it" may be discerned from the express words of the statute or by implication: at 257. In other words, no hard and fast rule. The context in Chugg was fundamentally different. Not only did it concern the criminal law but there was a specific statute that addressed the question of onus in relation to exceptions, exemptions, provisos and the like: see 257-258. Third, the Scheme Administrators did not refer the Court to any case where the principles in Chugg had been applied in areas other than statutory interpretation.

PANOPUS' AUTOMATICALLY ESTABLISHED SCHEME CLAIM 70 Having answered the First Issue and Second Issue in the negative, Panopus has an Established Securities Claim in respect of the ADY Shares. That conclusion is consistent with the manifest intention of the Schemes that the claims of clients of OPSL would be automatically recognised based on their net account balances. The Explanatory Statement to the Schemes of Arrangement dated 3 July 2009 (Explanatory Statement) provided (at p 61), in relation to claims in respect of Deposited Securities: The Liquidators consider that many of the Proprietary Claims and damages claims of former clients of the Scheme Companies would be likely to succeed as against the Scheme Companies if the current litigation proceeded to trial. On that basis, except as provided below in this Section 10.1, a Scheme Creditor with Deposited Securities that has made or may potentially make a damages or Proprietary Claim against a Scheme Company for the loss of the Deposited Securities: (a) will have their damages claims against the Scheme Companies in respect of their Deposited Securities automatically recognised under the Schemes; (b) will have their Proprietary Claims for the re-delivery of Scheme Securities automatically recognised under the Schemes; and (c) will not be required to provide any evidence in support of their damages claims or Proprietary Claims against the Scheme Companies under the Schemes or to otherwise establish the existence of those claims… Appendix 10 lists the client account numbers of Account Holders that qualify to have their damages claims and Proprietary Claims automatically recognised under the Schemes… If your account number is listed in Appendix 10, your Proprietary Claim and/or damages claim for the loss of your Deposited Securities will be automatically recognised under the Schemes and the Calculation Rules will apply… (Emphasis in italics added.) 71 The Panopus Account was listed at Appendix 10 of the Explanatory Statement. Panopus therefore had a prima facie entitlement to have its claim automatically recognised in accordance with the Calculation Rules in Schedule 8 to the Schemes. As noted at [5] above, Panopus lodged a Scheme Claim for the value of the ADY Shares held in the Panopus Account. Under the Schemes, the Scheme Administrators and Panopus were obliged to endeavour to reach agreement on Panopus' Established Securities Claim Amount (as defined in cl 1.1 of the Schemes): cl 8.5 of the Schemes. To that end, the Scheme Administrators had access to the books and records of the Opes Prime Group, and extensive investigative powers which they exercised: see [20]-[21] above. The Scheme Administrators elected not to call Mr Blumberg (see [58] above), despite his critical involvement in the transactions the subject of this proceeding. 72 For the reasons set out at [47]-[53] and [57]-[59] above, the evidence adduced by the Scheme Administrators was insufficient to displace Panopus' prima facie entitlement to an Established Securities Claim. That being the case, it was open to Panopus to decline to call Mr Thomas to give evidence, and it is inappropriate to draw any Jones v Dunkel inference from its failure to do so: see [51]-[52] above. 73 In my view, the relevant provisions of the Schemes operate according to their terms in respect of Panopus' recorded holding of 23,250,000 ADY Shares. The ADY Shares being Panopus' (see [63] above), no question of set-off arises and Panopus' Established Securities Claim should not be reduced under Calculation Rule 4. I would therefore direct the Scheme Administrators to accept the Scheme Claim. I certify that the preceding seventy-three (73) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon.