GFIN Pty Limited v Gooden, in the matter of GFIN Pty Limited

30 March 2021 At 238: $100,200 has been amended to correctly state to $101,200. At [257], [258] and [259]: $300,322 has been amended to correctly state $343,715.73. At [261]: $400,322 has been amended to correctly state $443,715.73.

ORDERS NSD 1518 of 2018 IN THE MATTER OF GFIN PTY LIMITED (ACN 143 274 800) BETWEEN: GFIN PTY LIMITED (ACN 143 274 800) Plaintiff

AND: MALCOLM GOODEN First Defendant

BEAGLE FINANCIAL PTY LIMITED (ACN 143 274 766) Second Defendant

JASON PORTER IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF MALCOLM GOODEN Third Defendant

order made by: COLVIN J DATE OF ORDER: 16 MARCH 2021

1. On or before 30 March 2021, the plaintiff do file a minute of orders sought by the plaintiff to give effect to these reasons, including any orders as to costs, together with any written submissions in support of those orders such submissions not to exceed five pages.
2. Unless otherwise ordered, the question of final orders be dealt with on the papers. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

COLVIN J: 1 GFIN Pty Limited was established in 2010. It was admitted as a participant in the derivatives market known as ASX 24 conducted by Australian Securities Exchange Limited. Its business involved trading in derivatives quoted on ASX 24. The particular character of its business is known colloquially as a prop shop. A prop shop is a derivatives trading business that is conducted in a manner that that allows derivatives traders to combine their levels of trading activity so as to qualify for rebates offered to market participants if they surpass a threshold of monthly trading volume. 2 At all relevant times the managing director of GFIN was Mr Malcolm Gooden. 3 GFIN issued two different classes of shares that were described as ordinary shares and equity shares. At all material times, Beagle Pty Limited (Beagle) was the holder of 100% of the ordinary shares in GFIN. Beagle was also the majority holder of equity shares in GFIN as, at all material times, it held at least 51% of the equity shares. 4 Under the constitution for GFIN the holders of equity shares are not entitled to vote at shareholders meetings. They are entitled to an interest in the assets of the company on winding-up. As to dividends, the constitution confers an absolute discretion on the directors of GFIN as to whether classes of shares shall be considered for dividends and provides that the directors may allocate dividends to any one or more classes to the exclusion of other classes and may allocate dividends at different rates to different classes. If dividends are allocated to ordinary shareholders then they are required to be allocated pro-rata as between the members of that class. 5 The initial shareholders in GFIN entered into a shareholders agreement. Amongst other things it provided for Mr Gooden to be the managing director and for the rights attaching to equity shares to include a dividend pro-rata notwithstanding the constitution. Therefore, the shareholders agreed that the discretion as to the payment of dividends would be exercised so that equity shareholders would have a pro-rata entitlement to any dividend. There was also a provision in the shareholders agreement to the effect that the managing director may declare dividends quarterly based on the cash flow requirements of GFIN from time to time. 6 The shareholders agreement also dealt with funding for GFIN. It provided for the managing director to determine the funding requirements for GFIN from time to time on the basis that best endeavours would be used to fund GFIN from external borrowings from its bankers, but that the managing director may require shareholders to contribute by way of subscription for shares or making loans to GFIN. 7 The constitution of GFIN provides for all the powers of the directors to be conferred upon a managing director with such person to have authority to exercise those powers alone and without a meeting with the other directors. This was the position that pertained to Mr Gooden at all material times. 8 Beagle is, and always has been, wholly controlled by Mr Gooden. He is the sole shareholder in, and director of, Beagle. 9 Therefore, at all material times, the day to day activities of GFIN were effectively under the sole control of Mr Gooden. He also had majority control of GFIN. However, the activities of GFIN were to be conducted for the benefit of all shareholders on the basis that they all would be entitled to the benefit of dividends. 10 The equity shareholders of GFIN claim that Mr Gooden breached his fiduciary duties as a director of GFIN and that Beagle was a knowing recipient of certain of GFIN's monies which were paid to Beagle by Mr Gooden in breach of his duties as a director of GFIN. With leave, they bring proceedings in the name of GFIN against Mr Gooden and Beagle pursuant to orders of this Court allowing for the derivative proceedings. GFIN seeks declaratory relief and orders for the payment of compensation by Mr Gooden and Beagle.

Summary of outcome 11 For the following reasons, GFIN has made out the substance of part of its complaints. Other complaints misunderstand the nature of the risks inherent in the business conducted by GFIN and the exposure of contract traders to the loss of amounts retained by GFIN from time to time. In particular, those aspects of GFIN's claims that are founded on a perspective that GFIN held funds that belonged to contract traders are misconceived. Once that aspect of GFIN's dealings is properly understood, the foundation for a number of the complaints about Mr Gooden's handling of funds held by GFIN has not been made out on the evidence. Therefore, only part of the relief sought by GFIN should be granted.

The relevant parties and the nature of the arrangements between them 12 The equity shareholders in GFIN at the time of commencement of the proceedings were: (1) UTS Capital Pty Ltd (UTS), a company controlled by Mr Stuart Cameron; (2) J Gale Family Investments Pty Ltd (JGFI), a company controlled by Mr Jeremy (Jack) Gale; (3) JKB Capital Pty Ltd (JKB), a company controlled by Mr John Bignell; and (4) Beagle. UTS and JGFI were also each parties to the shareholders agreement. 13 At all material times, each of Mr Cameron, Mr Gale and Mr Bignell were involved in trading derivatives and caused the companies controlled by them to become equity shareholders in GFIN in order to benefit from a rebate incentive scheme offered to participants in the ASX 24 market. As has been noted, by bringing together trading volumes in derivatives on ASX 24 through GFIN as a participant, GFIN could achieve the volumes necessary to receive the rebates. The equity shareholders could then share the benefit of those rebates with GFIN. 14 Mr Cameron traded through Tsunami Trading Pty Limited (Tsunami), a company controlled by him. Mr Gale traded through Gale Capital Pty Ltd (Gale Capital), a company controlled by him and Mr Bignell traded through JAG Securities Pty Ltd (JAG Securities), a company controlled by him. Each of the companies entered into contractual arrangements with GFIN pursuant to which they traded derivatives on ASX 24 using GFIN's status as a participant in ASX 24. The trading was carried out by Mr Cameron, Mr Gale and Mr Bignell respectively. GFIN retained a percentage of the profits generated from such trading and part of the rebates and paid the balance to each contract trader. The agreements made as to the respective shares varied between traders apparently depending upon the views of Mr Gooden as to the profile of their trading when the terms were agreed. The precise terms of the arrangements are of some significance for the present proceedings and are dealt with in more detail below. 15 GFIN also entered into contract trader arrangements with other parties who were not shareholders in GFIN. From time to time GFIN also employed traders who conducted trading on terms that involved the payment of a salary and a small share of the profits from trading. 16 Under the contract trader arrangements, the traders were not clients of GFIN. Rather, they conducted trades on behalf of GFIN under contractual arrangements agreed with GFIN. Under those arrangements the remuneration of the trader would depend upon the profits generated from trading by the trader on GFIN's account. Obviously, there was risk to GFIN in allowing such trading. GFIN might become liable for losses incurred by trading on its account. As described below, the contract trader arrangements provided for rights on behalf of GFIN to retain monies that would otherwise be payable to contract traders to cover such risks and for each contract trader to indemnify GFIN in certain respects. In addition, in the case of shareholders, they were required to either advance funds to GFIN or not call on accrued remuneration entitlements so as to enable GFIN to have sufficient funds to maintain a minimum account balance to be able to settle its trades on the ASX 24 market. 17 There was also risk to the contract trader if the money retained by GFIN from each trader could be used to cover shortfalls in the trading positions of other traders. The manifestation of this risk and the way in which it was to be dealt with is a significant aspect of the claim by GFIN against Mr Gooden of breaches of his duties as a director, both statutory and fiduciary. However, what appears from the evidence is that the contract traders were aware that the retained funds held by GFIN were to cover trading risks associated with the activities of all traders but GFIN managed that risk by requiring an appropriate retention for each trader and by imposing limits on the positions that may be taken by each trader. 18 The terms of the trading agreement between GFIN and Gale Capital (described as the Trader in the agreement) were in evidence. The trading agreement recited that the Trader wishes to contract with GFIN to undertake trading in derivatives on behalf of GFIN and that GFIN agrees to allow it to do so. It said that all trades must be executed in the name of GFIN and must be made using GFIN's funds at the sole risk of GFIN and settled through GFIN's account with its clearing provider (cl 2.2(b)). There were agreed limits within which the Trader was required to trade both as to the maximum order and the maximum position and specified stop loss limits (cl 3.4(a)) and restrictions on the holding of open positions (cl 3.4(b)). GFIN agreed to provide to Gale Capital as the Trader 85% of the Trader's Net Trading Profits (cl 4.1, item 2 of the Schedule). The term Trading Profits was defined to mean 'all profits minus all losses made by the Trader in trading Derivatives under this Agreement in the Relevant Year' (item 2 of the Schedule). The Trader also agreed to indemnify GFIN against all loss, damage, cost or expense suffered by GFIN failing to observe the provisions of the agreement or an Event of Default (cl 7.1). GFIN could withhold any money due to the Trader 'while GFIN acting reasonably considers an amount may become payable by the Trader to GFIN under the … indemnity or [the agreement]' (cl 7.2). 19 The evidence is to the effect that similar arrangements were agreed with other contract traders. As has been noted, at some points in time there were also traders who were employed by GFIN. However, it is the nature of the arrangements with contract traders that is of significance for present purposes. 20 As will emerge, the references to the requirement that all trades must be on behalf of GFIN and must be made using GFIN's funds are of some significance. As are the rights to retain (withhold) amounts to cover future amounts that may become payable under the indemnity or the agreement. 21 GFIN was required to have a clearing account with a 'Clearing Participant' as described in the ASX 24 Operating Rules. The Clearing Participant had to guarantee the availability of funds to settle on trades by the participant, in the present case, GFIN. The Clearing Participant set minimum account balance requirements for the clearing account. 22 The evidence of arrangements with ABN AMRO and Macquarie Bank Limited (Macquarie) (each of which acted as the Clearing Participant for GFIN at different times during the relevant period) was to the effect that the relevant clearing account had an omnibus character in which sub-accounts were maintained that related to the activities of each trader. Each contract trader was allowed to have access to the details of the sub-account in the GFIN clearing account with ABN AMRO or Macquarie as the case may be. The sub-account details depicted a daily position and cash account statement for each contract trader. In particular, each contract trader could see the gains and losses from trading by that trader. Submissions for GFIN tended to describe the sub-accounts as representing funds standing to the credit of the contract trader or as funds to which the contract trader was entitled. However, for reasons that have been given, that was not correct. 23 The practice of GFIN was to 'retain' funds from each contract trader. Although the existence of the practice is clear from the evidence, there was little evidence as to the precise practice or the way in which the retained amount was determined. Having regard to the terms of the agreements made by GFIN with the contract traders and the requirement to maintain a minimum overall balance with the Clearing Participant, I infer that the retained funds were to cover the risk of trading losses and to maintain the minimum balance. However, there appears to have been a degree of informality as to the arrangements between GFIN and the contract traders as to the level of 'retained' funds that were required from time to time. 24 When it came to the overall standing of the account with the Clearing Participant, in the present case at least, it was only the market participant (GFIN) who could see the details for all sub-accounts. No doubt this reflected the fact that GFIN was the customer of the Clearing Participant and, notwithstanding the omnibus character of the account, it was GFIN's account that was maintained by the Clearing Participant. Within GFIN it was Mr Gooden who operated the account and therefore it was only Mr Gooden who had access to the overall information as to the balance of the Clearing Participant account. 25 Submissions advanced for GFIN described the Clearing Participant account as an omnibus account and for consistency I will adopt the same description, but the terminology should not be allowed to detract from a proper understanding of the character of the account which derives from the matters I have already described. 26 Over the relevant period, GFIN's omnibus account was first held at ABN AMRO (where the required minimum balance was $1,000,000) then at Macquarie (where the required minimum balance was alleged by GFIN to be only $250,000) and finally through arrangements with Phoenix Trading Group Pty Ltd (Phoenix) using its omnibus account (where the arrangement only required $100,000 to be maintained to cover trading risk). 27 At all material times, GFIN's operating accounts for its business were held at Westpac. Receipts and payments that did not relate to trading activities on ASX 24 occurred through the operating accounts (although there were often transfers between the operating account of GFIN and the omnibus account maintained by the Clearing Participant). 28 Significantly, what is not addressed by the terms of the agreements made with contract traders is the status of the 'retained' funds. It appears that the agreements contemplated that the funds could be 'retained' on the basis that they were to be used to meet liabilities arising from the trading activities of all traders, but it is important to recognise that they were held back from monies that were otherwise payable to traders as a result of trading on GFIN's account on its behalf. In other words, the retained monies were GFIN's monies (not the contract trader's monies) and they were not paid to the contract trader in the exercise by GFIN of its rights under the agreement to defer paying the Net Trading Profit amount by way of remuneration of the contract trader. 29 Therefore, to describe them as being 'retained' by GFIN is a misnomer. From time to time, the trading activities of a trader might result in profits and losses. The sub-account was a running balance of those outcomes. Not only was the trading on GFIN's account, but there was a risk that losses by one trader would have to be covered by profits by another trader or from GFIN's own funds. Further, the minimum balance had to be maintained so that trading activities could continue to be cleared by the Clearing Participant. Therefore, the 'retained' funds were used for the purposes of GFIN's business of trading on ASX 24. 30 The effect was that the trader was a deferred creditor of GFIN to the extent of the monies withheld. If the reasons that justified the withholding by GFIN of the 'retained' monies did not manifest in actual liability for loss, then those monies were payable to the contract trader. Again nomenclature should not be allowed to detract from the character of the amounts concerned. For GFIN, the monies that were withheld by GFIN and reflected in the balances in the sub-account for each trader in the omnibus account were described as retained monies. Again for consistency I will adopt the same terminology, but the description should not detract from a proper consideration of the character of those monies. 31 As I have already noted it appears that, as a matter of practice, contract traders were expected to maintain a certain level of retained monies. However, there was not strict adherence to that practice throughout the relevant period. Also, at times, the shareholders in particular were called on to advance monies to GFIN to enable it to have sufficient funds to maintain the minimum balance in the omnibus account. However, there was no clarity as to those arrangements which otherwise appeared to be a loan which meant that GFIN would not have to arrange to borrow funds from third parties. 32 Mr Gale gave oral evidence about the way in which contract traders would be paid their share of the profits from trading. He said that he would lodge an invoice with GFIN when he wanted to draw funds that were shown in his sub-account within the omnibus account maintained by GFIN. He gave the example that if he had $70,000 of what he described as 'total equity' in his account (as shown on the daily statement) he would lodge say a $10,000 invoice ($11,000 with GST) and the next day his sub-account would show roughly $13,700 having been reduced from his sub-account which he described as 'the funds I had requested, plus GST, plus GFIN's profit-split'. The banking records of GFIN for its operating account were in evidence. They showed that from time to time amounts were transferred from the omnibus account to the operating account of GFIN. When this occurred the transfer was recorded in what was described as the GFIN admin sub-account within the omnibus account. The funds that were transferred out of the omnibus account and into the operating account would be used to pay amounts to contract traders in the manner described by Mr Gale. However, they were also used to cover general operating expenses of GFIN. It is the use of funds from the omnibus account to cover general operating expenses that loomed large in the complaints made by GFIN. 33 Though not the subject of specific evidence from Mr Gale, the submission of an invoice and the inclusion of GST reflects the underlying nature of the arrangement, namely that each contract trader was performing trading services for GFIN and was being paid a fee for doing so based upon the returns generated from the derivatives trading. 34 Otherwise, Mr Gale had no knowledge of the conduct of the admin sub-account as part of the omnibus account at ABN AMRO. He was aware that rebates from ASX 24 would be received into the omnibus account and credited to the contract traders according to their levels of trading. However, he only discovered the details of how that occurred through the omnibus account after the relevant events the subject of the proceedings. 35 All trading by contract traders occurred using a platform provided by GFIN and GFIN could access the trading information and monitor the trading activities of each trader and the open position value and margins (exposure to profit or loss) for each trader on a daily basis. 36 Mr Gooden as the managing director of GFIN under the comprehensive delegated authority conferred upon him as managing director by the constitution (and as controller of 100% of the ordinary shares in GFIN) was the only person within GFIN with access to the full details of the omnibus account and the trading activities of all traders at any point in time. As managing director, Mr Gooden also had sole day to day control of GFIN's operating account. 37 The arrangements for an account (the omnibus account) with a Clearing Participant were required by the ASX 24 Operating Rules which applied to each market participant. It appears that under those Rules the omnibus account was to be used only for ASX 24 trading and withdrawals from the account could only be paid to GFIN's operating account (and then from that account payments could be made by GFIN to satisfy arrangements with contract traders). 38 There were also the ASIC Market Integrity Rules (ASX 24 Market) 2010 (Integrity Rules) made under s 798G(1) of the Corporations Act 2001 (Cth) that applied at the relevant time. Those Integrity Rules required participants to segregate client accounts and required omnibus accounts to be operated so as to keep separate the 'House Account' and the 'Client Account' at all levels in the chain of dealings. In particular, they stated that a participant must not net off the Client Account against the House Account. 39 However, the arrangements made by GFIN with contract traders did not make the traders clients of GFIN. On the contrary, the agreed terms made clear that trading was being conducted on the account of GFIN. Therefore, from the perspective of the Integrity Rules, all trading was on the House Account of GFIN. All funds in the omnibus account were GFIN's funds. The terms of the trading agreement that were entered into between GFIN and each of its contract traders provided no insulation of one trader from another. All contract traders looked to GFIN for the payment of the Net Trading Profit and GFIN looked to the individual trader to cover the loss (at least to the extent that it could be offset against the proceeds of other profitable trading or was the result of a breach of GFIN's agreement with the contract trader). The restriction on netting off between accounts did not apply to GFIN because all the sub-accounts in the GFIN omnibus account were GFIN accounts. 40 Therefore, at any point in time, the nature of the arrangements as between each contract trader and GFIN exposed each contract trader to the financial circumstances of GFIN. That meant that if one contract trader incurred considerable losses and GFIN was not able to cover those losses from retained funds for that contract trader (or there was delay in being able to do so), GFIN needed to use other funds at its disposal (or borrow funds) to cover the losses. In extreme circumstances, the necessary consequence may be that GFIN's ability to pay the retained amounts to other contract traders may be compromised, at least for a time. However, that solvency risk is inherent in the fact that the contract traders were all trading on GFIN's account. The derivatives were all bought and sold by GFIN. It had a contractual arrangement with the traders to pay them the Net Trading Profit amount. 41 At some points, the case for GFIN was put on the basis that the retained amounts were held by GFIN as trustee. The basis for that characterisation was not articulated. In particular, there was no claim that a trust arose according to the principles stated in Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 (as summarised in Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (in liq) (1978) 141 CLR 335 at 353 (Gibbs ACJ, Jacobs and Murphy JJ agreeing)). Rather, the claim was advanced on the basis of a factual claim that the retained amounts were the funds of the contract traders that were held by GFIN on their behalf. For reasons, I have given, on the evidence, that was not the character of the retained funds.

The specific claims by GFIN 42 The subject matter of the present proceedings concerns (a) payments totalling $564,615.73 made by GFIN to Beagle allegedly without consideration or authorisation; (b) payments totalling $29,390 made by GFIN to Mr Gooden as managing director that allegedly exceeded his approved level of remuneration under the shareholders agreement; and (c) loss of the order of $1,500,000 allegedly caused by what may be compendiously described as improper operation of the omnibus account of GFIN. These three figures represent reduced amounts that were advanced in written closing submissions as compared to the amounts specified in the amended statement of claim (and written opening submissions as to quantum). Therefore, it is those amounts that are claimed by GFIN. 43 As to claim (a), the claim made is that the amount was misappropriated by Mr Gooden to Beagle. It is alleged that payments described as consultancy fees (or consulting fees) were paid to Beagle and as Beagle had no entitlement to any consultancy fees from GFIN because it provided no consulting services to GFIN, the monies were misappropriated by Mr Gooden for his own benefit as the party in control of Beagle. This claim is pleaded in paragraphs 64-67 and 78 of the amended statement of claim. 44 As to claim (b), the claim is that in FY2016 Mr Gooden caused himself to be overpaid as managing director. This claim is pleaded in paragraphs 68-71 and 79 of the amended statement of claim. 45 As to claim (c), a complex series of dealings with overlapping financial consequences for GFIN were advanced together with a considerable number of alternative ways of assessing the quantum of compensatory awards against Mr Gooden and Beagle. 46 The breaches that were said to make up claim (c) were as follows. 47 First, it was claimed that when Mr Gooden caused GFIN to move its omnibus clearing account from ABN AMRO to Macquarie, GFIN suffered a loss because a large part of the funds standing to the credit of GFIN at ABN AMRO did not find their way into the Macquarie account (claim (c)(1)). The funds allegedly diverted from the omnibus account to the operating account of GFIN are claimed to have been contract traders' funds used and accumulated solely by them. Notably, it is not claimed that the funds were diverted away from GFIN. Rather, necessarily inherent in the complaint is an allegation that the funds in the omnibus account were not funds that could be applied to the general purposes of GFIN. Rather, they were funds held by GFIN on behalf of contract traders. This claim is pleaded in paragraphs 38-53 and 76 of the amended statement of claim. 48 Second, it was claimed that Mr Gooden caused the Macquarie omnibus account to be operated by transferring retained amounts held in respect of particular contract traders (and claimed to have been held on their behalf) to be used for general purposes of GFIN (claim (c)(2)). The particular respect in which this alleged conduct produced loss for GFIN was not articulated. It too appeared to be premised on claims that the funds were not general funds of GFIN available to be used to meet operating expenses of GFIN and that the way in which the account was operated left GFIN without funds that it was required to hold on behalf of individual contract traders (and use to cover trading risks if they manifested but not to pay general liabilities of GFIN). In submissions, it was also said that Mr Gooden used those funds to pay 'persons he chose to favour including himself, Beagle [and certain named third parties]'. However, the pleaded case does not raise any complaint beyond the fact that Mr Gooden caused the omnibus account to be operated in a way that produced a substantial negative balance in the GFIN admin sub-account. It was the use of funds from the sub-accounts in the names of the contract traders to cover this accumulated negative balance that was the pleaded case. In effect the allegation was that it was a breach of duty to apply funds that were shown in the sub-accounts in the name of the contract traders to meet general operating expenses of GFIN. Rather, those funds should have been held separately by GFIN so as to meet claims by the contract traders. This claim is pleaded in paragraphs 57-63 and 77 of the amended statement of claim. 49 Third, it was claimed that Mr Gooden caused GFIN to borrow large amounts of money from third parties which he then misappropriated (claim (c)(3)). A considerable part of this claim overlaps with claim (a) and claim (b) because it is alleged that the borrowed monies were the source of funds used to pay consultancy fees to Beagle and additional salary amounts to Mr Gooden. However, part of the claim is that Mr Gooden caused GFIN to borrow large amounts which he used to 'pay other persons and entities including contract traders'. This aspect of the claim appears to raise questions as to whether the borrowing was undertaken with due care and diligence or for a proper purpose. To that extent it is an allegation that extends beyond a claim of misappropriation. This claim is pleaded in paragraphs 72 and 80 of the amended statement of claim. 50 Fourth, a claim that Mr Gooden caused GFIN to borrow monies so as to enable GFIN to maintain the minimum balance required by the Clearing Participant banks, particularly ABN AMRO where a larger balance was required, and did so without informing the other directors (claim (c)(4)). This claim also appears to allege that the borrowing was undertaken without due care and diligence or not for a proper purpose. This claim is pleaded in paragraphs 73-74 and 80 of the amended statement of claim. 51 Significantly as to the third and fourth aspect of claim (c), Mr Gooden admitted in his defence that he caused GFIN to borrow monies from third parties from time to time. He said that the borrowed funds were used to meet GFIN's 'general cash requirements which included but were not limited to meeting GFIN's minimum trading requirements'. 52 Each of the claims is alleged to be supported by evidence to the effect that Mr Gooden took steps to conceal what he was doing. In particular it is said that he concealed (a) the fact that the contract traders' funds were not secure; (b) GFIN's true financial position including its borrowings; (c) the payments to Beagle; and (d) the nature of the arrangements with the Clearing Participant banks. In effect the claim was that findings of misappropriation and improper borrowing by Mr Gooden (and the attribution of knowledge of that wrongdoing to Beagle) were supported by the fact, on the case advanced by GFIN, that Mr Gooden had concealed what he was doing. Despite the emphasis in the evidence about the alleged concealment, it was advanced as a matter of context rather than the basis for the claims made by GFIN. At best, it was evidence that might support the drawing of inferences in support of the case as alleged. However, it is evidence to be assessed in a context where Mr Gooden was given complete authority to manage the financial affairs of GFIN including the arrangement of borrowings that may be necessary. Although there were points at which Mr Gale, Mr Bignell and Mr Cameron sought more detail from Mr Gooden as to the current financial position of GFIN, nevertheless they left matters other than trading to Mr Gooden. 53 All claims were framed as claims to declaratory relief as to breaches by Mr Gooden of his duties as a director of GFIN, compensation for alleged breaches by Mr Gooden of his duties as a director of GFIN (either in equity or pursuant to s 1317 of the Corporations Act) and, insofar as amounts were received by Beagle, compensation on the basis of principles deriving from Barnes v Addy (1874) LR 9 Ch App 244 or on the basis of Beagle's alleged knowing involvement in Mr Gooden's breach of duty pursuant to s 79 of the Corporations Act. 54 Finally, I note that the proceedings when first commenced took the form of claims by UTS, JGFI, JKB, Tsunami, Gale Capital and JAG Securities seeking 'damages for misappropriation of funds belonging to GFIN and funds belonging to the plaintiffs for Mr Gooden's benefit contrary to GFIN's constitution, shareholder agreement and in breach of his director's duties under the Corporations Act and the general law'. The originating application was said to be both a derivative action (relying upon s 236 and s 237 of the Corporations Act) and a claim for damages and compensation under the Australian Consumer Law (ACL), relying on a contravention of the misleading and deceptive conduct provision in s 18 of the ACL. 55 Leave was then given for the derivative proceedings to be brought by the minority shareholders of GFIN in the name of GFIN against Mr Gooden and Beagle and the application was amended to seek 'an account and compensation for misappropriation of funds belonging to GFIN for Mr Gooden's benefit contrary to GFIN's constitution, shareholder agreement and in breach of his director's duties under the Corporations Act and the general law'. So, the action proceeded as a derivative action by GFIN against its director Mr Gooden and Beagle as the majority shareholder alleging misappropriation. The statement of claim that was filed in the proceeding reflected the fact that it was only the misappropriation claims that were thereafter advanced by GFIN against Mr Gooden and Beagle. As has been explained the allegations made by GFIN are that its monies were misappropriated or that monies were borrowed for an improper purpose (or in breach of the duty to act with due care and diligence) because the borrowings were arranged in order to benefit Mr Gooden and others and the borrowed funds were thereafter wholly or partly misappropriated. 56 The claim for misleading and deceptive conduct was not maintained. However, evidence that had been prepared in support of allegations of misleading and deceptive conduct was received on the application because GFIN relied on those affidavits. The consequence is that the evidence ranged beyond what was relevant to the overall claim of misappropriation. As has been explained, actions by Mr Gooden that were said to involve concealment, secretive dealings, non-disclosure and misleading representations were relied upon as context for the claim of misappropriation. In opening submissions these aspects were said to amplify the breaches by Mr Gooden because they occurred in a context where Mr Gooden: (1) Took steps to conceal GFIN's true financial position; (2) Provided assurances that GFIN was profitable and the trading funds of traders were secure; (3) Requested JAG Securities to pay money to GFIN under false pretences; (4) Failed to provide financial information of GFIN when requested to do so; and (5) Failed to inform the board and minority shareholder of GFIN about Mr Gooden's secret dealings in (a) arranging third party lenders to provide funds to GFIN so it could meet margin requirements with its bankers; (b) paying contract traders monies when GFIN did not have the funds to pay; (c) paying Beagle monies to which it was not entitled; (d) paying Mr Gooden amounts in excess of his salary; and (e) paying monies to persons unknown for purposes unknown. 57 However, as to evidence concerned with the above matters, it is important to bear in mind that the evidence was not advanced to support separate claims as to misconduct by Mr Gooden as a director beyond the alleged misappropriations and improper borrowing. There were no such claims. Rather, in effect, the secretive and misleading character of Mr Gooden's dealings was advanced to support the allegations to the effect that Mr Gooden had misappropriated the funds of GFIN and had improperly borrowed funds.

Defence by Mr Gooden and Beagle 58 Neither Mr Gooden nor Beagle appeared at the final hearing of the claims by GFIN. Beagle took no active part in the proceedings throughout the interlocutory stages. Mr Gooden actively defended the claims up until shortly before the final hearing when he was made bankrupt on his own petition. Leave was given to GFIN to proceed against Mr Gooden: GFIN Pty Limited v Gooden, in the matter of GFIN Pty Limited (No 2) [2020] FCA 1440. Mr Gooden's trustee in bankruptcy filed a submitting appearance. GFIN proceeded to present its case on the merits and contended that the failure of Mr Gooden, in particular, to give evidence should enable the Court to conclude more readily that the case as alleged had been proven. 59 Various matters were raised by way of defence. The following claims made in the defence are of relevance to the way the case was put by GFIN at the final hearing: (1) Ms Jodie Kim Mallam (Ms Kim) was employed by GFIN as a trader to conduct trading activities on behalf of Mr Cameron. (2) In addition to other payments made at about the time that GFIN moved its omnibus account from ABN AMRO to Macquarie, a payment of $438,331.20 was made by GFIN to JAG Securities on 16 December 2016. (3) When he was required or requested to do so, Mr Gooden informed the other directors of payments made by GFIN. (4) The calculations made by GFIN as part of its claim concerning amounts that were paid at the time of setting up the account with Macquarie were selective in nature. (5) Macquarie adjusted the required minimum balance for the omnibus account based on Macquarie initiated risk evaluation. (6) Loans to GFIN involving Mr Gooden, Beagle, Mr Murray Ward, Ms Kerry Ward and Ms Kim occurred from inception of GFIN until 2018 when an administrator was appointed to GFIN. (7) As to a claim that on 9 November 2017, Mr Gooden caused GFIN to transfer $825,509.74 from contract trader sub-accounts within the omnibus account at Macquarie into the GFIN admin sub-account within the same omnibus account: 'since 2010, cash journals transferred from individual sub-accounts to the admin account were varied depending on the trader involved, trader preference for personal sub-account journals and how the individual trader requested their trading account would appear at the clearer' and 'different cash journal preferences' were requested by contract traders and the omnibus account was administered accordingly. (8) Mr Gooden confirmed all salary increases with Mr Gale, Mr Bignell or Mr Cameron. (9) Mr Gooden caused GFIN to borrow funds from third parties from time to time and the borrowed funds were used to meet GFIN's general cash requirements which included, but were not limited to, payments to employees and traders. (10) Mr Gooden and Beagle 'was an employee and/or trader'. (11) Mr Gooden informed the other directors of the funds that were borrowed by GFIN as required or requested. 60 Many of the allegations by GFIN as to the overall nature of the business of GFIN and its general structure were admitted in the defence. Those admissions are reflected in the factual findings below. 61 In some respects, the submissions advanced by GFIN (particularly the written closing submissions received after the hearing) ranged outside the case as pleaded. For example, they complained about the conduct of Mr Gooden in 'secretly' negotiating and entering into the arrangement with Macquarie with a much lower margin requirement without notifying other directors of GFIN as being a breach of fiduciary duty in itself. They also complained that Mr Gooden should have notified the directors when the trading activities of one trader (Mr Lucas) resulted in substantial losses on a single day when the Brexit leave result was announced in the United Kingdom on 24 June 2016. Instead, so it was submitted, Mr Gooden misled the directors and shareholders of GFIN (particularly Mr Bignell, Mr Cameron and Mr Gale) into believing that Macquarie required them to keep funds with GFIN totalling $850,000 when that was not the case. It was submitted in closing that Mr Gooden should have informed the other directors about what had occurred with the losses consequent on the Brexit announcement that resulted from the trading by Mr Lucas rather than borrowing monies to cover the position. However, claims of that kind were not pleaded, nor were they stated in the written opening submissions. 62 Further, these submissions merge into complaints that might have been made at the behest of Mr Bignell, Mr Cameron and Mr Gale (or the companies controlled by them by which they undertook contract trading on GFIN's account) to the effect that their agreements were not properly performed or that GFIN (by Mr Gooden) engaged in misleading or deceptive conduct (being a claim that was not pursued after leave was given to advance derivative proceedings in the name of GFIN against Mr Gooden and Beagle). They are not submissions that support the pleaded case as to why Mr Gooden is alleged to have breached the duty he owed to GFIN as its managing director by misappropriating funds and undertaking improper borrowing. 63 In particular, there was no case pleaded that Mr Gooden exposed GFIN to claims that might be made by third parties about the contract trading arrangements or the financial circumstances of GFIN nor was there a pleaded claim to the effect that Mr Gooden breached his duties as a director by continuing to conduct the business after the problem emerged with the losses incurred at the time of the Brexit announcement as a result of the trading by Mr Lucas. 64 Rather, all of the pleaded complaints were about particular payments having been made by Mr Gooden as managing director without the knowledge of the other directors and in circumstances which amounted to misappropriation of the funds of GFIN and also about Mr Gooden causing GFIN to borrow money which was then diverted to Beagle, himself and others. In effect, they were largely claims that Mr Gooden took the company's money for his own benefit. Claims beyond a case of that kind would have given rise to complex questions concerning the nature of the business of GFIN, including matters such as the precise extent of the authority conferred on Mr Gooden, the extent to which the actions of Mr Gooden exacerbated the financial circumstances of GFIN and what would have been likely to have been the counterfactual eventuality if Mr Gooden had disclosed the losses incurred in June 2016. They may also have required consideration of the precise arrangements made with each contract trader, the nature of the risks that were inherent in the derivatives trading activities conducted by GFIN and what might be prudent conduct for a director managing those risks. 65 In circumstances where the final hearing proceeded in the absence of the defendants and there was no application to amend, I proposed to deal only with the case as pleaded and opened.

Costs order sought by GFIN 66 A specific claim was made for an order for costs on the basis that GFIN be entitled to claim such costs as a provable debt in the estate of Mr Gooden.

Outline of reasons 67 In my view, the merit of the claims made by GFIN is best assessed by first considering the events chronologically rather than by grouping the claims by subject matter as was done in submissions for GFIN. Therefore, these reasons take the form of a chronological account of my findings as to relevant matters that are established by the evidence. Where facts are simply recounted they should be read as findings in terms of those facts as recounted. The relevant legal principles are then addressed. Each of the claims that are advanced by GFIN are then considered within the context of those overall chronological findings. Then the question of relief in respect of the claims against Mr Gooden is addressed, including the appropriate order as to costs in the context of the bankruptcy of Mr Gooden.

Approach to the evidence given position adopted by Mr Gooden 68 The failure by Mr Gooden to adduce evidence is significant in the present case because much of the subject matter of the proceedings concerned the financial dealings of GFIN at a time when those activities were under the sole control of Mr Gooden. Only he knows what went on. On their evidence, Mr Gale, Mr Bignell and Mr Cameron were not involved in the financial affairs of GFIN at the time of the relevant events. They left those matters to Mr Gooden and they focussed on trading. Therefore, they can give no direct contemporaneous evidence of the dealings engaged in by Mr Gooden as managing director of GFIN. It is only after the event that they have had access to the banking and other records of GFIN. 69 Therefore, so it was submitted by GFIN, knowledge of the relevant facts is peculiarly with Mr Gooden. As a result slight evidence of those facts may be sufficient to prove the fact and allow inferences in favour of the case as advanced by GFIN to be more readily drawn: see the summary of the relevant principles by Gleeson J in BCI Finances Pty Limited (in liq) v Binetter (No 4) [2016] FCA 1351 at [121]-[132] (a case which went on appeal but not as to the correctness of the summary of the principles to be applied when considering the significance of a failure to give evidence). 70 The operation of such principles must be considered alongside any explanation as to why a person does not give evidence. The failure of Mr Gooden to give evidence is explained by his bankruptcy and the decision of his trustee to abide the outcome. He was not called upon by the trustee to give evidence. GFIN says that the absence of any response from Mr Gooden is a matter that should be brought to account because Mr Gooden was made bankrupt at the eleventh hour on his own petition after defending the proceedings for a considerable period and without providing any detailed explanation by way of defence and provision of documents as to what occurred in relation to the events that involved payments to him and Beagle and loans from third parties. In my view, it is appropriate to consider the manner in which the defence was conducted by Mr Gooden when he had conduct of the case and the broad and general nature of his response to the claims advanced. These matters assume particular significance when considering the evidence as to whether there was some basis for the payments made to Beagle and the loan arrangements made by Mr Gooden. The defence of those allegations was put in the most general of terms. 71 In addition, inherent in the nature of the claims advanced by GFIN are allegations of dishonesty on the part of Mr Gooden. Indeed, the case was put on that basis. It reflects the fact that the claim is founded on a view that Mr Gooden misappropriated monies held by GFIN and directed those monies to the benefit of himself, Beagle or third parties. Further, to the extent that those misappropriations affected funds described in the sub-accounts of the omnibus account of GFIN maintained for the purposes of settling trades on the ASX 24 market, it is said that Mr Gooden misappropriated monies held by GFIN as trustee for the contract traders or otherwise on their behalf. 72 In large measure, the Court is invited to draw inferences from the documentary records coupled with general evidence to the effect that Mr Gooden acted secretively and in a manner that concealed the true state of affairs of GFIN from Mr Gale, Mr Bignell and Mr Cameron. 73 Therefore, there are three factors to be borne in mind in making findings as a matter of inference from the available information. First, the case as advanced invites the Court to draw inference from the documents (and in many cases what is said to be absent from those documents). Care must be taken to ensure that there is no other inference that is equally available from the documentary material relied upon by GFIN. Secondly, the case as advanced invites the Court to draw inferences of dishonesty, being circumstances that gives rise to the application of the principles in Briginshaw v Briginshaw (1938) 60 CLR 336. Thirdly, the case as advanced, must be considered in circumstances where Mr Gooden did not appear to give evidence or answer the claim by way of detailed defence, having maintained an active, but generally pleaded, defence of the case until shortly before the final hearing when he was made bankrupt on his own petition. 74 In making the following factual findings I have been conscious of the need to apply each of these principles. As they may pull in different directions, I have taken the view that they must be given effect by bringing each of them to account as part of an overall assessment of the available evidence.

Chronological findings 75 Before considering the chronology, it must be noted that much of the affidavit evidence advanced for GFIN took the form of reconstruction well after the relevant events occurred. The reconstruction by each of Mr Gale, Mr Bignell and Mr Cameron was undertaken when they obtained bank account records and financial records of GFIN. Those investigations were undertaken in the second half of 2018 and resulted in the commencement of an application to bring these derivative proceedings. The views expressed in the affidavits based upon these investigations are not evidence as to actual events. They are evidence of views formed by the three deponents based upon their examination of the financial records. In relation to these aspects of the evidence, save for limited respects in which the familiarity with the facts on the part of Mr Gale, Mr Bignell and Mr Cameron enables them to point to matters to which the bank records and financial records might relate, I have had regard to the documents themselves rather than the argumentative conclusions reached by the deponents as to what may be concluded from those documents. 76 The following chronological account is taken from the affidavit evidence relied upon by GFIN and the admissions of Mr Gooden in his defence. The deponents were not cross-examined. Save for respects in which the affidavit evidence is contradicted by contemporaneous documents, the following account reflects the unchallenged account given by the witnesses relied upon by GFIN. 77 At all material times, the directors of GFIN were Mr Gooden, Mr Cameron and Mr Gale. 78 GFIN was registered by Mr Gooden in April 2010. GFIN Financial Solutions Pty Ltd (GFIN Financial) was a wholly owned subsidiary of GFIN. The only significance of GFIN Financial for present purposes is that GFIN sold its shares in GFIN Financial for over $600,000 in July 2017 and the manner in which those funds were dealt with by GFIN forms part of the relevant chronology (see below). 79 The initial equity shareholders in GFIN (which included UTS and JGFI) and Beagle entered into a shareholders agreement in 2010. Clause 4 of the agreement provided that Mr Gooden shall be the managing director. Clause 20 of the shareholders agreement provided that the managing director would receive a salary of $70,000 per annum from 1 January 2011 and if the profit of GFIN reached $500,000 per annum then the salary would increase to $150,000. There was evidence to the effect that no increase in the salary of Mr Gooden as managing director was agreed. However, there was an agreement made between GFIN and JKB which indicates that there was an agreed increase in salary to $100,000, at least an increase with which JKB agreed. However, I note that for the shareholders of GFIN to allow it to pay Mr Gooden a salary greater than that specified in cl 20 without a unanimous resolution of all would be a breach of the shareholders agreement. 80 From the outset, Mr Gooden acted as managing director of GFIN and acted as the manager of its financial affairs and day to day operations. Mr Gooden entered into arrangements with contract traders, made arrangements with banks, managed the company accounts and arranged the technology that was used for derivative trading. The other directors left all such matters in the hands of Mr Gooden. 81 GFIN entered into contract trading agreements with various entities. The terms of those arrangements varied with contract traders being entitled to payment of an amount of the order of 85% of the net trading profits attributable to their trading activities. 82 On 25 February 2014, Mr Cameron sent the following email to Mr Gooden with the heading 'Gfin Questions': As time goes on I am wondering if and when I get a return on my shareholding and and funds sitting at Gfin. I am aware we have had our hiccups along the way - however at the moment - and for a long while I am getting no return on $400k in my trading account and no return on my shares (and I don't know what return on Gfin Green $60k) I keep more money there than I need to as I am aware that Gfin needs funding - however even $400k in a term deposit is going to earn me $14k per year. These funds are at risk from other traders however I am not being paid for that risk. I keep thinking its early days yet- but in reality its not. I think we need to really look at things - at this stage I have not seen any financials for Gfin and believe me that is a concern. I have many other shares and know the balance sheets and profit and loss of these companies - however with Gfin I don't know whether we are scraping by or making money. 83 As will emerge, the fact that Mr Cameron was well aware that the funds held in what he described as his 'trading account' were at risk of being diminished by the activities of other traders at GFIN is a significant matter. This reflected the nature of the arrangement whereby he was trading on GFIN's account and therefore losses made by other traders on GFIN's account exposed contract traders to the risk that GFIN would have to cover those losses by resorting to funds shown in the trading accounts of other traders. 84 The email prompted a long response from Mr Gooden in which the exposure of the amount held in the trading account to the risks of the GFIN business was acknowledged. 85 In a reply email Mr Cameron objected to some of the matters in Mr Gooden's response. He expressed concern that he could not see the GFIN financials. He concluded: I remain a committed stakeholder and will continue to try and build my account balance - I just need reassurance that this ship is fit to sail and is building it's funds. Its very hard for me to leave $500k at Gfin and not know anything about its P/L. 86 The email exchange continued and produced this further statement from Mr Gooden in response to Mr Cameron on 28 February 2014: From my perspective, it's troubling me that having spent many years now working with you both at Aliom and GFIN that I need to continue to reassure you that your funds are as safe as they can be and that your risk to other traders/clients is higher or lower than at any other time before. It's just not justified. As I've explained before, if you feel nervous about the risk associated with the funds you hold in GFIN then we can lower your holdings, but that will necessitate a different commercial deal. However, whether we alter your risk exposure or not, I must insist that once we agree to move forward that we are not continually forced to revisit this discussion any further. … I understand your shareholding is important to you both in the way that you receive payments and your potential earnings from it in the future. If however you wish to keep a different amount in your account (for whatever reason), we can adopt the following scale: More than $400K - Current deal [which seems to have involved 100% of profit on trading being returned on the basis that Mr Cameron maintained a trading account with a minimum balance of $500,000] $250K - $400K = 90% profit split (rebate included) and one trading system subsidised Less than $250K = 80% profit split (rebate included) and no trading system subsidies. All I want moving forward is for you to have a little faith in me. As I've explained before it is disappointing that this may not be the case. I will extract everything out of our current trader base, bring new traders in and sack the ones that aren't performing. If I have something important to say then I will, otherwise it's probably not worth saying. I've hardened my approach significantly lately, and the team now realise that lack of performance equates to being discarded. 87 In around November 2014, JKB became an equity shareholder in GFIN acquiring a 9% shareholding from Beagle and leaving Beagle with a 51% equity shareholding and 100% ordinary shareholding. Mr Bignell who controlled JKB did not become a director of GFIN. 88 On 5 November 2014, Mr Gooden sent an email to Mr Bignell outlining what Mr Gooden described as 'an equitable commercial arrangement for your proposed trading activities'. The proposal as outlined dealt with the allocation of rebates from ASX 24 and proposed a 95% profit split on trading. As to payment of trading profits it said: Payment of Trading Profits - as a shareholder, you will be entitled to draw on your trading profits via a combination of both consultancy payments and dividends from the company. We would obviously need to work through the best solution for you as well as ensuring GFIN isn't penalised if you wish to draw franked dividends prior to the tax being paid, etc. I'm happy to work with you on the best option for you. 89 The reference to the payment of trading profits as 'consultancy payments' is reflected in other documents. It reflects the fundamental nature of the trading arrangement. GFIN would allow trading on a contract basis on its account and then pay contract traders 'consultancy payments'. For shareholders who were contract traders there was also the potential to receive distributions as dividends. 90 The email set out a list of 16 names as 'the current group of traders at GFIN'. Then under the heading 'ABN AMRO FUNDS ON DEPOSIT/LIMITS' the email said: I've had a long standing relationship with ABN Amro having founded Aliom, so in confidence they have provided me with a very good funding/commercial arrangement which was great especially when we were caught up in the MF Global situation. That has allowed me to pay as much to the traders as possible without having to retain monies. Initially our funds required was $500K, however that has increased to $650K and we will need to lodge a further $500K in the next quarter. Having experienced the MF Global situation, my aim is still to keep a minimum amount of funding on deposit with the clearer at any point in time. I think I have successfully managed to do that over recent years, it's always good to remain vigilant on these things. Our limits on the main products as a firm are as follows. XT 8,000 YT 12,000 IR 12,000 It is important to note that we are only using a fraction of these limits. Most traders in recent months have scaled back their need for limits. Most of the traders are scalpers, stacking is essentially a thing of the past and as a firm we have very few positions on at 4.30. We may have a couple of hundred three years and maybe 100 tens and the same in bill spreads, etc. We have not had a haircut call (margin) since inception with ABN Amro. I will however be retaining monies from the existing traders going forward, most likely in the form of retention of rebate for the next quarter or so. Given our funding requirements will increase it's a natural progression anyhow. 91 As this communication shows, it was part of the contract trading arrangement that each trader had to allow monies to be held back by GFIN in order to cover the risk associated with trading by all traders, hence the identification of who the traders were, the nature of their trading and the limits within which the overall trading activities of all traders at GFIN occurred. For the shareholders in GFIN there appears to have been a further obligation to contribute funds to GFIN that would be reflected in the balance of their sub-account as part of the omnibus account. These funds were provided to ensure GFIN could maintain sufficient funds to cover the minimum deposit required by the Clearing Participant bank. 92 Accordingly, Mr Bignell responded to the email by saying that he assumed that his capital injection through a stake in GFIN would be used to boost deposits held with ABN AMRO 'to cover the extra margin'. Mr Gooden responded: 'Yes the consideration for your shares would be injected into the company and would assist with margining requirements with the Clearer. That is the best use for them at present'. Mr Bignell deposed to complaints about what was done with funds that he paid to acquire shares in GFIN, but no reliance was placed upon those matters in submissions. This was relied upon as a matter that reflected adversely upon Mr Gooden and his conduct in relation to GFIN, but it was not the subject of any claim that the conduct amounted to a breach of fiduciary duty. 93 On 20 January 2015, Mr Gooden asked JAG Securities to transfer $200,000 to GFIN in the form of a loan for about six months until trading balances in GFIN built up and there were enough funds to meet the requirements of ABN AMRO. In his affidavit evidence, Mr Bignell raised complaints about what was done with those funds. However, he said that GFIN paid back the loan on 12 February 2016. 94 On 12 February 2015, GFIN and JKB entered into an agreement concerning the issue of new shares in the capital of GFIN which would be allotted to JKB. The recitals to the agreement state that it was entered into to reflect the issue of the shares and to outline 'the objectives, rights and obligations of JKB' in GFIN. The other shareholders were not parties to the agreement. Nevertheless its terms adopt the same form as the shareholders agreement entered into in 2010 and contains substantially the same provisions. As to payment to the managing director, it provides: Shareholders agree that the Managing Director will receive a salary of One hundred Thousand Dollars ($100,000.00) per annum as and from the 14 September 2012. In the event that the profit of the Company reaches Five Hundred Thousand Dollars ($500,000.00) per annum then the salary of the Managing Director will increase to One Hundred and Fifty Thousand Dollars ($150,000.00) per annum. 95 The reference to an agreed salary of $100,000 at this point in time is significant. It sits somewhat inconsistently with general evidence to the effect that no increase in the salary of Mr Gooden was agreed at any time. 96 In around May 2016, Mr Bignell raised with Mr Gooden the fact that he was considering withdrawing all his trading funds from GFIN (that is, the trading funds of JAG Securities) after he had separated from his wife. Mr Bignell's evidence as to his conversation with Mr Gooden at that time was as follows: [Mr Gooden] suggested that withdrawal was not a good idea because I would have to cease trading. He suggested that a smaller amount be withdrawn from my trading account to be held by GFIN which would be repaid on my request and he also suggested that GFIN retain my rebates going forward until I requested them to be repaid. On 16 May 2016, by an agreement with [Mr Gooden], [Mr Gooden] withdrew the amount of $361,705.71 from my trading account. This was whilst I was awaiting clear advice from my family law solicitors concerning marital assets and I made it very clear to him the funds would need to be repaid. 97 Jumping forward, Mr Bignell deposed to complaints as to what occurred thereafter in paying out the balance of his account. In particular, he said that he received a payment of a further amount of $179,511.79 on 23 January 2017 on the basis that the whole amount was treated as a dividend from GFIN and GFIN would retain the tax and the dividend would be paid as fully franked, but there has never been a fully franked dividend. These matters of 'elaboration' were not relied upon by GFIN in the present proceedings. 98 Returning to June 2016, at that time one of the parties with which GFIN had a contract trader arrangement was Southend Futures. Mr Simon Lucas conducted derivatives trading on GFIN's account for Southend Futures. As at 23 June 2016, the value of the sub-account in the omnibus account at ABN AMRO with the name Simon Lucas was $47,297.18. Between 23 and 24 June 2016, trading positions on trades by Mr Lucas incurred losses of over $460,000 due to the derivatives market being affected by the Brexit vote announcement in the United Kingdom. The result was that the value of the sub-account for Mr Lucas went to a negative figure of $414,025.64. The effect on GFIN's omnibus account with ABN AMRO was to reduce the overall balance from $1,014,006.40 to $581,481.05 overnight. 99 ABN AMRO issued a notice to GFIN that it had violated the $1,000,000 minimum for its account and ABN AMRO requested that GFIN deposit $418,519 to cover the deficit. 100 On 27 June 2016, GFIN deposited $270,000 into the ABN AMRO omnibus account from its operating account. On 29 June 2016, a further $75,000 was deposited into the omnibus account from GFIN's operating account. Those funds ($345,000 in total) came from GFIN's operating account at Westpac. The GFIN admin sub-account at ABN AMRO actually had an increase in funds of about $440,000 (moving from a negative balance of $173,852.07 on 23 June 2016 to a positive balance of $268,991.11 on 29 June 2016). Therefore, there appears to have been funds in addition to the $345,000 (being about $95,000) that were paid into the ABN AMRO omnibus account at this time. Together with movements in other sub-accounts in the omnibus account at ABN AMRO, the total deposits of about $440,000 took the overall balance for the account to $1,041,145.76. 101 Then on 1 July 2016, the sub-account for Mr Lucas changed to negative $4,625.42 and the GFIN admin sub-account changed to negative $57,158.95. It may be inferred that there was a re-allocation of most of the $440,000 in funds that were added to the GFIN admin sub-account to the sub-account of Mr Lucas. Changes to the balances of other sub-accounts accounted for the fact that the negative balance in the GFIN admin sub-account did not go further into negative territory by that time. 102 Mr Gooden did not inform the other directors of what had happened with the trading by Mr Lucas and the deficiency in the omnibus account that had occurred as a result. 103 As to the source of the funds that were injected into the omnibus account, an amount of $250,000 was deposited into the operating account of GFIN on 27 June 2016 with the description 'Rtgs High Value Payment Ref 0416030 Southend Futures Simon Lucas' and an amount of $100,000 was deposited into the same account on 28 June 2016 with the description 'Deposit R M Ward Tfr from Wards'. These deposits correspond with the timing of transfers from the operating account to the ABN AMRO omnibus account of $270,000 on each of 27 June 2016 and $75,000 on 29 June 2016 respectively (total of $345,000), leaving a balance in the operating account on that date of just $19,613.88. Given the state of the operating account it was the funds that came from Mr Lucas and Mr Ward that enabled the payments to be made to ABN AMRO. 104 It is not indicated what was meant by the description 'Rtgs High Value Payment'. I note that the Reserve Bank of Australia maintains a High Value Payments system. It involves real-time gross settlement (or RGTS). The nomenclature on these transactions seems to indicate use of this system for the transfer. 105 The Court was not taken to any evidence as to a possible source of the remaining amount of about $95,000 that made up the total of about $440,000 in funds that were deposited into the ABN AMRO omnibus account at this time. However, it is to be noted that the FY2016 accounts for GFIN show a loan account for Mr Lucas in an amount of $95,790. If GFIN provided the additional $95,000 (or thereabouts) that would account for the amount of the loan. However, as is explained below, it is difficult to reconcile the FY2016 accounts with what happened at the end of June 2016 because the total amount of $350,000 in deposits from Southend Futures and R M Ward are not identified in the accounts whether as loans or otherwise. It is possible that these amounts were called in by GFIN as amounts due to it by those parties at that time. As a contract trader may have a responsibility to cover trading losses, it is equally explicable that the amount of $250,000 apparently received from Southend Futures or Mr Lucas on 27 June 2016 was a payment made in performance of an obligation of that kind. However, if that is so, it is not clear why the amount of $95,790 would be depicted as a loan. There is simply insufficient evidence from which to draw a conclusion. 106 It was submitted that it should be inferred that the transfer of $250,000 into the operating account was received from Mr Lucas as a loan. There are other entries in the operating account where the description 'loan' is used. For example, deposits of $100,000 made on each of 5 and 8 July 2016 into GFIN's operating account each have the description 'Deposit Tm Bank New loan from Kim'. However, an entry of that kind was not used for the amounts received from Mr Lucas or Mr Ward at this time. 107 It was further submitted that the amount of $250,000 was ultimately paid back to Mr Lucas on 1 June 2017 (almost a year later). On that date there was an amount of $275,000 received into the operating account with the description 'Rtgs High Value Payment Ref No 0306139 MacQuarie Bank Li/Rfb/Futures Qc'. Also on 1 June 2016 an amount of $250,000 was paid out of the GFIN operating account with the description 'Withdrawal Online 1606764 Pymt Southend F Southend Futures'. It was not explained how it might be concluded that the amount was a repayment of a loan rather than a disposition from the amount of $275,000 received into the operating account on the same day. There was no annotation on the account that provided any indication as to the purpose of the payment to Southend Futures. There is only the degree of correspondence in the amounts (noting that they are not identical). 108 GFIN points to an email from Mr Gooden to GFIN's accountant Mr Adam Cammidge on 13 February 2017 (concerning the preparation of GFIN's accounts for FY2016) as relating to the amount of $250,000. In that email, in response to a request from Mr Gooden to confirm the nature of certain items highlighted on a banking spreadsheet including a receipt of $250,000 from Mr Lucas, Mr Gooden said: 'Please apportion the $250,000 amount from Simon Lucas as trading profit. In addition, please create a loan with GFIN owing Simon Lucas $95,790.05'. To the extent that this fragment of information indicates anything, it suggests that the $250,000 was an amount which GFIN was entitled to receive from Mr Lucas. Save for the proximity to the events concerning the loss incurred by Mr Lucas on trading, there is no reason why the content of the email should lead to the conclusion that the $250,000 when received into the operating account of GFIN was a loan. That proximity might lead to Mr Lucas being called upon to perform an obligation to make some payment that was due to GFIN as much as it might lead to Mr Lucas making a loan. 109 As has been noted, the loan amount of $95,790.05 corresponds with the balance of funds in addition to the amount of $345,000 transferred from the operating account that seems to have been received into the omnibus account to cover the loss occasioned by the Brexit announcement. If so, it may have been a loan. 110 The evidence indicates that GFIN and Mr Lucas had ongoing commercial dealings. It is difficult to draw any conclusions as to the status of particular payments without understanding the overall nature of those dealings. Without some form of comprehensive analysis of the accounts for 2016 and what they show as to all of those dealings as between GFIN on the one hand and Mr Lucas and Southend Futures on the other hand, it is not possible to draw any inference as to the character of the amount of $250,000 that was received into the operating account of GFIN. 111 What is established on the evidence is that there was a substantial shortfall below the cover required by ABN AMRO on its omnibus account as a result of a loss being exposed on the positions taken on trading activity by Mr Lucas. The shortfall was covered by injecting funds into the omnibus account. A considerable part of those funds came from the GFIN operating account. About $95,000 came from a source that is not identified on the documents but may have been a loan from Mr Lucas. Both prior to and after those events the GFIN admin sub-account that formed part of the omnibus account at ABN AMRO was shown as having a substantial negative balance. Therefore, the total cover provided by the 'retentions' in the sub-accounts of contract traders was more than the overall requirement of $1,000,000 because it also needed to cover the extent of the negative balance in the admin sub-account. After the additional funds had been injected into the omnibus account that negative balance was only $57,158.95. Whether it was appropriate for the admin sub-account to be operated with a negative balance is considered below in addressing the individual claims made by GFIN. However, what may be noted at this point is that each of Mr Gale, Mr Bignell and Mr Cameron accepted that the 'retained funds' that were included in their sub-accounts were funds held to cover the trading losses of all contract traders. Therefore, even on their own evidence, the use of those 'retained funds' to cover the trading losses incurred by Mr Lucas was appropriate. 112 Mr Gooden commenced negotiations with Macquarie to take over the Clearing Participant responsibilities for GFIN trading on the ASX 24 market. The first in a series of emails in evidence was on 1 July 2016 when an officer at Macquarie sent an email to Mr Gooden in which he said that he was working on the various things needed to get GFIN up and running as soon as possible. The officer asked for the 'financials' for GFIN for FY2015. He said that he was 'discussing with our risk on getting the limits signed off'. Mr Gooden responded that he 'would appreciate confirmation of all limits and commercials based on our previous discussions prior to continuing'. 113 However, plainly there had been earlier discussions. In a later email dated 5 October 2016, Mr Gooden followed up a response to the last email to Macquarie sent on 19 July 2016. It said: I've not received any feedback for a couple of months now and some of the traders have been enquiring as to if and when our clearing is moving. Not sure where you are at, we are approaching 12 months since this discussion started and my impression is that you aren't able to cater to our requirements. Can you confirm this is correct? 114 Therefore, it appears that discussions between Mr Gooden and Macquarie commenced in the final quarter of 2015. It was submitted for GFIN that it should be inferred that the approach to Macquarie was prompted by what had occurred with Mr Lucas and Brexit in late June 2016 and was designed to reduce the minimum level of cover that was required. Indeed it was suggested that the reason for the move to Macquarie was to assist in covering up what had occurred. Based on the contemporaneous evidence of the content of the email exchanges with Macquarie, I do not accept those submissions as to findings that should be made. 115 Returning to the chronology, on 11 July 2016, Macquarie asked for some more financial details and amongst other things asked the following question which appeared to be directed to obtaining information to set an appropriate margin: We have been checking with a number of our on-boarding customers on the way their Books worked over the brexit period, with the volatility spikes and margins increases.. did you see any increase in your IM requirements and also did the company balance sheet see a decline in P&L over this period. 116 In a response on the same day Mr Gooden dealt with the questions raised and responded to the above question as follows: With regards to Brexit, we had one senior trader realise a loss which did affect our balance sheet. However this was a fraction of his performance for the financial year and our stance on retained trader funds provided the necessary protection to GFIN as an entity. All other traders either ceased trading over Brexit or registered profits. Needless to say trading conditions are tricky at present and will most likely remain so for the forsesable [sic] future. 117 This is a relatively candid response by Mr Gooden concerning the loss in relation to the Brexit announcement. It is inconsistent with any attempt to cover up the loss by moving to Macquarie. 118 By mid-October 2016, Mr Gooden was proposing a move to Macquarie on 1 December 2016. On 19 October 2016, Mr Gooden sent an email to Macquarie in which he said: I am required to give ABN one months notice, so Nov 21 is a possibility provided everything is finalised in coming days. Otherwise we will find another date. My main concern is ensuring our current limits exist for the 1 million in funds lodged, if I can transition the traders without taking anything away from them then they'll be happy. 119 The content of this email is also inconsistent with the submission advanced for GFIN that the move to Macquarie was motivated by Mr Gooden seeking to reduce the level of cover required on the omnibus account. At the time, Mr Gooden was referring to maintaining the same limits as applied for ABN AMRO and the same amount to be held in the omnibus account. 120 The case for GFIN was that on the beginning of 25 November 2016, 'the balance in GFIN's ABN AMRO omnibus trading account was $1,587,662.82'. It also claimed that between 25 November 2016 and 20 December 2016, Mr Gooden caused $1,587,662.82 to be transferred from the ABN AMRO omnibus account to GFIN's operating account. The latter allegation was admitted by Mr Gooden in his defence. Therefore, irrespective of whether the omnibus account had that amount as at 25 November 2016, amounts totalling those funds were withdrawn and transferred to the GFIN operating account over the specified period. 121 It is also established that only $350,000 of those funds was then transferred to the new Macquarie omnibus account, being $250,000 on 16 December 2016 and $100,000 on 22 December 2016. 122 These events may be placed in the context of the following email from Mr Gooden to Macquarie on 5 December 2016: Preparing for the roll now following another busy month in Nov, 460,000 lots from memory. Looking forward to moving across to Macquarie though! We will only have a handful of smaller traders until late January, the larger guys are switching off over the break. Quick question, John Bignell is finalising a rather expensive house renovation and is looking to draw on profits until he returns late Jan. Is it possible for us to seed the account with say $250K using only 5 to 10% of our allocated limits, then in late Jan the larger traders return and we will increase funds in excess of the million. If the above isn't suitable then it may be easier for us to switch off until late Jan, let me know your thoughts and I can organise from there. Otherwise not much else to work on. We have decided to refrain from transferring any existing LCC's. John may require an LCC once he returns however we can sort that over the break. In coming days I'll firm up the traders who may wish to start on Dec 15 and send over their system requirements and limits (depending on the above funding question). 123 It appears that operation at the lower limit was proposed as a temporary measure which would apply when Mr Bignell and others were not trading up until late January 2017. 124 The response came from Macquarie as follows: For the traders that you would look to transition in December, can you supply a very quick trader/risk profile? Ultimately, I have no real issue with this but will need to give the Risk Management Team an understanding of the initial risk profile for Macquarie. I guess we will need to know i.e. How Many traders Intra day limits/position limits you would like to allocate to them Typical overnight position if any 125 Also, on 16 December 2016, GFIN paid $438,331.52 to JAG Securities at the request of Mr Bignell. The amount included rebate adjustment amounts due to JAG Securities based upon its volume of trading. It came from the operating account and drew upon funds that had come across from the ABN AMRO omnibus account. There is no suggestion that this amount was improperly paid to JAG Securities. 126 On 21 and 29 December 2016 amounts totalling $16,500 were paid to Gale Capital. There is no suggestion that these amounts were improperly paid to Gale Capital. 127 However, GFIN focussed attention upon the following particular amounts that were paid to other parties in November and December 2016 by GFIN from its operating account. They are: (1) 28 November 2016, to Jodie Kim, $10,500; (2) 28 November 2016, to Scott Cossens, $91,000; (3) 2 December 2016, to Mr Gooden $3,000; (4) 2 December 2016, to Jodie Kim, $1,333; (5) 8 December 2016, to Mr Gooden, $5,626; (6) 13 December 2016, to Beagle, $5,500; (7) 13 December 2016, to GFIN Green, $33,000; (8) 15 December 2016, to Ronald Mur, $4,350; (9) 16 December 2016, to Scott Cossens, $76,000; (10) 16 December 2016, to Kerry Ward, $170,000; (11) 16 December 2016, to Ronald Mur, $65,000; (12) 16 December 2016, to Beagle, $11,000; (13) 29 December 2016, to Beagle, $5,500; (14) 3 January 2017, to Mr Gooden, $8,626; and (15) 10 January 2017, to Beagle, $5,500. 128 The claim made is that the funds that came from the ABN AMRO omnibus account were not available to be used by GFIN for its general operating expenses and loan repayments. Complaint is also made about the use of some of those funds by making payments to Mr Gooden and Beagle. However, as to all of the payments it is said by GFIN that they were not made to meet GFIN's usual operating expenses. It is said that there was an obligation to transfer funds held in the ABN AMRO omnibus account that related to the trading activities of contract traders to the new Macquarie omnibus account and that did not occur. Instead the amounts in the list were paid out to persons from monies that should have been deposited into the new omnibus account at Macquarie. 129 There was no real evidence pointed to by GFIN upon which the Court might form a conclusion as to the reason for each of the disputed payments. Other than pointing to their amounts and the payees, no evidence was identified as a basis upon which the Court might conclude that the payments were not made to meet genuine liabilities of GFIN (noting that there are separate claims that there was no basis for any payments to Beagle and that Mr Gooden's entitlements were limited to his salary as managing director). There was no real evidence as to the nature of the business dealings conducted by Mr Gooden as managing director in enabling the derivatives trading by contract traders and employees on GFIN's account. 130 Therefore, the heart of the complaint about what happened when the omnibus account was transferred to Macquarie was the claim, in effect, that the monies in the omnibus account belonged to the traders and GFIN was not at liberty to apply those funds for its own purposes. The statement of claim describes these funds as 'Contract Traders' funds'. For reasons that have already been given that characterisation is problematic. The funds in the omnibus account were all GFIN's funds. They were held to cover trading risks to which GFIN might be exposed by the trading activities of contract traders. As was the case with Mr Lucas, there was the potential on any day for the position taken during the day to expose GFIN to a considerable loss that had to be covered when all trading was settled at the end of the day. In addition there were risks that would be carried forward if there were open positions at the end of one day's trading (although it is to be noted that there are references in the evidence to most trading occurring within each day). There was also evidence of calls being made from time to time for traders to pay amounts to GFIN to provide cover for trading risk and to meet the requirement for a minimum balance to be maintained for the omnibus account as a whole. 131 Therefore, the position in relation to the sub-account balances was much more complex than the simple foundation on which the case by GFIN was advanced. It appears that, at any point in time, the sub-account balances as depicted may be in part profits from trading and in part monies provided by the contract trader (shareholder) as a form of deposit to cover future trading risks. The retained profits from trading represented amounts that would be payable as to the agreed percentage share to a contract trader assuming that the trader had no open positions at the relevant point in time on which there was still uncertainty as to the outcome. Further, those funds were subject to the exercise by GFIN of its right to retain funds to cover day to day trading risks of the kind that had been manifested by the trading activities of Mr Lucas on the day of the Brexit announcement. In order for the contract trader to continue trading, an amount sufficient to cover the future daily trading risk for the particular trading had to be kept in the account. It was not an amount that was available to the trader unless the contract trading arrangement was to be terminated. Finally, putting to one side the retention right of GFIN, the whole of the retained profits shown in the account were not available to the contract trader. As was explained by Mr Gale, if an invoice was sent to GFIN for the payment of part of the amount represented by the sub-account balance, then GFIN would deduct its percentage share. Only the net balance, plus GST, would be paid to the contract trader by GFIN. In many instances GFIN's share was 15%. Mr Bignell seems to have been a large trader compared to others. For JAG Securities (Mr Bignell's trading entity), it appears that the agreed percentage was 5%. 132 In short, the amounts shown at any point in time as the sub-account balance of a trader did not represent funds that belonged to the contract trader nor did they represent an amount which GFIN was obliged to pay the contract trader. Amounts that might be paid by GFIN were exposed to the vagaries associated with future derivatives trading by all traders, itself a risky activity. 133 Returning to the list of payments between November and December 2016 (set out above) (Disputed Payments), I note that the sub-account documents before the court show that Scott Cossens was a contract trader. There is also a reference in a later email from Mr Gooden to Mr Gale dated 13 June 2018 (responding to queries raised by Mr Gale) to the effect that there were direct transfers by 'Scott' into the ABN AMRO account in November 2016 in two tranches totalling $110,000. Therefore, it is an available inference that the payments made to him were consulting fees under his day trading agreement with GFIN or the refund of amounts that had been contributed by him to provide cover for his trading activities. Payments to Mr Cossens account for $167,000 of the Disputed Payments. There is also in evidence a loan agreement between GFIN and Mr Cossens, but that is for a later date in 2017. 134 GFIN Green Pty Ltd was a subsidiary of GFIN. The bank documents before the court indicate that consulting fees were paid to GFIN Green by GFIN. The bank statements for GFIN's operating account refer to payments being made by GFIN to GFIN Green and being received by GFIN from GFIN Green. Some identify these as 'Gfin Fs Loan'. There are all sorts of valid commercial reasons why a payment might be made to a subsidiary. GFIN Green accounts for $33,000 of the Disputed Payments. 135 As had been noted, GFIN had received $100,000 from the Wards on 28 June 2016. A further $100,000 was deposited by three transfers into GFIN's operating account on 20 October 2016. Two of the deposits were annotated as 'Tfr from Wards'). The third as 'Deposit … Rem: Ronald Ward'. On the same date $68,000 in funds was also transferred into the operating account by GFIN Financial. Those deposits enabled GFIN on the same day to transfer to the ABN AMRO omnibus account an amount of $170,000. Further deposits totalling $50,000 were made into the operating account by the Wards on 1 November 2016. The same day $20,000 was transferred from the operating account to the ABN AMRO operating account. Finally, on 23 November 2016, an amount of $35,000 was deposited into the operating account of GFIN with the annotation 'Deposit … Rem: Murray Ward'. It enabled GFIN to transfer $36,000 the same day to the ABN AMRO omnibus account. It may be inferred from these bank records and other references to loans being made to GFIN by the Wards, that they provided considerable funds in 2016 which were paid by GFIN into the ABN AMRO omnibus account. One of the Disputed Payments was made to Kerry Ward. It may be inferred that this was a repayment of loan funds that had been directed to the ABN AMRO omnibus account. In short these payments seem to relate to repayment of funds that had, at least in part, been added to the funds held in the ABN AMRO account and, in that sense, were not a dissipation of funds that corresponded with accrued entitlements of contract traders. 136 The Disputed Payments also include $1,333 and $10,500 (together, $11,833) paid to Jodie Kim. As has been noted Ms Kim had deposited considerable funds into the GFIN operating account in July 2016. In addition on 14 November 2016, a total of $50,000 was deposited into the operating account with the descriptions 'Deposit Tm Bank New loan from Kim' and 'Deposit Scott Claughton new loan from Kim'. On the same date an amount of $50,000 was transferred from the operating account to the ABN AMRO omnibus account. It is open to infer that the payment to Ms Kim related to a loan that she had provided to GFIN which had been used to increase the funds in the omnibus account. 137 The Disputed Payments also include $69,350 paid to 'Ronald Mur'. There are references to 'Ronald Mur' and 'Ronald Ward' in the operating account of GFIN. It appears that the full name of Mr Ward was Ronald Murray Ward. Submissions were made for GFIN on the basis that this was the case. There appears to be no reference in the evidence to a Mr Mur. The significance of the connection with the Wards is that there were instances where monies received from them into the operating account were then transferred to the omnibus account. 138 On 25 November 2016, a few days before the Disputed Payments, an amount of $125,000 was transferred from the ABN AMRO omnibus account (described as 'Abnamroclearing') to the GFIN operating account. The same day $101,500 was withdrawn. Of that amount, $51,000 was noted as 'Rpy Mallam' and $50,500 was noted as 'Rpy Cossens'. I note that Ms Kim's full name is Jodie Kim Mallam. These amounts are not included in the Disputed Amounts, but provide context for considering what was occurring when amounts were transferred from the ABN AMRO omnibus account to the GFIN operating account in November and December 2016. 139 Therefore the above evidence shows transfers as between the operating account and the omnibus account directing funds to and from third parties. The manner in which these transfers occurred is consistent with GFIN borrowing funds to cover shortfalls in the funds in the omnibus account because of losses incurred by traders or to pay to contract traders their share of profits at times when it was necessary to top up the funds in the omnibus account to maintain the minimum balance. Indeed, the documents show that from time to time the sub-accounts for particular traders were in the negative. When that occurred, as might be expected from time to time given the risks inherent in derivatives trading, in order to maintain the overall minimum balance in the omnibus account (and so enable other contract traders to continue trading on the GFIN account) it was necessary for GFIN to cover the losses until the sub-account position improved. All of which is to say that the evidence does not demonstrate that in November and December 2016, Mr Gooden simply removed funds from the ABN AMRO omnibus account and misappropriated it by paying it to third parties. On the evidence it is equally open to infer that what occurred in relation to the majority of the disputed payments (other than the amounts paid to Mr Gooden himself and Beagle) was that funds that had been borrowed in order to maintain the $1,000,000 minimum balance required in the omnibus account and those funds were simply repaid to relevant parties in November and December 2016. 140 Nevertheless, for GFIN to operate its business on the basis that the sub-account balances from time to time were amounts which GFIN could expend without regard to the likelihood that, in due course, it was to be expected that GFIN could have to pay those amounts to the contract traders (after deducting its percentage share in those cases where the amounts represented accumulated trading profits or funds that had been contributed by contract traders) was a very risky approach to the prop shop business. It depended upon future GFIN earnings being sufficient to cover the shortfall. 141 A small deficit as between the accumulated entitlements of contract traders (which corresponded in broad terms to their balances in the sub-accounts) and the funds immediately available to GFIN to meet those entitlements if called upon to do so may be justified. But the greater the deficit the greater the risk that GFIN would be unable to pay the entitlements (or the greater the amount that it would need in its operating account to cover the deficit). However, in order to determine at any point in time whether there was such a deficiency it is necessary to understand the extent to which the funds in the omnibus account are funds that have been provided by third parties by way of borrowings to cover the minimum balance and the extent to which the contract traders have provided those funds (either by retained earnings or by contributions for the purpose of covering the minimum deposit). GFIN did not seek to demonstrate the overall position of the GFIN omnibus account as at November and December 2016 and so no conclusion can be reached in that regard. As a result it may be that $350,000 was the full extent of accrued entitlements of contract traders and the deposits provided by them that were not paid to contract traders at that time (noting that large amounts were paid out to JAG Securities ($438,331.52), Scott Cossens ($91,000) and Gale Capital ($16,500)). 142 Of the Disputed Payments, $27,500 were paid to Beagle (one of which was paid in January 2017). Each of those payments had the annotation 'Cons Fee'. That notation is consistent with Beagle acting as a contract trader because the same notation appears throughout the bank statements for the operating account of GFIN where payments are being made to contract traders. Further, each amount is consistent with the practice described by Mr Gale of a trader issuing an invoice to draw down an amount of accrued profit share (the amounts being $5,500 in three instances and $11,000 in another). Finally, there are references in the sub-account names to Beagle which are consistent with it having a contract trader account with GFIN. These matters are considered below in dealing with claim (a). At this point it is sufficient to note that the question whether there was a bona fide reason to pay Beagle is the subject of claim (a). Any complaint about payments to Beagle as part of claim (c) overlap with that claim. 143 Finally, of the Disputed Payments, $17,252 was transferred to Mr Gooden (one of which was paid in January 2017). In each case the notation in the bank statement was 'Payment Malcolm Go Salary Mg' or similar. At this point it is sufficient to note that the question whether there was a bona fide reason to pay Mr Gooden is the subject of claim (b). Any complaint about payments to Mr Gooden overlap with claim (b). 144 It was accepted by GFIN that other payments made by GFIN from its operating account in the relevant period were for operating expenses. 145 Therefore, the evidence establishes the following as to the period in November and December 2016 when the Disputed Payments were made: (1) $1,587,662.82 was transferred from the ABN AMRO omnibus account to the GFIN operating account; (2) $350,000 was transferred from the operating account to the Macquarie omnibus account; (3) $438,331.52 was transferred from the operating account to JAG Securities, a contract trader; (4) $167,000 was transferred from the operating account to Mr Cossens, likely in respect of his dealings as a contract trader; (5) $16,500 was transferred from the operating account to Gale Capital a trader; (6) $251,183 was transferred from the operating account to parties who had lent funds to GFIN that had been transferred to the omnibus account at ABN AMRO (Ms Kim and the Wards); (7) $33,000 was transferred from the operating account to GFIN Green, a subsidiary of GFIN, a transaction that has not been shown to be improper in any way; (8) $27,500 was transferred from the operating account to Beagle for Cons Fee which is a matter the subject of claim (a); (9) $17,252 was transferred from the operating account to Mr Gooden who was entitled to a salary as managing director and there is a separate claim as to an alleged overpayment of his salary in this period (the merit of which depends upon a consideration of the payments to which he was entitled on an annual basis and the amount received by him on an annual basis); and (10) The balance was for operating expenses of GFIN. 146 Therefore, of the $1,587,662.82, a total of $1,223,014.52 (being the sum of the amounts in (2) to (6) above) comprised amounts that were of a kind that were represented by the amounts in the omnibus account and on the logic of the case advanced by GFIN are not the subject of complaint. GFIN accepts that the balance was applied for operating expenses of GFIN. Therefore, it is only $44,752 (being the sum of the amounts in (8) and (9)) that may be questioned and whether there was a proper basis to pay those amounts depends upon claim (a) and claim (b). 147 As has been explained, within the omnibus accounts there were sub-accounts for each of the contract traders and a sub-account styled 'GFIN admin Account'. After the omnibus account was moved to Macquarie and the levels of trading increased after January 2017, there was no requirement imposed by Macquarie to increase the minimum amount held in the omnibus account to the required level of $1,000,000. 148 As a result, when a contract trader was given access to that trader's sub-account it showed a positive balance in favour of the trader, but what the trader did not know from the sub-account information was that the actual cash in the omnibus account was insufficient to cover the whole of that balance by reason that a substantial part of those funds was offset by the negative balance in the GFIN admin sub-account. 149 At no time did Mr Gooden inform Mr Cameron, Mr Gale or Mr Bignell that the amounts shown in the trader sub-accounts did not represent cash held in the omnibus account by reason of the negative balance in the GFIN admin sub-account. The question whether there was any significance for the case advanced by GFIN as a result of that failure is addressed below. 150 On 23 January 2017 a deposit of $200,000 annotated 'Remitter: Ronald Ward' was made into the GFIN operating account. On the same day a payment was made to JAG Securities of $179,511.79 annotated as 'Pymt Jag Securi Cons Fee Jag'. A few days later on 27 January 2017, there was a further deposit of $75,000 annotated as 'Deposit Scott Cossens Loan'. On the same day there was a payment of $16,840.35 annotated as 'Pymt Blarney Fu Cons Fee Blarney'. On 31 January and 1 February 2017 there were payments of 'Cons Fees' to Don Humphries, Kels Trading and Southend Finance as well as a salary to Scott Cossens. Therefore, what was occurring at this point is that funds were being received by GFIN into the operating account from third parties and it was those borrowed funds (rather than transfers out of the omnibus account) that were being used to make payments to GFIN's contract traders and employee traders. 151 The same practice continued into February, although on 9 February 2017 an amount was received into the operating account from 'Gay King Thompson' of $475,000 of which $250,000 was paid to Mr Bignell and $200,000 was transferred to Macquarie. 152 On 14 and 16 March 2017 there was a strange series of transfers. $1,500,000 came into the operating account with the annotation 'From Southend Futures'. The same amount (in two tranches) was transferred to the omnibus account the same day. Two days later the amount of $1,750,000 was transferred from the omnibus account to the GFIN operating account. Of that amount $1,561,000 was transferred out of the operating account with the annotation 'Payment Southend F Ln Rpy + Int Sthd'. 153 Not all payments into the Macquarie omnibus account came through the GFIN operating account. For example, on 12 May 2017 there was a cash receipt into the Macquarie omnibus GFIN admin sub-account of $55,000 that did not come from the operating account. 154 Thereafter, amounts were received into the operating account from the Macquarie omnibus account and 'Cons Fee' payments were made to various parties. This was the case up until May 2017. Throughout the period from December 2016 to May 2017, the GFIN admin sub-account at Macquarie remained in credit. 155 On 4 May 2017, Mr Gooden spoke to Mr Bignell and told him that Macquarie was putting pressure on him to increase the funding amount that GFIN had on deposit. He said that he was going to need Mr Bignell to inject at least another $450,000 if he wanted to keep trading, taking the amount in his account up to $500,000. 156 Whilst all this was happening, there was a delay in the preparation of the end of financial year accounts for GFIN for the year ending 30 June 2016. Ensuring the preparation of the annual accounts was a responsibility of Mr Gooden as managing director. 157 From February 2017, Mr Cameron and Mr Gale asked Mr Gooden to provide the accounts for GFIN for the previous financial year and a current balance sheet. Although Mr Gooden did not provide the accounts or a current balance sheet to them at that time, he did provide assurances that everything was fine with GFIN. The state of dealings between Mr Gale and Mr Gooden at the time concerning the accounts is evident from the terms of the following email sent by Mr Gale to Mr Gooden on 10 February 2017: Thanks for the discussion about my status as a director of GFIN Pty Ltd the other day. I appreciate your suggestion to stand down if I was concerned about the risks. I suppose with any business there is risk and after thinking about it I'm happy to accept that and remain as a director if that suits you. It probably makes sense from a corporate governance view as well to have two directors. Plus it's probably about time that I learnt more about how to manage a balance sheet. As we discussed the other day I'm fine to be involved in as much or as little of the day to day decisions or negotiations as you would choose. The main thing for me is that I should be more proactive in making myself aware of the overall financial position of the company probably on a quarterly basis. I suppose a good time to have the first look at it will be when Mitchell Wilson prepare the financial statements shortly. Then when you get time to have a chat about it we can run through the main parts of the statements and how they relate to the bottom line. I'm no accountant but to simplify it I suppose the important issue would be how much is owed for all potential outgoings such as traders' retained earnings and commissions, quarterly running costs, salaries and loans vs assets and cash position which I'm presuming would be mainly funds held with the clearer and in the bank. Or in other words how does the balance sheet/cash position look if everyone gets paid everything owed at the end of the quarter. 158 In late March 2017, Mr Gale received the financial accounts for GFIN and signed them as director on 27 March 2017. The accounts for FY2016 showed profit for the year of $30,968 (compared to profit for the previous financial year of $517,566). Significantly, the cash position of GFIN as at 30 June 2016 was shown in the FY2016 accounts as $13,014 (in a Westpac operating account) and $1,040,213 (in an ABN AMRO account, which appears to be a reference to the omnibus account). 159 The FY2016 accounts as signed by Mr Gale included Note 7 'Trade and Other Payables' as follows: 2016 2015 $ $

Current Other Creditors 9,350 8,888 PAYGW Payable 7,415 2,575 Superannuation Payable 8,269 3,622 25,034 15,085

Non-Current Loan - Kim Mallam - 50,000 Loan - John Bignell (114,965) 200,000 Loan - GFIN Blue Pty Ltd (9,586) 5,308 Loan - GFIN Financial Solutions Pty Ltd 28,792 31,895 Loan - Simon Lucas 95,790 - 31 287,203

160 From this note it was evident that relatively large amounts had been borrowed by GFIN in FY2015 and FY2016 and that, at the end of FY2016, $114,965 was payable by GFIN to Mr Bignell and $95,790 was payable by Mr Lucas to GFIN. As has been indicated, it is difficult to reconcile the overall state of these accounts with the events that occurred when the trading position of Mr Lucas was exposed at the end of June 2016 as a result of the Brexit announcement. But there is no suggestion that the reference to the loans in Note 7 gave rise to any concern or questions on the part of Mr Gale when he was asked to signed the accounts as a true record of the financial position of GFIN. 161 The profit and loss statement for FY2016 recorded a substantial increase in trading costs, mostly attributable to an increase in 'Consultants' from $1,764,923 in FY2015 to $3,015,110 in FY2016. Expenses showed an increase in wages from $91,674 in FY2015 to $320,552 in FY2016. 162 Mr Gale reviewed the FY2016 statements when he signed them and to him 'they appeared consistent with [Mr Gooden's] representations that GFIN was profitable and that our traders' funds were safe and secure'. He thought there was nothing unusual about them except for the substantial reduction in profit from the previous year. 163 As to the then current position of GFIN, Mr Gale again asked Mr Gooden for a current balance sheet in March 2017 and then again by the end of May 2017. 164 From June 2017, Mr Gooden caused the Macquarie omnibus account to be operated in a manner whereby the GFIN admin sub-account frequently had a negative balance and the requirement for a minimum balance was satisfied by amounts in the contract traders' sub-accounts being sufficient to meet the minimum balance as well as cover the negative balance in the GFIN admin sub-account (although there were points at which the minimum balance requirement was not met). 165 On 1 June 2017, an amount of $275,000 was transferred from the Macquarie omnibus account to the GFIN operating account. Its effect was to cause the GFIN admin sub-account to go into debit resulting in a negative balance of $108,170.42 for the admin sub-account. 166 While this was happening, Mr Gale was still pressing Mr Gooden for information. On 16 June 2017 Mr Gale sent an email to Mr Gooden in which he said: Over the next few days can you please let me know the parent company's net financials. ie. Any surplus/debt if the company were to be wound up now. I would just like to get quite an accurate picture of my own financial situation if GFS gets sold. My income is potentially going to reduce depending on how things pan out so I just want to try and plan ahead a bit. Also could you please let me know my net liquidation figure for my trading account too. So without a potential $650K boost to the bottom line [which appears to be a reference to funds expected from a sale of GFIN's shares in GFIN Financial] what is GFIN Pty Ltd's ALSF I suppose. Meaning if all debts on or off balance sheet, trader's retained earnings, salaries, share equity, tax and anything else is accounted for will there be a surplus or a deficit; and roughly how much please. By off balance sheet I mean the $94K of excess brokerage paid by me wasn't showing in my net liquidation. Does this mean that it hasn't appeared as a liability in the financial statements; and are there any other amounts like that owing to other traders that may not have been accounted for. 167 Mr Gooden responded by email on 19 June 2017: I'll start working on the numbers for you. I can only do estimates at the moment, it's obviously a changing number as each day passes. It might be best to have the 2016/17 accounts compiled straight away (ie, July 1) both for GFIN and GFIN FS [being GFIN Financial]. I am happy to action that for GFIN. You have a few questions in your email so I best just work through them, will revert back shortly 168 The GFIN admin sub-account was briefly restored to a positive balance on 23 June 2017. On 23 June 2017, an amount of $450,000 was received into the GFIN operating account. It was annotated as 'John Bignell Jag Securities Pty Ltd'. This was the transfer of the amount that Mr Gooden had sought from Mr Bignell in their conversation on 4 May 2017 (see above). On the same day there was a transfer of $250,000 to Macquarie and a payment of $100,000 annotated as 'Pymt Kerry Ward Ln Rpy Mw'. It appears that those funds were received into the Macquarie omnibus account on that day. Together with other funds received directly into the omnibus account (or by allocation of funds from another sub-account) they made a total of $291,837.91 which increased the balance in the GFIN admin sub-account into positive terms. Therefore, the manner in which the $450,000 was deployed by GFIN was contrary to what Mr Gooden had told Mr Bignell. A few days later there was a payment of $75,000 out of the GFIN operating account annotated as 'Pymt Scott Coss Sc Ln Rpy'. I infer that the two payments annotated 'Ln Rpy' were to repay loan funds to the Wards and Mr Cossens. In effect, those loan repayments were made by using part of the $450,000 deposit from Mr Bignell. 169 Then on 3 July 2017, there was an overall debit amount to the GFIN Admin sub-account at Macquarie of $552,268.26 sending the GFIN Admin sub-account into substantial debit. Of that amount only $75,000 appears to have been received into the operating account. The balance of the figure seems to have resulted from adjustments as between the sub-accounts because Mr Bignell's evidence was to the effect that on 3 July 2017 he noticed that his sub-account had been credited with $450,000. However, no such amount was transferred from the operating account to the GFIN omnibus account on that day. As has been noted, $250,000 had been transferred a few days earlier. Mr Gooden sent Mr Bignell an email on 4 July 2017 in which he said: May rebate was transferred to Jag yesterday, will send through calcs later today for your records. $450k was credited to trading account yesterday also. 170 This statement was, at best, misleading, particularly given the fact that the sub-accounts were used to indicate to contract traders the state of funds that were held in the omnibus account for the purposes of covering the minimum balance required by the Clearing Participant to cover the risk of trading losses. 171 On 25 July 2017 an amount of $691,992.86 was received into the operating account with the annotation 'Deposit' and a number. From 28 July 2017 into early August 2017 various payments were made drawing on the deposited funds. They include $100,000 to repay a loan to 'Ronald Mur' (presumably the Wards), $154,333.33 to repay a loan to Ms Kim and various 'Cons Fee' amounts. Also, $200,000 went across to the GFIN admin sub-account at Macquarie. 172 It appears that the deposit amount of $691,992.86 is likely to have been the proceeds received from the sale of GFIN's shares in its subsidiary GFIN Financial which were sold about this time. 173 On 29 August 2017, Mr Gale sent an email to Mr Gooden which included the following: Also it would probably make sense that I delay coming down until you have the GFIN Pty Ltd 2016/17 Financials ready to sign. I know that you are flat out but do you envisage that could be sorted within the next month? With the imminent potential changes to the prop structure it would be good to have some clarity about the current financial situation so that I can have a meaningful discussion about the future of the prop business with you. 174 The reference to the 'prop business' appears to be a reference to the colloquial expression 'prop shop' used to describe the kind of business conducted by GFIN. The reference to imminent changes in structure appears to be a reference to the sale of the shares in GFIN Financial. 175 The next day, Mr Gooden responded indicating that he was working on the GFIN accounts. He said that he was discussing with Mr Bignell 'his withdrawals and how he wants to move forward so will probably take a little longer to finalise it'. He said that he should have a draft within coming weeks, but noted that the financials were not due until March 2018. The email then said: With regard to GFIN and the bigger picture … I'm going to recommend a change to Phoenix as it will still give GFIN autonomy but will allow individual traders to interact directly with Phoenix, reduce operational and IT costs and most importantly provide relief from the ongoing funding requirements which have been both stressful and expensive. 176 Mr Gale made further requests for the FY2017 accounts but was told that Mr Gooden was working on them with the accountant. Those requests from Mr Gale continued until May 2018. 177 In the period from August 2017 up until the end of October 2017 various amounts were received into the operating account of GFIN from the omnibus account at Macquarie and 'Cons Fee' amounts were paid to various parties who appeared to be contract or employee traders of GFIN. 178 On 1 November 2017 an amount of $200,000 was transferred from the GFIN admin sub-account at Macquarie to the GFIN operating account. At that point the GFIN admin sub-account reached a negative balance of $616,808.61. The next day $100,000 was withdrawn from the operating account to repay a loan to Ms Kim. 179 There were two reasons why such a large negative balance could be maintained in the GFIN admin sub-account. First, there were significant positive balances in the sub-accounts that were in the names of GFIN's contract traders. Second, Macquarie allowed the GFIN omnibus account to be operated with a much lower overall balance than had been the case at ABN AMRO. Although the arrangement with Macquarie appeared to require that the same minimum balance of $1,000,000 that had applied at ABN AMRO to carry over, in practice from December 2016 to November 2017 the Macquarie omnibus account was operated with a much lower overall positive balance. 180 On 9 November 2017, the combined credit balances of the sub-accounts for GFIN's contract traders, being a total amount of $825,509.74, was transferred to the GFIN admin sub-account. The contract traders concerned were Mr Andrew Marshall, Mr Gale, Mr Cameron and Mr Bignell. The effect was to take the GFIN admin sub-account from substantial debit into positive territory with a credit figure of $208,701.13. Later in November an amount of $125,000 was transferred from the GFIN admin sub-account to the operating account. 181 At that time, Mr Gooden arranged for the omnibus account with Macquarie to be replaced by an arrangement with Phoenix. It seems that the arrangement with Phoenix did not require GFIN to maintain coverage in the same way as had been the case for Macquarie and ABN AMRO. Instead, GFIN took the benefit of the clearance arrangements made by Phoenix with its own Clearing Participant bank. It appears that Phoenix only required GFIN to maintain a balance of $100,000 with Phoenix to cover the risks associated with its trading. 182 Apart from pointing to instances where amounts were used to repay loan amounts and instances where funds were directed to Beagle or to Mr Gooden, GFIN did not seek to undertake any comprehensive analysis of the financial affairs of GFIN through the relevant period. Mr Gale deposed in general terms that funds were used 'to pay company expenses, to repay loans made by third parties such as Murray Ward, to pay himself a salary and pay so called consulting fees to Beagle'. 183 The use of funds to pay the salary and the 'consulting fees' are the subject of specific claims. Otherwise, the complaint made is that the retained funds in the trading sub-account balances should have been kept separate and not used for the general purposes of GFIN. This is reflected in the evidence of Mr Gale that 'By [Mr Gooden] not informing us that the amounts showing on our Macquarie retained trading fund statements were not representative of the actual money in the bank, we believed that our retained funds were safe and secure, and therefore continued our trading involvement with GFIN'. Beyond that, the evidence does not condescend to any particularity as to alleged misuse of funds in the GFIN operating account. It simply says that the funds were used, amongst other things, to repay loans without seeking to demonstrate that the loans were improperly arranged or that the loan funds were not used for the purposes of GFIN, such as to maintain the minimum balance required by the Clearing Participant, to cover trading losses or to meet operating costs. 184 In early May 2018, Mr Gooden indicated that he wished to cease his involvement with GFIN and proposed a sale of his shareholding in the company. In that context, Mr Gooden provided to Mr Gale draft accounts of GFIN for FY2017 and a draft profit and loss statement for GFIN for the next financial year, as at May 2018. The draft profit and loss statement showed large trading losses of approximately $736,000 as at May 2018. 185 At a meeting on 17 May 2018 with Mr Gale and Mr Bignell, Mr Gooden indicated that he was willing to sell his shareholding in GFIN for $150,000. He said that including funds at Phoenix, profit owing from Phoenix and the rebate there was possibly over $400,000 cash in GFIN. In response to a question from Mr Bignell as to whether their trading funds were secure and GFIN was making a profit, Mr Gooden said that the trading funds were secure and they will not be used for any purpose other than trading except as provided for under the trading agreements and that GFIN was profitable. It is to be noted that this statement occurred well after the events the subject of complaint by GFIN and was qualified by reference to the terms of the trading arrangements. 186 On 24 May 2018, Mr Gooden sent an email to Mr Gale, Mr Bignell and Mr Cameron which had the subject heading 'RE: GFIN Discussions' and began by saying: I understand there has been some discussion relating to the company and concerns regarding the balance sheet. 187 The email listed amounts described as 'current rounded trader retentions', being amounts that were due by GFIN to contract traders. The amounts were as follows: Mr Bignell $137,000 Mr Cameron $133,000 Mr Marshall $93,000 Mr Gale $50,000 Mr Mahoney $50,000 188 These amounts totalled $463,000. Yet the email went on to explain how after taking into account alleged taxation credits, the cash required by GFIN to pay all trader retentions was approximately $379,000. 189 What was made clear by the email was that GFIN did not have the cash required to meet these obligations to contract traders. The email made this point abundantly clear by saying (in the course of an extended explanation by Mr Gooden as to why the ability of GFIN to pay its debts was not determined purely by its cash reserves) that: Without a doubt the preference would be to have cash sitting in trader accounts so all feel happy and secure, but the reality is that such a scenario adds no contribution or protection other than a 'feelgood' scenario. This of course differs to a company that is say providing financial services. Licence conditions require that all cash is indeed segregated. I'm sure you are clear on that. … As mentioned previously, trader funds are not segregated. Never have and never will. You all should know this. In previous instances when GFIN was clearing with both ABN Amro and Macquarie, it was a much easier way to provide balances to individual traders and subsequent account for retentions, etc. Once GFIN transitioned to Phoenix, that convenience was no longer available. Trader retentions exist for GFIN and Phoenix separately. 190 Notwithstanding the terms in which the email is expressed, it appears that the contents of the email brought to the conscious attention of Mr Gale and Mr Bignell for the first time the possibility that their individual contract trader funds were being used to cover operating costs of GFIN other than risks associated with trading. 191 Mr Bignell put the position in the following terms: [Mr Gooden] was trusted to be responsible for large sums of trader's funds that didn't belong to GFIN. Whilst they were held in the GFIN omnibus account, those funds were always payable to the trader when called upon. This is well-known in the industry. The business can't function otherwise. I was willing to bear the risk of other traders taking losses, with it being understood that the company (GFIN) will put in place stop loss thresholds and take other measures to prevent excessive trading losses across the board. However, I was not willing to take the risk of my trading capital being used to pay company expenses without my knowledge or consent. 192 It is to be noted that it is the use of the funds in the contract trader sub-accounts to cover the operating expenses of GFIN that is the subject of complaint by Mr Bignell. He recognises that the balance in his sub-account within the omnibus account was exposed to the risks of trading activities by other traders but expected Mr Gooden to take steps to limit that risk. 193 To like effect, Mr Gale said: The trader funds were pooled in one clearing account. Traders like me accept that we each wear one another's trading risk. Therefore, prop shops like GFIN are quite selective as to who they bring on board as a trader. One of [Mr Gooden's] main roles as the managing director was to manage the risk by not letting one trader lose too much of the pooled funds. 194 Mr Cameron was aware of that position well before then as was evident from the terms of his email to Mr Gooden on 25 February 2014. 195 Further, examination of the terms of the contract trader arrangements would have exposed the fact that the arrangement between GFIN and its contract traders was such that, at least as to trading profits, the profits were earned on behalf of GFIN and then it was liable to pay the contract trader a percentage of those profits. 196 In any event, the case advanced by GFIN was not a case about Mr Gooden breaching his fiduciary duty by misrepresenting the nature of the contract trading arrangements to the contract traders and what was done with those funds. Therefore, the propriety of Mr Gooden's conduct is to be evaluated not by reference to any impression he may have created as to the segregation of funds (a matter about which GFIN made no claim), but rather by reference to the nature of the arrangements that were actually agreed with contract traders. 197 If a contract trader had provided funds to GFIN as part of its arrangement with GFIN (which appears to have been the case in some instances) or allowed GFIN to retain part of the Net Trading Profits to which the trader would be entitled (which also appears to have been the case in some instances), then no basis was advanced as to why those funds, in the hands of GFIN, should be treated as the property of the trader rather than the property of GFIN and not be used to meet operating expenses of GFIN in any circumstances. No doubt GFIN had a contractual obligation to repay the funds provided by the trader and pay out any retained Net Trading Profits if the trader called upon GFIN to do so, but the trader had no more than an ordinary claim against GFIN for those monies. Further, each trader was exposed to the risk that by reason of the activities of another contract trader, GFIN may have insufficient funds to satisfy that claim when made by the contract trader. 198 Certainly by May 2018, GFIN was in financial difficulties. However, the reason for those difficulties was not exposed by the manner in which GFIN presented its case. It did not assert that there was some form of breach of Mr Gooden's duties as a director in exposing GFIN to financial risks that resulted in its financial position. Rather, the claim made was that Mr Gooden directed GFIN's money to himself, Beagle and third parties and he did so for his own benefit and improperly having regard to the alleged character of the retained monies. 199 The financial difficulties led Mr Gooden in his email of 24 May 2018 to press for 'compliance with required funds and retentions' for each of the traders. Mr Gooden set out the position in the email in the following terms: John Bignell -$210K ($250k required) Jack [Gale] -$1.9K ($50K required) Stuart Cameron +$8K ($100K required) Andrew Marshall -$20K (not trading) Richard Mahoney +$58K ($50K required) Both John and Stuart have requested funds from Phoenix without achieving required retained funds. In both cases I have approved the fund withdrawal requests, most recently Stuart a few days ago. I have also approved funds request for both John and Stuart well below agreed GFIN retentions. Whilst I am sympathetic to individual circumstances it has no doubt at times provided flow on ramifications that have needed to be addressed. In your various capacities as shareholders and/or directors you should be aware of this. Interest payments on loans have impacted the profitability of the company. In the past I have needed to deal with this and bear the stress associated with it. No longer. Non-compliance with individual trader retentions going forward will not be tolerated. Nor will the inability to sufficiently fund agreed funding requirements with Phoenix. Whilst it is the overall responsibility of GFIN to provide the required funding in the past which it has done at great expense, I will not permit such disregard for agreed terms, especially from shareholders/directors. … It is obviously a priority at this stage to ensure that cash on hand and cashflow increases in coming months. Given the majority of traders at present are GFIN shareholders, I believe it is in the mutual interest of all concerned that this is prioritised. Jack has agreed to no longer receive consultancy payments and subsidised system costs, Stuart I believe you have indicated the same and John I'm not sure as to your contribution however that can be discussed shortly. I've not derived a wage for six months in order to assist cashflow and will continue to do so. The main focus in coming months is to generate sufficient revenue to boost the supply of cash. GFIN has reduced its liabilities in trader retained funds significantly. This should be acknowledged. At a time when clearer/margin requirements are at the highest levels ever, individual retentions are at the lowest ever. It should be the other way around. Put quite simply, the retention requirements for each of you individually is extremely low considering the current commercial deals and market access/limitation that is enjoyed. Any further withdrawals on individual retained funds will not be tolerated. Should any shareholder/director/trader wish to exit the company then procedures can be undertaken to arrange such an exit. Jack indicated that all three of you intend to continue with GFIN however the option is always there for one or more of you to exit. I have also indicated that I am willing to offer my shares for sale, however to this point it doesn't appear as though any of you are either in a position or willing to undertake such a purchase. 200 The position adopted by Mr Gooden reflects a view that there are agreed or required levels of retention for each trader. These levels are not being met and this means that GFIN has little margin to cover adverse outcomes from individual trading. 201 However, it appears that Phoenix itself only required an amount of $100,000 to be held on deposit. Therefore, it is unclear as to the basis upon which Mr Gooden made the calls for further funds in his email of 24 May 2018. 202 The email also addresses the overall financial position of GFIN and the concerns that had been raised in the following terms: Back to questions regarding the financial position of the company. In particular this time any question relating to solvency. To date the company has paid all invoices and is up to date with any statutory/regulatory payments, most importantly the ATO. If at any point in time it is perceived that a debt is due and the company may have difficulty in servicing such debt then I would notify the Directors/Shareholders to that effect. However liabilities typically don't have to be paid all at once. The company has sufficient capital to operate and meet its financial obligations. In many past instances, MF Global and Gaye Thompson for example, loans have been sourced from external sources to assist the funding of the company and individuals within it. If we focussed purely on the balance sheet in order to ascertain company solvency (as seems to be the concerns raised) then it would have been impossible to navigate such difficult circumstances. At no point in the past if I have called on shareholders to provide extra funding to the company has such support been offered. That has remained consistent for the duration of GFINs existence. 203 In this regard, I note that there is a reference to GFIN meeting past insufficiencies in retentions from traders by securing loans 'from external sources'. The content of this part of the email does not indicate any clandestine aspect to those past dealings. They are being presented in the email as if they are matters that are known to the addressees. 204 On 6 June 2018, Mr Gale sent an email to Mr Gooden with the subject description 'GFIN Loans and consultant fees'. It said: Just for further clarity on the accounts can you please have a look at the attached spreadsheet and provide some further explanation on the loans and consultant fees. I have highlighted the Wards in blue, Mal in yellow and Kim in Green. If you could summarise how much Kim and the Wards deposited as loans since 2011 and how much of that has been repaid. Also I can see that over the last seven years you have lent funds to GFIN but it appears that you might be a net debtor. Can you confirm if there is an outstanding amount owed to GFIN by you personally. Also with regards to Scott's loan repaid to him I can see approximately 126,000 going out but only 15,000 deposited by him. Did some come from his trading account? I'm guessing some of the consultant fees for 2015 to 2017 paid to you must be from trading. Could you please provide your trading statements for the last seven years. As a rough guide I calculated the following. My calculations could be incorrect. 2016/17 MG salary after tax $103,512 MG loans from GFIN $106,450 Beagle Consultant Fee $101,200 2015/16 MG salary after tax 77,634 Beagle consultant fee 200,200 MG loans from GFIN $100,000 2014/15 MG consultant fee 176,400 MG loans to and from MG to GFIN 2011 to 2014 Loans to and from you to and from GFIN 205 A few points may be noted about this email. First, it is directed to the presently contentious topics of loans and consulting fees. Secondly, it presupposed that some of the consultancy fees were from trading by Mr Gooden. There is no hint in the inquiry that Mr Gale believed that such trading should not have occurred. On the contrary the form of the inquiry suggests that Mr Gale expected that there was trading by Mr Gooden and the consultancy fees related to that trading, hence the request for trading statements. At best it may indicate that Mr Gale was suspicious as to whether there was any such trading (or as to its extent) and was asking for proof. Thirdly, there was no complaint raised about the loans by the Wards. What was being sought was information about the current amount due to them. Fourthly, details were sought as to whether Mr Gooden was a net debtor of GFIN. 206 Mr Gooden responded on 8 June 2018 in the following terms: Happy to assist. With regard to the spreadsheet, I assume you have copied and pasted from the bank account? Many of the identifiers, ie, narrations on the transactions do not reflect the eventual treatment of the transactions. The yearly accounts will contain all information relating to the transactions, I suggest you liase with Adam [GFIN's accountant] if you need to confirm these details as no point in doubling up on all that work. As explained previously, the only two loans on the GFIN books at present are John (owing GFIN) and Murray. Kim and Scott are fully paid. With regard to your statement regarding myself as a net debtor, it is completely incorrect. I have attached a spreadsheet containing my trading performance in addition to trading statements from ABN Amro and Macquarie. With regard to ABN Amro, I have provided a consolidated statement for ease to follow. It is self explanatory, as is the spreadsheet. You will see that trading profit owed to myself is approx $223K. With regard to your calculations, the two salary amounts after tax for 2015/16 and 2016/17 are correct. I'm 99% certain that in those two financial years, Beagle received no consultancy fees at all, I can confirm this with my accountant. Adam can easily confirm this should you wish to inquire with him also. In 2014/15, my records indicate that I received consultancy fees to Beagle rather than a salary, approx. $111K on initial inspection. As with the above, can easily be confirmed with Adam. That being the case, I have not received any proceeds from my trading profits, ie, $223K. As explained recently and to assist with cashflow I've not paid myself in six months. This should also be noted. There is no outstanding amount owed to GFIN by myself as per the above, I am actually owed by GFIN, probably well in excess of $300K. (emphasis added) 207 Of particular significance is the reference in this email to an attached spreadsheet containing Mr Gooden's trading performance and trading statements from ABN AMRO and Macquarie. Therefore, on the face of the email, Mr Gooden provided detailed information to Mr Gale about his trading activity through GFIN. It would be a very odd email to send if there was no such information at all. There was no evidence to the effect that the information referred to in the email was not provided. 208 On 13 June 2018, Mr Gooden sent an email to Mr Gale in which he said, amongst other things: I've just had a quick look at your questions, brief answers below. 1. Scott transferred $50K direct into ABN Amro on 16/11/2016. I'll forward Scotts banking transfer record shortly. 2. Scott transferred $60K direct into ABN Amro on 29/11/2016. I'll forward Scotts banking transfer record shortly. 3. These payments were initially my trading profit or salary. The reason $200K is allocated between Beagle and Murray is that I'd allocated $200K of my profit split (which was originally paid to Beagle) to offset $200K of Murrays loan. Had I not done this then I would have declared $200K profit for Beagle and Murrays loan would increase by a further $200K. 209 The terms of the above email do not appear to respond to the email of 6 June 2018. Rather the form of the response suggests that there was a follow-up email from Mr Gale which was met by the above response to three specific questions. Therefore, in the response given at point 3 it is not evident what is referred to as: 'These payments'. Without the email to which this is a response it is not possible to understand what is meant by this response. 210 A few days later, Mr Gooden followed up with a further email to Mr Gale as follows: In the interests of having an 'open and frank discussion about what has been going on', please note below. I'll also require some information from Stuart, John and yourself which is self explanatory. 1. With regard to your continued questioning regarding the status of loans, I am at a loss as to why the information is not clear to you and reflected in the accounts. All notes relating to these transactions and explaining any change in treatment are contained in the accounts. Granted it has been a messy process, however it is all accounted for. I suggest you once again consult with the information in the accounts and reconcile for yourself. You can also confirm with Adam any consultancy payments and salaries paid by GFIN to myself or Beagle. Should you wish to alter any such treatment of monies then you will need to specifically identify and explain why such treatment should occur. 2. Further to the above point and given recent discussions, I am now considering treating the profits in my trading accounts as consultancy fees. You questioned as to whether or not other persons traded this account. The only input from a third party was Simon Lucas when, for two or three rolls, we traded the roll together. You were aware of this Jack. I am happy to provide trading statements however they will be in the format of daily ABN Amro statements. The statement server was decommissioned post ABN Amro (to save $1,200 per month). All information is still contained in the ABN Amro statements, just not in the format contained in the innovent style statements. 3. I am aware that John and yourself have canvassed the prospect of altering transactions relating to Johns account as dividends. Can you please provide evidence relating to any agreement whereby certain withdrawals from John and to be treated as dividends? 4. With regard to John and his mothers loan, can you please provide an explanation as to why you believe a 4% differential ($19K loss) is in the best interests of GFIN given his immediate withdrawal of such funds. You mentioned the other day that it was to 'keep the peace'. Is that your reasoning? 5. Furthermore, can you please explain as to why you believe it was fair for John to have received the recent adjustment to profit split/GST and why this was in the best interests of GFIN? Can you confirm as to what Johns profit split deal is, and explain as to why that is in the best interests of GFIN. 6. Please provide information for the past seven years relating to salary, consultancy fees, bonuses and any other benefits you have received from GFIN or a related GFIN entity for non trading activities. Please ensure that you include your role in GFIN Financial Solutions and GFIN Blue, the bonus you received from the sale of GFIN Financial Solutions and payments post the sale of GFIN Financial Solutions. 7. Please provide information for the past seven years relating to trading system subsidies for both yourself and Stuart. Please provide totals for such system costs for the seven year period. 8. I note that Stuart has not signed a trading agreement. Please explain as to why you believe it fair for Stuart to have received 100% profit split on his trading profits up until the Phoenix transfer? 9. I note that Stuart and John have received IT hardware and continued support from Zlatko on numerous occassions [sic] at the expense of GFIN. Can you please explain as to why it is in the best interests of GFIN to pay these? 10. Similarly, John had his office fit out at Gordon paid for by GFIN. Can you please explain as to why it is in the best interests of GFIN to pay these? 11. The ASX co-location costs have not been apportioned to TT users which included John and Stuart. Can you please explain as to why it is in the best interests of GFIN to have paid these costs and if not, should GFIN attempt to recoup some of these monies? Jack I would also like to address a comment from you 'It now appears these losses have been accruing for years due to cost overruns..'. This statement is grossly unfair, especially given you were a Director of GFIN FS and were quite aware that that business was loss making for years and the parent company subsidised most of its costs in addition to receiving benefits from GFIN like system cost subsidies, etc. I have not received any response relating to my email dated May 28, 2018 regarding my intention to sell my shares and resign as an officeholder. I will now proceed with other avenues given no such offer has been received. Finally, it is clear that GFIN has a funding issue at present. I have also indicated that I will no longer obtain funding for the business from either myself or third parties. Given recent discussions and that fact that the business does not have the required funding to continue, I will consult with some specialists with a view to placing GFIN into voluntary administration should the current issues not be resolved shortly. I feel this process will be necessary in order to avoid potential liquidation of the company. I envisage that the company will have a week or two at most before this will need to happen. I will update you once ready. Feel free to forward this email to John and Stuart should you wish. 211 The above email exchanges were produced by Mr Gale without making any reference to the enclosed information concerning Mr Gooden's trading and the reference to records being available setting out that trading. There was no evidence for GFIN dealing with these matters beyond a general assertion that there was no consultancy fee arrangement or contract trading agreement. What is evident is that the position maintained by Mr Gooden was that there was trading and the dispute was about whether it had resulted in payments to Beagle or not. 212 The emails were said by Mr Gale to expose inconsistencies in Mr Gooden's position as to his trading profits because they were variously described as 'trading profits', 'trading profit or salary' and 'consulting fees'. I do not accept this characterisation of the above emails. What they advance is a position whereby amounts were due for trading activities conducted by Mr Gooden and that there were records to demonstrate that position and a spreadsheet was provided summarising the trading profits. The case for GFIN did not engage with these aspects. 213 Thereafter the dispute between the parties escalated and these proceedings were commenced on 22 August 2018.

Relevant law concerning the claims by GFIN of breaches of director's duties 214 GFIN claims that Mr Gooden breached both his statutory and 'common law' duties as a director. Both kinds of breaches are said to give rise to liability on the part of Beagle to the extent that it was a recipient of benefits with knowledge of the breach (through Mr Gooden as its director). 215 Each of the claims made by GFIN against Mr Gooden was characterised as (a) a breach of the director's duty to act in good faith and for a proper purpose; (b) an exercise of powers as a director without care and diligence; (c) improperly using company information or his position as a director to gain an advantage for himself or someone else or to cause detriment to GFIN; and (d) a breach of the director's duty to avoid conflicts between the interests of GFIN and his personal interests. The first three descriptions correspond with civil obligations imposed on directors by s 180, s 181 and s 182 of the Corporations Act. The form of the fourth description might relate to whether those obligations have been met, but is expressed in terms that reflect a recognised proscriptive duty of directors at general law. At general law there are also recognised duties on the part of directors to act in good faith and for a proper purpose. 216 Every claim by GFIN was pleaded as having the character of each of the four breaches and as also to breach both the statutory and common law duties of that kind. In a different case the distinctions between the various duties may be of significance. However, in the present case, for reasons which will emerge, the factual foundation upon which the claims were based has not been made out and therefore it is not necessary to range through the various alternatives. 217 At this stage it is sufficient to identify some general legal principles of relevance. 218 Directors of companies are fiduciary agents who cannot exercise their powers as directors in order to obtain a private advantage or for some purpose that is foreign to the power: Mills v Mills (1938) 60 CLR 150 at 185 (Dixon J); and John Alexander's Clubs Pty Limited v White City Tennis Club Limited [2010] HCA 19; (2010) 241 CLR 1 at [87]. They must not promote personal interest by making a gain in circumstances where there is a real possibility that their personal interest will conflict with that of the company whose interests they as directors are bound to protect: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 103 (Mason J). 219 The property of a company is property to which a fiduciary obligation attaches: Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296 at [254], [275]. In that respect it is equated with trust property: O'Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262 at 277-278 (Spigelman CJ, Priestly and Meagher JJA agreeing). 220 Therefore, misappropriation of company property by a director in his direct or indirect personal interest is an improper use of the office of a director and is a failure to act in good faith and for a proper purpose: O'Halloran at 277 and Kalls Enterprises Pty Ltd (in liq) v Baloglow [2007] NSWCA 191 at [152]-[159]. 221 At general law, where the Court is asked to form a view as to whether a director exercised a power for a proper purpose then it is necessary to give credit to the bona fide opinion of the directors, if such an opinion is identified, and to respect the director's judgement as to matters of management: Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821 at 835. This position is generally reflected in the terms of s 180(2) of the Corporations Act which deals with the exercise of business judgement. 222 In addition, directors owe common law and equitable duties of care which require directors to discharge their responsibilities with skill and diligence: Australian Securities and Investments Commission v Rich [2009] NSWSC 1229 at [7205]-[7206]. 223 Broadly speaking a person who has been knowingly concerned in a breach of trust or who receives trust property in breach of trust may be personally liable in effect as an accessory to the breach. It is a principle that supports the integrity of the duty of fidelity that all trustees must discharge in their dealings in respect of trust property. Over time, principles of that character have been applied in cases where there have been breaches of duty by directors. Such principles are often referred to by reference to the decision in Barnes v Addy in which important, but not exhaustive, aspects of the nature of the liability were formulated. The relevant principles require consideration of the state of knowledge of the person said to have been involved in the breach of fiduciary duty or the recipient of property impressed with fiduciary obligations: Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89. 224 Liability based upon Barnes v Addy principles may arise where the breach of duty by a fiduciary takes the form of misappropriation: Kalls at [152]-[159]; Farrow Finance Co Ltd (in liq) v Farrow Properties Pty Ltd (in liq) [1999] 1 VR 584 at [147]; and Cassegrain v Cassegrain [2012] NSWSC 403 at [215]-[218], [229]-[254]. Further, Barnes v Addy liability is not confined to instances where there has been a breach by a fiduciary of the proscriptive duties expressed in the conflict and profit rules. In Bofinger v Kingsway Group Limited [2009] HCA 44; (2009) 239 CLR 269 at [49]-[51], the High Court found that breach of the affirmative obligation of a mortgagee to account for surplus monies, which was described as 'fiduciary in character' was a circumstance that 'would suffice to engage the principles associated with the "second limb" in Barnes v Addy'. 225 However, it must be doubtful whether such liability extends to an instance where the breach by a fiduciary is properly characterised as a failure to act with due care and skill (in the case of a director, a failure to exercise powers and discharge duties with the required degree of care and diligence). Although both equity and statute recognise the existence of such a duty on the part of a person who acts in a fiduciary capacity and will award compensation for its breach, it must be doubtful whether the breach of that duty will, of itself, give rise to Barnes v Addy liability. The duty of care to be exercised by directors is not fiduciary in character: Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187 at 237-240. The principles in Barnes v Addy arise because of the fiduciary character of the obligations being breached not because there is a dealing with a person who may be identified as a fiduciary. 226 As has been noted GFIN made a claim against Beagle based upon Barnes v Addy principles in respect of monies said to have ended up in its hands as 'consulting fees'. 227 At general law, compensation assessed according to equitable principles may be awarded for breach of fiduciary duty. Also, under s 1317H of the Corporations Act a Court may order a person to compensate a corporation for damage suffered by the corporation where the person contravened a civil penalty provision and damage resulted from the contravention. Contraventions of s 180, s 181, s 182 and s 183 are civil penalty provisions: s 1317E. 228 A person involved in a contravention of s 181, s 182 or s 183 (but not s 180) contravenes that provision. A person is involved in a contravention if they have been in any way directly or indirectly knowingly concerned in the contravention: s 79. As has been noted, GFIN alleges that by reason that Mr Gooden, at all material times, was a director of Beagle, it was involved in contraventions by Mr Gooden. It appears that the accessorial claim made by GFIN against Beagle related only to that part of the case that resulted in funds ending up with Beagle as 'consulting fees'.

Claim (a): consultancy fee payments by GFIN to Beagle 229 I note that there was no claim made that it was a breach of fiduciary duty for Beagle to act as a trader although there was evidence from witnesses that it was a concern. Rather, the claim made was that there was simply no consultancy arrangement between GFIN and Beagle pursuant to which consultancy fees might be paid. It was also alleged that Mr Gooden did not trade derivatives on his own behalf or on behalf of Beagle. 230 In his defence in these proceedings Mr Gooden claimed that he and Beagle 'was an employee and/or trader' for GFIN. However, he admitted that there was no written trading agreement to that effect. 231 The amount claimed is $564,615.73. That figure is the total of various amounts shown in the banking records for GFIN's operating account. 232 I find that an examination of the banking records for the operating account of GFIN for the period 15 January 2014 to 27 July 2017 shows that amounts depicted in the accounts for 'Cons Fee' (which I accept to be an abbreviation for consultancy fees) totalling $462,615.73 were paid by GFIN to Beagle (Consultancy Fees). There is a further amount of $100,000 that was transferred out of the operating account of GFIN with the notation 'Withdrawal Online … Pymt Beagle Fin Beagle Financial'. Therefore, this payment is not depicted as a consultancy fee. 233 However, I also find that the description 'Cons Fee' was used consistently in the operating account of GFIN when making payments to contract traders. For example, as has been noted, there is a payment on 16 December 2016 with the description 'Withdrawal Online 167513 Pymt Jag Securi Cons Fee Jag'. It is for an amount of $438,331.52. JAG Securities was the entity used by Mr Bignell for contract trading through the GFIN account. On the same day there is a payment with the description 'Withdrawal Online 1643520 Pymt Beagle Fin Cons Fee Beagle'. It is for $11,000. It is one of the contentious amounts that were said to have been made to Beagle after the closure of the ABN AMRO account. Therefore, the use of that description is consistent with the claim made by the defence of Mr Gooden. 234 Each of Mr Gale, Mr Bignell and Mr Cameron were unaware of any services that were provided by Beagle to GFIN to which consultancy fees may relate. They were also unaware of any agreement which entitled Beagle to the payment of consultancy fees for services provided to GFIN. However, the defence by Mr Gooden did not claim that the consultancy fees were made under a general arrangement by which Beagle was to be paid consultancy fees. The answer to the claim was, in effect, that the fees were paid for profits earned from contract trading. 235 There was evidence to the effect that Mr Gooden maintained that the consultancy fees paid to GFIN were earned by his own trading activities as a trader in his own interest on the GFIN account. Mr Bignell gave evidence that he understood that Mr Gooden had refused to supply trading statements to support that claim. However, he did not give evidence of any requests that he do so. Further, as has been noted, on 8 June 2018, Mr Gooden appears to have provided detailed information about his alleged trading activities, but there was no evidence from GFIN about those documents. 236 If indeed there had been trading by Beagle then you would expect there to be records relating to such trading. There was no evidence led from GFIN to the effect that it had checked the records and found that there were none. Rather Mr Gale's evidence was simply 'I do not believe that [Mr Gooden] has ever personally (or through Beagle) traded at GFIN. He has failed to provide trading accounts despite being requested by the directors and shareholders to do so'. 237 As has been noted, in email communications with Mr Gale after questions were being raised in 2018 about the financial circumstances of GFIN, Mr Gooden said that he was '99% certain' that in FY2016 and FY2017, Beagle received no consultancy fees at all, a matter that he invited Mr Gale to confirm with his accountant. However, Mr Gooden maintained that Beagle did receive and was entitled to receive $111,000 in FY2015. Those statements were made in an email in which he said he had attached the trading information with a consolidated statement of what he said was his trading. If indeed trading had occurred and that was the explanation for the payments to Beagle in FY2016 and FY2017 then it is very difficult to see how Mr Gooden might say in the same email that he was 99% certain that Beagle received no consultancy fees in those years if indeed the records he presented were contrary to that statement. Put another way, the statement in the email made in a context where trading information was provided operates as an admission against interest that Beagle was not receiving consultancy fees in FY2016 and FY2017 from trading activities undertaken through GFIN's account on behalf of Beagle. 238 Of the amount claimed as paid to Beagle, the amounts for relevant financial years are as follows (noting that of the amounts claimed, an amount of $51,000 included in the schedule to the amended statement of claim was conceded in closing submissions as not being part of the claim): (1) FY2014 $3,815.73. (2) FY2015 $119,900 (close to Mr Gooden's figure of $111,000). (3) FY2016 $216,700 plus the additional $100,000 not shown as 'Cons Fee'. (4) FY2017 $101,200. (5) FY2018 $22,000. 239 The above figures represent amounts shown in the banking records of GFIN for its operating account as 'Cons Fees' paid to Mr Gooden. Therefore, the banking records of GFIN are plainly inconsistent with the statement that Mr Gooden made in the email on 8 June 2018 about FY2016 and FY2017 and that must cast doubt as to whether anything may be concluded from his self-serving statement that amounts were earned by Beagle from derivatives trading. 240 I note that throughout the whole period most of the payments are made in amounts of $11,000 or $5,500. They are made regularly over more than three years. If they are proceeds of derivatives trading then they indicate considerable trading and a pattern of arranging payment of the consulting fees earned by such trading on a regular basis in similar amounts. 241 Up until February 2017, Mr Gale appears to have left matters entirely in the hands of Mr Gooden. Thereafter, it was not until mid-2018 that real questions were raised by Mr Gale, Mr Bignell and Mr Cameron and that occurred in the context of a situation where the draft accounts for FY2017 indicated low profitability. There is no suggestion of any complaint being raised in relation to the accounts for the previous years which account for a considerable part of the period in which the Consultancy Fees were paid. However, the end of financial year accounts for GFIN presented a single figure for consultancy fees paid in relation to the earning of gross profit from derivatives trading. Therefore, the fact that those payments included payments to Beagle would not have been evident from those accounts. 242 There is evidence from Mr Gale that he worked with Mr Gooden at the offices of GFIN but that he never saw Mr Gooden being involved in derivatives trading using the GFIN account. Mr Gale said that as director of GFIN he had never signed a trading agreement in respect of GFIN and Mr Gooden or Beagle. He said that he never saw Mr Gooden executing orders through a trading platform in the 8 years that he worked at GFIN. He said that Mr Gooden's role was not as a trader 'but rather as an administrator, business and operations manager and financial controller'. 243 There was some evidence of difficulty in obtaining access to email records of GFIN but no evidence to the effect that the derivatives trading records were not available. 244 As to Mr Gooden's claims that he or Beagle was a trader, Mr Bignell deposed that on several occasions Mr Gooden said to him words to the effect: 'I don't know how you guys handle the pressure of trading. I am very happy to run the business and leave the trading to you guys'. 245 When Mr Bignell joined GFIN as a contract trader he was provided with a list of the current group of traders (by email dated 5 November 2014). Neither Mr Gooden nor Beagle was on that list. 246 Mr Cameron deposed that as far as he was aware the claims that Mr Gooden and Beagle traded on the GFIN account 'are totally false'. He said that he had no knowledge of Mr Gooden trading through GFIN either personally or through Beagle other than his assertions to that effect which began in about June 2018. He maintained that as a director of GFIN he should have been told if the managing director was trading derivatives on GFIN's behalf. 247 Mr Cameron then deposed that he has reviewed the records of GFIN. He did not identify the records that he had reviewed. He did not describe the extent of the review. He did not refer to an examination of the books and records and he did not refer to any inquiries made of the accountants responsible for the preparation of the accounts of GFIN. He said only: There is nothing in evidence or in GFIN's records which indicate that Mr Gooden had access to a trading machine connected to either of the two available trading platforms … There is nothing to indicate that he had a login required to access those platforms. There are no daily trading statements. There are no documents indicating he or Beagle applied for or received a login to access electronic trading platforms. If Mr Gooden or Beagle were trading through GFIN using the login of a trader employed by GFIN or some other third-party trader, that trader would have had to enter Mr Gooden's/Beagle's trades for them. Mr Gooden does not identify this person. … I have never received a report or position reconciliation document which included position reconciliation of trades executed by Mr Gooden or Beagle. I have never received or seen a document from GFIN, Beagle or anyone else while trading through GFIN that indicated that Mr Gooden and/or Beagle were trading the markets, either through GFIN or elsewhere. I have reviewed GFIN's records and have not been able to identify any such report or record. 248 Somewhat inconsistently with this evidence, Mr Cameron went on to describe sub-accounts operated by GFIN with the titles 'Malcolm Gooden' and 'GFIN House' and that both are designated GFIN House accounts. He said that he was aware that House accounts were used by salaried traders who were employed by GFIN to trade, usually low volume trades with low limits and that he has no knowledge of House accounts being used for any other purpose. He then says that the House accounts were not meant for Mr Gooden to personally trade and if Mr Gooden or Beagle were using these accounts to do so then Mr Gooden never informed him about it. He explained that if Mr Gooden had done so then he would have been able to take credit for any profits while disclaiming responsibility for any losses. Mr Cameron also described an occasion when approximately $90,000 was made in the House Accounts during 2016 to make up for a large loss caused by an employed trader. He then said: 'I believe Mr Gooden is attempting to claim those recovered losses by others as his trading profit'. 249 It is difficult to know what to make of this and similar evidence. In some respects it seems to identify possible ways in which trading may have occurred by Mr Gooden or Beagle. It certainly engages with that possibility whilst at the same time disavowing that it occurred. It goes on to complain that if it did occur then that would have been 'a giant red flag' and that Mr Cameron would likely have taken his trading elsewhere if Mr Gooden or Beagle were indeed trading. 250 Mr Cameron also deposed that Mr Gooden always indicated to him that he had no interest in trading and that he just wanted to manage GFIN 'and leave the trading to you guys'. He also deposed that it is rare in the industry for prop shop managers to also trade through the entity they manage because it creates a conflict of interest that does not attract traders to the group. 251 Again, the issue is not whether it would have been a breach of duty for Mr Gooden to have undertaken such trading. The nature of the alleged breach is the paying away of GFIN's funds to Beagle as consultancy fees when there was no basis to do so. It is a bare claim of misappropriation. If there were profits from trading then that would provide an answer to an allegation of a breach of that kind. 252 Reliance is placed on the fact that there was no approval by other directors or shareholders to make payments to Beagle. I find that the payments to Beagle were not the subject of a specific board approval or an approval of members. However, Mr Gooden had delegated authority to make all decisions. It might be said that if he made an arrangement with Beagle then by reason of the conflict of interest that is a matter that he should have raised with independent directors. However, again that is not the nature of the complaint. What is said is that Beagle gave no consideration for the Consultancy Fees, not that there was a conflict of interest in making the payments. If a claim of that kind had been made, issues would arise as to the relief that should be granted if indeed Beagle gave consideration for the payments. Profits may have to be disgorged, but benefits received by GFIN may have to be brought to account as part of any assessment of the quantum of those profits. It must be borne in mind that the factual issue here is whether it has been established that Mr Gooden caused GFIN to give its money away to Beagle. 253 I note that Mr Gooden did not provide any details or particulars in his defence of his claim that the amounts paid to Beagle related to profits from trading. 254 Finally, as I have noted the allegation is a serious one and that is a matter to be brought to account in making relevant findings. 255 On balance, taking into account all of the evidence, GFIN has failed to establish that for FY2015, the payments to Beagle labelled 'Cons fee' were not payments in respect of profits earned from trading. There is evidence in the form of the sub-account descriptions and the email exchanges in 2018 which supports the conclusion that there was trading by Mr Gooden in FY2015. The 'Cons fee' description is also consistent with the form of payments made to other traders. The evidence to the effect that there was no trading is generally argumentative and is given without an explanation as to why information about actual trading was not able to be obtained. There is no explanation as to why Mr Cameron himself inquired as to the extent of Mr Gooden's trading or why the document attached to the email of 8 June 2018 was not produced or did not support Mr Gooden's claim. Given the seriousness of the allegation, the evidence falls short of establishing the factual basis for the claim. 256 Further, given that the defence advanced by Mr Gooden was that profits from trading was the only explanation for the payments made to Beagle, I find that the $100,000 amount paid to Beagle on 15 July 2015 has not been shown to relate to such trading. It is an amount that bears no resemblance to the pattern of the rest of the payments and it does not bear the annotation 'Cons fee'. There was no indication in the defence or the documents as to what the payment may relate to if it was not a consultancy fee for profit on trading. Therefore, GFIN has made out its factual claim as to that amount not being for any valuable consideration on the part of GFIN. 257 All of which leaves the balance of the claimed Consultancy Fees being $343,715.73. As to the balance: (1) GFIN has not explained why it has not been able to check the trading records of GFIN. (2) Mr Gale's evidence based upon his contemporaneous observation of the activities of Mr Gooden at GFIN is to be weighed with the fact that he said in the email to Mr Gooden of 6 June 2018 'I'm guessing some of the consultant fees for 2015 to 2017 paid to you must be from trading. Could you please provide your trading statements for the last seven years'. (3) The fact that Mr Gooden may not have been expected by Mr Bignell or Mr Cameron to have been trading on the GFIN account does not assist GFIN given the nature of its claim. (4) Mr Gooden himself stated in the email of 8 June 2018 that he was 99% certain that Beagle did not earn consultancy fees in FY2016 and FY2017. Given the context in which that statement was made (namely being pressed to provide details of his trading over the past seven years with GFIN) it is significant and persuasive evidence against the position advanced by Mr Gooden in his defence. (5) Mr Gooden provided no particulars in his own defence of alleged trading activities. (6) The payments have a consistent pattern and the total amounts involve several hundred thousands of dollars in payments to Beagle such that they would only be justified if there was considerable and regular trading by Mr Gooden over the whole of the two year period of FY2016 and FY2017 and the evidence of Mr Gale is inconsistent with that being the case. (7) Aside from the trading profit explanation there was no other matter raised in the defence of Mr Gooden to explain the payments to Beagle. (8) The allegation is a serious one. (9) Mr Gooden did not give evidence but his failure to do so is explained to a considerable degree by the approach adopted by his trustee in bankruptcy. 258 Taking all these matters into account, I am satisfied that GFIN has established that the amount of $343,715.73 was paid to Beagle at the instigation of Mr Gooden without any consideration. 259 It follows that the payment of the amount of $100,000 and the further amounts totalling $343,715.73 has been shown to be a misappropriation of GFIN's funds by Mr Gooden as director. Based on all the evidence the payments were arranged by Mr Gooden and his knowledge of the character of the payments must be attributed to Beagle. 260 The making of the payments might also be characterised as conduct by Mr Gooden that breached the obligation to exercise reasonable care and diligence to ensure that payments made by the company to the indirect personal benefit of Mr Gooden were in respect of amounts to which Beagle was properly entitled. 261 Claim to compensation in an amount of $443,715.73 has been made out as has an accessorial claim against Beagle as a knowing participant and knowing recipient in respect of the same amount.

Claim (b): overpayment of salary to Mr Gooden 262 The evidence establishes that in FY2017, Mr Gooden was paid $129,390 by GFIN. At that time his annual salary was $100,000 (counsel for GFIN having accepted that to be the case in closing submissions notwithstanding the initial claim that it was only $70,000). Mr Gooden's salary was initially agreed as an annual amount that applied 'as and from 14 September 2012'. Therefore, the annual amount was payable in each calendar year or in each year measured from 14 September. If the payments are calculated for the year commencing 14 September 2016 the same total figure is reached. 263 Accordingly, I am satisfied that Mr Gooden caused GFIN to overpay his salary as managing director by an amount of $29,390. The overpayment benefitted Mr Gooden personally. Mr Gooden was responsible for arranging the payment of his salary. There is no indication that the overpayment was attributable to error or misunderstanding. Faced with the claim, Mr Gooden defended the proceedings. 264 The payment of $29,390 to Mr Gooden on the basis that it was a purported payment of salary has been shown to be a misappropriation of GFIN's funds to the personal benefit of Mr Gooden. 265 A director exercising reasonable care and diligence would ensure that payments made by the company to that director were in respect of amounts to which the director was properly entitled. Further, faced with an evident overpayment a director exercising reasonable care and diligence would be expected to refund an overpayment in the circumstances I have described. 266 The claim to compensation in the amount of $29,390 has been made out.

Claim (c): the operation of the omnibus accounts 267 In its opening submissions, GFIN described the overall nature of the alleged breach of duty by Mr Gooden in the following 'broad terms': … by causing GFIN, to its detriment and without informing the board, to incur substantial liabilities, and to pay away substantial sums of money, much of which was held on trust for, or otherwise owed to, GFIN's contract traders. 268 Other than the borrowings from third parties, the substantial liabilities and their circumstances were not otherwise identified. The substantial sums paid away were said to be (a) the payment of the Consultancy Fees to Beagle; (b) the repayment to third party lenders of 'secret loans' (as to principal and interest) which Mr Gooden arranged without informing the other directors; (c) the payment of amounts in excess of the salary to which he was entitled; and (d) payments 'to persons unknown and for purposes unknown'. 269 The alleged breaches of duty were said to be 'amplified' by other alleged conduct by Mr Gooden being: (1) taking steps to conceal GFIN's true financial position from the other directors and minority shareholders; (2) providing assurances to the contract traders who were directors and shareholders) that GFIN was profitable and that their trading funds were secure; (3) requesting contract traders, in particular JAG Securities as controlled by Mr Bignell to pay money to GFIN under false pretences; (4) failing to provided financial information of GFIN when requested to do so; (5) failing to inform other directors and minority shareholders of the matters said to comprise the breach of duty (that is, paying away GFIN's property); (6) using his position as managing director of GFIN to conceal his breaches of duty; and (7) only after application of considerable pressure by other directors and shareholders, producing draft accounts for FY2017 and FY2018 which showed large losses and other records. 270 The other directors said they focussed on the trading side of GFIN's business and they trusted Mr Gooden to perform his role as managing director. 271 It was also said that had the contract traders known the true position they would not have continued trading with GFIN. 272 For reasons that have already been given, to the extent that the above matters hint at complaints by contract traders or elements of causes of action that the contract traders might assert against GFIN they are not relevant. Further, the claims of breach of duty that are alleged are to the effect that Mr Gooden caused GFIN to pay away the property of GFIN to others including Beagle, himself and in the repayment of loans by GFIN and in certain respects in conducting the omnibus account that he acted without informing the other directors and for improper purposes or without due skill and diligence. It is those particular claims that must be scrutinised for present purposes. An element of those complaints is that the paying away of the funds from the omnibus account was done without informing the other directors of GFIN of the uses to which the funds had been put or the difference as between ABN AMRO and Macquarie as to the minimum balance required to be maintained in the omnibus account. That is to say, Mr Gooden is alleged to have acted secretly or in a clandestine manner. But those matters are not, of themselves, said to constitute the alleged breach of fiduciary duty. 273 Further, there is no complaint by GFIN to the effect that Mr Gooden should have informed the other directors and shareholders as to losses that had been incurred on trading and any arrangements that he was making to cover those funds. And it was not said that the character of the breach of fiduciary duty was exposing GFIN to risk of insolvency. 274 Therefore, claim (c) does not raise issues as to whether Mr Gooden (as managing director of GFIN) created a false and misleading impression for each of the contract traders or whether he should have told others about the trading loss suffered as a result of the Brexit announcement (or other circumstances that caused GFIN to need to borrow money) or whether he caused GFIN to engage in activities that did not have due regard to the interests of contract traders as creditors of GFIN at a time when GFIN was trading in an insolvency context. The issues raised concern whether, in his activities as managing director, Mr Gooden breached his fiduciary duties to GFIN by the manner in which he dealt with the funds in the omnibus account. Any determination as to whether he did so must be evaluated on the basis that he was, throughout the relevant period, entrusted with delegated authority to make the commercial decisions as to the manner in which the affairs of GFIN were conducted. The delegated authority included managing the amounts to be withheld by GFIN from payment to contract traders in the exercise of its contractual rights under its agreements with them. Further, the funds in the omnibus account were GFIN's funds not funds of the contract traders. 275 It may be accepted that there was evidence to the effect that Mr Gooden did not tell any of the other directors about the operation of the GFIN admin sub-account in the Macquarie omnibus account, particularly that the account was being operated in deficit. There was also general evidence to the effect that Mr Gale, Mr Bignell and Mr Cameron relied upon the balances in the sub-accounts as indicating that there were retained funds in the amount of the balance that were held by GFIN. There is also general evidence to the effect that Mr Gooden gave assurances that the retained trader funds were safe and secure. 276 However, the operation of a negative balance in the GFIN admin sub-account did not, of itself, mean that the retained balances were not safe and secure. Whether that was so depended upon whether GFIN had the financial ability to meet its obligation to pay those retained funds to the contract traders when it was obliged to do so. GFIN's claim was not put in terms of solvency risk and the evidence was not adduced in a manner that addressed that issue. Rather, the manner in which the case was put assumed that there was some obligation on the part of GFIN to keep separate the retained funds and hold them, in effect, on trust for each trader or at least treat the retained funds as if they were the funds of the contract trader. Broadly speaking, the case advanced was that to apply those funds for the general purposes of GFIN such as to meet operating expenses and repay monies that had been borrowed from third parties (and to pay amounts to Beagle and Mr Gooden that were not due) was a breach of fiduciary duty because those funds were, in effect, the funds of contract traders to be used only to cover losses from their collective trading activities. For reasons already given, that was not the character of the retained funds. 277 Turning then to each of the claims that form part of claim (c).

Claim (c)(1): moving the omnibus account from ABN AMRO to Macquarie 278 As to claim (c)(1), the conduct that was alleged to be a breach of fiduciary duty by Mr Gooden was the making of the Disputed Payments using funds from the ABN AMRO omnibus account: see paragraph 76 of the amended statement of claim. As has been noted the breach was said to arise because the funds in the omnibus account were the funds of contract traders and Mr Gooden did not tell anyone that he was paying funds out of the omnibus account. 279 In effect it was said that there was $1,587,662.82 in the omnibus account at ABN AMRO and only $350,000 of those funds ended up in the new omnibus account at Macquarie. Of the difference, it was accepted that $454,831.52 was paid out to contract traders (being JAG Securities and Gale Capital). However, the rest was said to have been used to make the Disputed Payments and to meet general operating expenses of GFIN. 280 The above analysis assumed that the $1,587,662.82 in the omnibus account at ABN AMRO represented what was described by GFIN as retained funds (being funds representing amounts that were either contributed by contract traders or held back from the payments otherwise to be made to them by reason of profits made on their trading carried out on GFIN's account). There is no evidence establishing that to be the case. On the contrary, there is considerable evidence to indicate that at least some of the funds in the omnibus account had been borrowed by GFIN. In other words, it has not been proven by GFIN, even on the premise of GFIN's argument that all retained monies from contract traders (including any funds that had been contributed to enable GFIN to meet the minimum balance requirements of ABN AMRO for the omnibus account) were not to be treated as GFIN's funds, that the $1,587,662.82 comprised funds of that character. 281 Further, for reasons already given, most of the Disputed Payments were either payments to contract traders or involved the repayment of funds that, on the whole of the evidence, may well have been funds that were borrowed and paid into the omnibus account. Otherwise, there was the payment to GFIN Green and to Mr Gooden and Beagle (and whether there was a proper basis to pay those amounts depends upon claim (a) and claim (b)). 282 As has been noted, the evidence was to the effect that the directors and shareholders of GFIN delegated to Mr Gooden full responsibility for conducting the financial affairs of GFIN including borrowing funds where required. Managing the risks associated with trading derivatives was fundamental to that responsibility. Whether Mr Gooden acted with due care and diligence in carrying out that responsibility would be a matter that would need to be evaluated giving due respect to the fact that it was not for the Court to second guess the commercial judgements to be required in performing a responsibility of that kind. The case advanced by GFIN did not take on the burden of seeking to demonstrate why the decisions were a breach of a duty to act with due care and diligence beyond the complaint that Mr Gooden was dealing with contract traders' funds. 283 Therefore, it is entirely plausible on the evidence that there was only $350,000 in funds that might meet GFIN's description of 'contract traders' funds' that were held by GFIN at the time that the arrangements were made to move the funds from ABN AMRO to Macquarie. 284 In addition much of the case advanced by GFIN depended upon what it sought to characterise as the suspicious timing of the switch from ABN AMRO to Macquarie. It was submitted that the possibility of the switch was first considered at the time that there was the substantial trading loss as a result of the Brexit announcement. However, the email communications with Macquarie are not to that effect. They indicate that the discussions with Macquarie commenced well before the Brexit announcement. Further, there was a significant period when the discussions were on hold, a factor inconsistent with any case to the effect that the arrangements with Macquarie were made to try and conceal the losses made at that time. If indeed the purpose of the switch was to cover up the loss from the Brexit announcement then you would expect matters to have been pursued with urgency with Macquarie. The evidence was not to that effect. 285 No doubt the loss suffered from the Brexit announcement was a most unwelcome development for GFIN and produced a need for GFIN to find funds that would cover the deficit. It was a problem for Mr Gooden as managing director to deal with. He may have been expected to raise such a development with other directors. But, as has been observed that is not the nature of the claim. Rather, the fact of the loss is a matter relied upon to give context to the central complaint which is about the funds that were used to make the Disputed Payments. 286 The evidence demonstrates that GFIN sourced the funds that were needed to cover the shortfall in the minimum balance in the days immediately after the Brexit announcement from third parties, at least in part by borrowing monies. After it did so the negative balance in the GFIN admin sub-account at ABN AMRO was only $57,158.95. 287 Further, the evidence shows that given the nature of the arrangements between GFIN and the contract traders, the traders knew that funds that they had deposited with GFIN (and funds that they had earned through profitable trading that GFIN was entitled to hold back to cover future trading risks) were all at risk of having to cover the trading risks associated with the activities of other traders. It must also have been known to them (or should have been known) that if those amounts were insufficient to enable GFIN to maintain its minimum balance with the Clearing Participant in order to be able to keep trading then GFIN would have to cover the position from its own funds. It could source those funds from its own cash reserves, by borrowing or by making a call on shareholders to make further equity contributions. 288 The claims by GFIN did not allege that Mr Gooden acted in breach of his duties in exposing GFIN to the risk of the loss suffered on the Brexit announcement. For example, it was not alleged that he allowed trading outside of agreed or sensible trading limits. Nor did it allege that Mr Gooden had no authority to borrow (it appeared that he did have such authority). 289 In circumstances where (a) the other directors and shareholders were concerned with trading and Mr Gooden was given responsibility to manage the financial affairs of GFIN; (b) Mr Gooden has not been shown to lack authority to arrange borrowings by GFIN; (c) it was not correct to view the funds in the omnibus account as the traders' funds; and (d) it has not been shown that any of the funds (other than the funds paid to Beagle and Mr Gooden) were paid to third parties in respect of whom GFIN did not have a liability, the claim of impropriety in the handling of the funds in the ABN AMRO omnibus account at the time of the transfer to Macquarie has not been established, noting that it has already been determined that it was a breach of fiduciary duty to make the payments to Beagle and Mr Gooden.

Claim (c)(2): the operation of the Macquarie account 290 As to claim (c)(2), the complaint was that Mr Gooden caused $825,509.74 standing to the credit of four contract traders in their sub-accounts that formed part of the Macquarie omnibus account on 9 November 2017 to be off-set against the accumulated negative balance of the GFIN admin sub-account of $616,808.61 and that GFIN has not reimbursed the amount to the contract traders: see paragraph 77 of the amended statement of claim. It is said that GFIN suffered a loss of $825,509.74 as a result. 291 There was a deal of evidence to the effect that the Macquarie omnibus account was operated in a manner that caused contract trader sub-account balances to be presented to contract traders in a way that indicated that they represented actual funds in the GFIN omnibus account and that contract traders were not told that the sub-account balances did not represent funds standing to their credit. However, the case as pleaded did not articulate any respect in which conduct of that kind would amount to a breach of fiduciary duty. Rather, the complaint was about the use of the amounts shown in the sub-accounts for the four contract traders to cover the negative balance in the GFIN admin sub-account. 292 It is necessary to deal with the complaint in the manner in which it was pleaded. Inherent to the particular claim of breach of fiduciary duty is a claim that the monies in the sub-accounts for the contract traders were funds standing to the credit of the contract traders which GFIN was obliged to pay to them using the funds held in the omnibus account. This is revealed by the pleaded complaint that GFIN has not 'reimbursed' the relevant amounts to the four traders. 293 For reasons already given, the premise upon which such a claim is based is misconceived. All of the funds in the omnibus account were GFIN's funds, even those funds that had been contributed by contract traders so as to maintain the minimum balance. No doubt the traders had claims against GFIN, but they were claims as creditors of GFIN, not claims to the amount of money shown in their sub-account balances. The amounts shown in the sub-accounts related to trading in derivatives that was conducted on behalf of GFIN using GFIN monies. So much was expressly stated in the agreements between GFIN and the contract traders. It appears that the sub-accounts reflected profits on derivatives trading by the particular trader (including that share to which GFIN was entitled under the arrangements that it had agreed with the contract traders) and amounts contributed to ensure there were sufficient funds to be able to operating the omnibus account with the Clearing Participant. 294 Individual contract traders were entitled to payments from GFIN based upon the profits that were generated by the trading activities of the contract trader but all those profits were earned by GFIN. Payments to contract traders were made when an account was presented for a payment to be made and were paid by GFIN to each contract trader as consultancy fees on which GST was incurred. However, all traders knew that GFIN had to retain a minimum balance in the omnibus account and had to retain sufficient funds from each trader to cover risks associated with trading in derivatives. The precise amount required for these purposes depended upon the trading profile of the particular trader and whether the trader was a shareholder entitled to dividends as well as trading profits. Further, the shareholder traders had to leave a certain amount of any accrued entitlements to consultancy fees in GFIN (or pay in cash amounts to GFIN) so that it had enough funds to cover the minimum balance and the trading risk. 295 Each of Mr Gale, Mr Bignell and Mr Cameron thought that the balances that were shown in the sub-accounts were represented by funds held in the omnibus account. Plainly, that was not the case and it may be that the contract traders have a basis to claim against GFIN in that regard, a matter upon which I express no view because it is not in issue. It appears that in addition, Mr Bignell at least complains that he was asked to contribute funds to be held to cover the risks of losses when those funds were not used by GFIN for that purpose. However, what is in issue is whether the amounts depicted in the contract trader sub-accounts were properly handled by GFIN, not whether Mr Gooden misled the contract traders. 296 Of course, GFIN had a contractual obligation to pay to contract traders consultancy fees calculated by reference to the profits earned on derivatives trading by each contract trader. Further, GFIN would need to have funds to meet those obligations. Therefore, if Mr Gooden as the managing director of GFIN was to conduct its financial affairs on the basis that even though it had accumulated liabilities to pay contract traders it did not need to ensure that it was able to meet those liabilities when they fell due then that may amount to a breach of fiduciary duty. Whether it would be such a breach would depend upon the extent to which GFIN could call on its shareholders to contribute further funds or borrow funds to cover any instance where consultancy fees were required to be paid to a contract trader. But the case advanced by GFIN was not of that character. If it were, very different issues would have arisen to those exposed by the pleaded case. Rather, the complaint was, in effect, that GFIN held funds for the contract traders and, for that reason, it was a breach of duty to allow those funds to be used for the general purposes of GFIN. A claim of that character has not been established on the evidence. 297 To the extent that the claim is that the amounts totalling $825,509.74 were lost because they were applied against the accumulated negative balance of the GFIN admin sub-account and otherwise used by GFIN, it would be necessary to demonstrate that the funds were used to meet expenses that were not proper expenses of GFIN. That burden was not undertaken by GFIN. 298 It follows that claim (c)(2) has not been made out.

Claim (c)(3): borrowing by GFIN from third parties 299 As to claim (c)(3), a considerable part of the claim was to the effect that it was a breach of fiduciary duty for Mr Gooden to cause GFIN to borrow money so that it could make payments to Mr Gooden and Beagle to which they were not entitled. As has already been noted, expressed in those terms, the claim overlaps with claims (a) and (b). As those claims have been upheld, it follows that to borrow monies to make those payments would be a breach of fiduciary duty. The difficulty is that it has not been demonstrated on the evidence that the borrowing was undertaken to make those payments. Rather, the evidence is to the effect that borrowings occurred when GFIN had insufficient funds to maintain the minimum balance required for the omnibus account or to be able to pay consultancy fees to contract traders. There were times when the impugned payments to Mr Gooden or Beagle occurred at or about the time that funds were borrowed. However, the evidence falls short of demonstrating that the borrowings were made for that purpose. 300 The rest of claim (c)(3) is to the effect that the borrowings were incurred to pay other persons and entities including contract traders. As has been noted, one of the responsibilities delegated to Mr Gooden as managing director was to borrow funds where they were required by GFIN. One of the reasons borrowing may be appropriate was to ensure that GFIN had sufficient funds to pay contract traders as and when payments were due to them. The same may be so in the case of payments due to 'other persons'. The fact that borrowed funds were used to pay GFIN creditors does not establish a breach of fiduciary duty. No other aspects of the borrowings have been shown to be improper or made without due skill and diligence. Those matters were simply not addressed. 301 Therefore, this claim has not been made out.

Claim (c)(4): borrowings to maintain the minimum balance in the omnibus accounts 302 As to claim (c)(4), it concerns the propriety of Mr Gooden arranging to borrow monies from third parties when funds were needed to maintain the minimum trading balance in the omnibus accounts at ABN AMRO and Macquarie: see paragraph 80 of the amended statement of claim. 303 As has already been stated, the evidence established that there were a number of occasions when Mr Gooden arranged for GFIN to borrow significant amounts that were then paid into the omnibus account. Indeed, Mr Gooden admitted as much in his defence where he said that the borrowed funds were used to meet the general cash requirements of GFIN from time to time which included 'GFIN's minimum trading requirements'. 304 To the extent that the complaint was that the borrowing was arranged without due skill and diligence, there was nothing pointed to by GFIN to explain why in the circumstances of particular borrowings the terms agreed or the amounts borrowed were not appropriate. On the evidence, there was a need to borrow funds, namely to maintain the minimum trading balance. Mr Gooden has not been shown to lack authority to arrange borrowings that were needed. There was a commercial judgement to be made as to the appropriate way in which to raise the necessary funds given the nature of the business conducted by GFIN and the extent to which it could provide security for such borrowing. No attempt was made by GFIN to articulate why the arrangements made were not appropriate. Rather, it was the fact that borrowings occurred at all that seemed to be the subject of complaint. 305 To the extent that the complaint was that the borrowings were not for a proper purpose, the only improper purpose advanced appears to be tied up with the complaint that the funds in the omnibus account shown in the contract traders' sub-accounts should not have been appropriated to meet general expenses of GFIN. That claim has failed for reasons already given. Otherwise, it could not be said to be an improper purpose to borrow funds to cover the shortfall in required funds to be held in the omnibus account. 306 The complaint by the contract traders in their evidence was, in effect, that they provided more cover than GFIN needed during the time the Macquarie omnibus account was operated, particularly in the period between July and November 2016. Further, the funds that they provided were used to meet the general operating expenses of GFIN. As a result when eventually they came to call upon GFIN to meet its obligations to pay accrued consultancy fees that were due to them (and reimburse amounts they had advanced to GFIN as a condition of being able to trade on its account), GFIN did not have the funds to meet those claims. These matters may be reasons why those contract traders may complain against GFIN for breaching the arrangements with those contract traders. It may also be a basis upon which GFIN might complain against Mr Gooden for causing GFIN to be operated in a manner that exposed GFIN to claims by those traders or for not having regard to the interests of creditors in conducting the affairs of GFIN. But none of those matters formed the basis for GFIN's claim. 307 The mere fact that funds were borrowed by Mr Gooden without informing other directors and those funds were used to maintain the minimum balance required by the Clearing Participants is not a breach of duty. To borrow funds for that purpose in the exercise of the delegated authority apparently conferred on Mr Gooden was entirely consistent with the nature of the business conducted by GFIN and the arrangements made by the directors for the management of its financial affairs. 308 Otherwise, in effect, claim (c)(4) was a complaint that Mr Gooden did not inform the other directors of the fact of the borrowings. That complaint must be evaluated in the context of the findings already made that (a) Mr Gooden has not been shown to lack authority to arrange those borrowings; and (b) it has not been demonstrated that the purpose of the borrowings was to secure the funds that were then overpaid by way of salary and misappropriated to Beagle or some other improper purpose. The complaint that the other directors of GFIN were not informed was rolled up to a considerable extent with a complaint about the borrowed funds being diverted to pay Beagle consultancy fees and Mr Gooden an excessive salary: see paragraph 72 of the amended statement of claim. In effect, it was a complaint that GFIN's borrowed funds were diverted to Beagle and Mr Gooden and the other directors did not know that was happening. Formulated in that way the claim stands or falls with the allegation that the borrowed funds were misappropriated. 309 What is left is a general complaint about a failure to tell the other directors that borrowed funds were being used 'to pay other persons and entities including contract traders'. It was not articulated why Mr Gooden had an obligation to tell the other directors that he was spending the borrowed monies on particular persons and entities. Again, the real complaint appears to be about the borrowings themselves. For reasons already given it has not been demonstrated that the borrowings were made in breach of duty. 310 For those reasons, claim (c)(4) is not made out.

Remedies and costs 311 Having regard to the findings I have made, I am satisfied that it is appropriate to grant declaratory relief against Mr Gooden and to order Mr Gooden to pay compensation to the extent I have indicated as to claim (a) and claim (b). In addition, I am satisfied that Beagle should be ordered to pay compensation based upon principles of accessorial liability for the breach of fiduciary duty by Mr Gooden in causing the identified payments to be made to Beagle. However, insofar as the application raised the matters the subject of claim (c), the application has not been successful. Therefore, it is not necessary to address the various ways in which GFIN formulated its claim to compensation based upon claim (c). In a number of respects they too were infected by the erroneous view that the 'retained amounts' were funds belonging to the contract traders. 312 In all the circumstances, I consider that it would be appropriate to afford GFIN an opportunity to make submissions as to the terms of final orders to reflect these reasons and, in addition, to make further submissions as to costs in the light of the outcome. I will make orders to that effect. I certify that the preceding three hundred and twelve (312) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Colvin.