306 This First Reconciliation thus concerns the $1,800,000 deposit into STG1 which, on the applicants' tracing exercise, is part of the ultimate source of funds in BOQ1. It purports to show that the $1,800,000 came from sources that were assets of the FSF, mostly but not entirely the rent from Officeworks Hobart. It seems designed to demonstrate that the subtotal of $2,099,007.86 is all attributable to income from such FSF sources, and that $1,800,000 from that subtotal amount was paid into STG1 on 6 September 2016, and the rest paid out in 'FSF expenses, pensions, other investments'.
307 For the following reasons, I do not accept that the First Reconciliation, or the four others like it, support the applicants' case.
308 First, the way the numbers in the table above are derived is entirely opaque. The bank statements for BW1 for the relevant period which were in evidence span some 20 months and contain thousands of transactions, which on their face vary greatly in character, source and or destination: see the summaries at [299]-[300] above (while these relate to bank statements from January 2016 to September 2019, the earlier ones are no different in that regard). For each of the BW1 account statements which include the transactions on which the reconciliation is apparently based, there are hundreds of thousands of dollars' worth of inflows and hundreds of thousands of dollars of outflows. The outflows were usually somewhat less than the inflows, meaning that a net balance accumulated over time which was then drawn on to make the $1,800,000 payment to STG1. It is impossible for the court to go through that many transactions to satisfy itself that the summary provided in the reconciliation is accurate.
309 The opacity is increased by evidence from Mrs Frigger that she in fact prepared the reconciliation on the basis of electronic transaction listings downloaded from Bankwest, which are not in evidence; not from the bank statements which are in evidence (ts 295-296). She said, 'The computer does the work, basically'. She appeared to be referring to the use of accounting software which she later said 'most likely is MYOB' (ts 329). This appeared to have involved some coding for transactions which Mrs Frigger entered (ts 304 ln 31). When cross-examining counsel asked whether he would be able to find the amounts which were totalled in the reconciliations for rent from a particular tenant (International Massage Centre) Mrs Frigger said 'I don't think you're going to be able to, because you just don't have the knowledge that I do' (ts 306-307). Mrs Frigger could not say whether she still had the relevant MYOB record on her computer (ts 335).
310 From the court's point of view, this reconciliation process is a black box. It is not possible to understand how many transactions of such disparate character have been condensed into the line items above. Given my concerns about Mrs Frigger's credibility, the court will not simply take her word for it.
311 Second, the first respondent presented certain calculations of her own in order to demonstrate that the First Reconciliation was unreliable. She tried to identify and add up all the transactions apparently involving CommSec which were shown in the bank statements from 31 December 2014 (not 29 December 2014 as the applicants assert) to 6 September 2019 (although the first respondent also included a transaction that took place on 8 September 2016). It adds up a large number of payments to and from CommSec which are shown in the bank statements for that period. The net flow of funds is $328,995.82 out of BW1 to CommSec. Yet, the First Reconciliation shows a net inflow from 'share trading' for that period of $122,617.10. Mrs Frigger sought to explain this in closing submissions by saying that the first respondent had left out of account 'five direct investments' made during the period of the First Reconciliation (ts 916), but she did not identify where they were in the thousands of transactions in the BW1 statements for the period.
312 The first respondent performed a similar exercise for payments to and from Michael Frigger which appear in the bank statements for the same period. There are about 140 of these, many labelled 'gift', showing a net outflow to Michael Frigger of $128,380.80. Once again, how that is consistent with the First Reconciliation is impossible to say. Mrs Frigger submitted that at least some of them were payments of 'my own money' (i.e. non-FSF) to Michael (ts 916-917). That further obscures where they fit into the First Reconciliation, which is ostensibly of FSF funds.
313 The first respondent similarly presented total outflows to Mastercard of $299,053.08. Mrs Frigger accepted in cross-examination that payments made to Mastercard during this period were for her personal expenses (ts 298), which she claimed were withdrawn from the FSF as her pension (ts 282). How that fits into the amount of $292,688.09 shown in the First Reconciliation, which is supposed to include 'FSF expenses, pensions, other investments' cannot be explained. Mrs Frigger sought to explain it in closing submissions by asserting that many of the payments were matched by corresponding contributions in by the applicants (ts 919). But she did not make that assertion good by reference to the BW1 statements that were in evidence. There is also no suggestion in the evidence that the detailed provisions of the FSF Deed about pensions to which I have referred were complied with in relation to the payment of this putative pension, including the establishment by the trustee of a pension account: see [169] above. It appears to be nothing more than an opportunistic explanation Mrs Frigger gave in closing submissions.
314 The first respondent also prepared a schedule of payments between 16 February 2016 and 6 September 2016 to a barrister and unexplained cheque payments totalling $67,152.65. She also prepared a schedule of share dividend receipts totalling $24,219.75; compare the applicants' figure of $109,612.84. Mrs Frigger asserted in closing submissions that there were many other dividend payments not called such in the bank statements, but did not identify what they were (ts 917). All this sheds significant doubt on the reliability of all of the applicants' reconciliations.
315 Mrs Frigger complained of unfairness in that these calculations were raised by the first respondent in its closing submissions without putting them to her in cross-examination, when they could have been explained (e.g. ts 920). But in the end the first respondent's calculations were submissions, based on numerical calculations, in response to numerical calculations such as the First Reconciliation, which the applicants put in their opening submissions. The onus was on the applicants to adduce the necessary evidence, and to explain how it supported the First Reconciliation. They did not do so; instead they effectively asked the court to accept their numbers on trust. There was no unfairness in the first respondent pointing out several ways in which, on the face of things, the applicants' submission did not match the evidence. Also, in the way the trial transpired, the applicants had six days between the first respondents' closing submissions and their own in which they could have prepared more specific submissions linking the First Reconciliation and the others to the evidence. They did not do so.
316 Third, as has been explained in the above analysis of specific transactions in BW1, for most of the period covered by the First Reconciliation, the account appears to have been used as the operating account for the BP Business, which was not an FSF asset. The applicants sought to make this consistent with their case that the account is an FSF asset. They said that the land from which the business operated was a trust asset, and net receipts into the account from the business were payments by way of rent to Mrs and Mr Frigger as owners of that land in their capacity as trustees of the FSF (ts 157, 286ff, 904). But that rationalisation is pure assertion from Mrs Frigger, a witness to whom I assign no credibility, without a scintilla of independent verification. And it too exacerbated the opacity of the underlying calculations: Mrs Frigger said in cross-examination that when she prepared the reconciliations (ts 295), 'I do a set off between what I think is BP's expenses and BP income. I do a set off between the two and I work out how much of rent we were required to pay and that is the amount that I've put into the reconciliation'. The court has no way of knowing how that set off was done, and will not rely on Mrs Frigger for its veracity.
317 Fourth, Mrs Frigger said that the reconciliations were based on a 'last-in first-out' rule of thumb (ts 156). By that I take her to mean that when a withdrawal of funds is made it is to be attributed as having been taken from the most recent deposits before it. Mrs Frigger suggested that this was 'an accounting thing' (ts 156) but, even if that is so, it does not assist the applicants, as the present issue involves the application of the law to the facts. As has been explained, in cases of 'tracing', as that word is commonly understood in the context of legal and equitable remedies, presumptions of that kind are often applied, so as to make it possible, for example, to identify the equitable interest of a claimant such as the beneficiary of a defaulting fiduciary. I say presumptions 'of that kind', but the last-in first-out presumption seems to be unknown to the law of tracing in Australia: see the summaries of the principles in Re Global Finance Group Pty Ltd [2002] WASC 63; (2002) 26 WAR 385 at [93]-[120] (McLure J) and Caron and Seidlitz v Jahani and McInerney in their capacity as liquidators of Courtenay House Pty Ltd (in liq) & Courtenay House Capital Trading Group Pty Ltd (in liq) (No 2) [2020] NSWCA 117; (2020) 102 NSWLR 537 at [10]-[18] (Bell P, Bathurst CJ and Macfarlan JA agreeing); see also the Hon J Edelman, 'Understanding Tracing Rules (2016) 16(2) Queensland University of Technology Law Review 1 at 11-12. The 'first-in first out' presumption in Devaynes v Noble (1816) 1 Mer 529; 35 ER 767 (commonly described as Clayton's Case) is mentioned in these summaries, albeit it has been criticised in Australia and not often followed in more recent cases: see Global Finance at [108], [112]. But neither McLure J, Bell P, nor Edelman J in his Honour's journal article mention any 'last in first out' rule.
318 One must be careful not to take that too far. As has been emphasised, this is not a case of tracing in aid of legal or equitable proprietary remedies. In the end, the character of any given sum of money as an FSF asset, or not, depends on the objective characterisation of whether it is impressed with the necessary trusts based on all the circumstances. But it remains the case that how the application of a 'last-in first-out' rule might assist with that characterisation is not explained. The opacity of the reconciliations which I have already mentioned further obscures the point of adopting that rule, if indeed it was adopted.
319 Those four matters persuade me that the First Reconciliation is not at all reliable. The court can only conclude that the same must be said of the other four reconciliations, given that the opacity of the 'reconciliation' process which Mrs Frigger appears to have undertaken does not permit any of them to be verified independently. The applicants' reconciliations do not support their case.
320 I reach that conclusion without taking any account of another submission the first respondent made based on alleged inconsistency between the First Reconciliation and the profit and loss statement for the FSF for the financial year ended 30 June 2016 (ts 862). I accept Mrs Frigger's submission to the effect that the cash amounts in the First Reconciliation cannot be usefully compared with the profit and loss report produced for tax purposes (KAT 4 p 413; ts 918). But the inconsistencies between the cash shown in the First Reconciliation and the cash transactions in the BW1 statements have not been satisfactorily explained, when the onus was on the applicants to do so.
321 There are two other problems which only relate to the First Reconciliation and the one that follows it. As I have said, the First Reconciliation is concerned with establishing the source of a payment of $1,800,000 into STG1. One problem with this is that STG1 is an account in the name of Jessica Frigger and, aside from the doctored statement for that account, the only evidence of any specific intention that those funds be held by Jessica on trust for the beneficiaries of the FSF on the terms of the FSF Deed is a cheque butt produced by the applicants on which Mrs Frigger appears to have written that the payment of $1,800,000 on 6 September 2016 was paid to 'J Frigger ATF FSF @ St George Bank' (ACTF 18 p 8).
322 It was not put to Mrs Frigger in cross-examination that this cheque butt was a forgery. But nor did Mrs Frigger give any evidence to say when she entered that note on the cheque butt (ACTF 18 paras 5-9, p 8). Nor was there any evidence of any objective communication from Mrs Frigger to Jessica Frigger of an intention that Jessica should somehow hold the funds as trustee for the FSF, nor any evidence of an objective communication to anyone else. Nor was there any evidence of Jessica's consent to do so. I put no weight on the cheque butt. So there is no clear evidence that the funds paid out to Jessica Frigger on 6 September 2016 retained their character as trust funds. That is also relevant to the reconciliation the applicants present for the second of their five periods, which purports to show the source of funds for a $350,000 deposit into STG1. Further, the cheque butt for that deposit does not refer to the FSF. These problems with STG1 are not relevant to the subsequent reconciliations.
323 The other problem specific to the First Reconciliation is that the withdrawal of $1.8 million cannot be attributed entirely to rental income from the Hobart and Edward Street properties, because according to the First Reconciliation itself, during the relevant period of 31 December 2014 to 6 September 2016 there had not been rental income of that amount from those properties. The total for rent from those properties shown in the First Reconciliation is only $1,550,302.80. Also, between 1 January 2015 and 1 January 2016 alone there were other debits from BW1 usually exceeding $500,000 per month. The applicants did not establish any basis, whether in fact or in law, on which the court can conclude that the rental income that was received into BW1 in this period somehow accumulated in its own silo, untouched by the ongoing frequent withdrawals during this period, until (in the case of the First Reconciliation) $1,800,000 was withdrawn on 6 September 2016 and paid into STG1. In those circumstances it is not possible to discern from the evidence around BW1 any objective intention on the part of the applicants that the $1.8 million paid into STG1 was to be attributed to the rental income from the Hobart and Edward Street properties.
324 The applicants provided a schedule to their aide memoire entitled 'Table 1 - Tracing FSF Rental Income to BOQ and Shares Portfolio', filed in support of closing submissions, which purported to be a 'colour coded tracing of Frigger Super Fund income' (Tracing Table). This was an attempt to present the applicants' reconciliations in a different form. The numbers in it were, however, different to the figures in the reconciliations discussed above. For example, the Tracing Table eliminated, or at least did not refer to, amounts for the rent on the Armadale property ('Rent BP service station') and on the Residential Properties, and 'Net share trading' and other amounts which appeared in the First Reconciliation. The running 'Bankwest Balance' shown in the Tracing Table does not match any balances in the applicants' reconciliations, or any balances in the BW1 bank statements themselves. It appears that the applicants have simply eliminated or ignored all the various kinds of transactions appearing in the bank statements as described above that do not suit their purpose of establishing that the money that came out of BW1 was money that came in as FSF income. The Tracing Table does not improve the reliability, or comprehensibility, of the applicants' tracing exercise.
325 Nevertheless, the applicants submitted in their aide memoire that in cross-examination Mrs Trenfield effectively conceded the correctness of their reconciliation (Table 3 item 13). They appeared to be referring to the following passage (ts 576):
… And so, in January 2016, there were some deposits from BP, and those deposits probably ended in about the middle of February when the BP service station business was sold. Fine. So, did you add up the funds that came through from BP for that short period of time - about six weeks?---Not from recollection, no.
Why not?---Well, as again, our position has been that there is such a mix of funds and we're not the holder of all of the source documents, that then be some inferences gained from analysis of bank statements, but that the owner of the account is best placed to do that exercise.
This was not a concession that the applicants' reconciliations were correct. It was merely a statement that the holder of the account is likely to be best placed to add up deposits from the BP Business because they will have access to the source documents.