Harstedt Pty Ltd v Apollo Development Enterprises Pty Ltd [2017] VCC 834

Judgment: (1) Within 14 days of this day the parties must bring in short Minutes to give effect to these reasons.

"The Spirit of the Lord God is upon me; because the Lord hath anointed me to preach good tidings unto the meek; he hath sent me to bind up the brokenhearted, to proclaim liberty to the captives, and the opening of the prison to them that are bound."

"For I the Lord love judgment, I hate robbery for burnt offering; and I will direct their work in truth, and I will make an everlasting covenant with them."

3 Just what any of this has to do with an allegedly non-recourse investment is not immediately obvious.

4 An organisation known as Isaiah 61 Management Foundation (according to material handed to Mr Olsen, who is the Director and Principal of Harstedt Pty Ltd, the plaintiff in this case):

• Is a Not For Profit Humanitarian Group, able to use your capital to make substantial Bank Debentures Trading Gains in a Joint Profit Sharing Agreement. Your share, you keep.

• You gain a substantial, safe High Yield Growth. Major PROFITS.

• Your own Investment Capital can remain in your own bank, if able to facilitate Endowment Platform Trading.

• Humanitarian Foundation Share Profits are cross allocated for critical World Need Projects and at no cost to you.

• Your own Profits are disbursed monthly to your own designated account.

• All Bank Securities Trading is pre arranged within major AA or better World Banks where the Foundation have safe, established Trading Relationships. (Court Book ("CB") 391)

5 Mr Olsen is a stockbroker of 15 years' standing. (Transcript ("T") 56, Line(s) ("L") 25-26). In late 2006, he received a call from a Mr Noel Carter, with whom he was acquainted "through the finance industry". Mr Carter told Mr Olsen "he was wanting to raise capital on behalf of a project and would [Mr Olsen] be interested in introducing my clients to the project." (T57, L1-6) This transaction took place "in the last quarter of 2006". (Ibid, L9-10).

6 Mr Olsen told Mr Carter that the proposal "had one major flaw, disadvantage, in that the proposal offered no capital protection". (Ibid, L17 & 18) Mr Olsen said he would not proceed on that basis. (Ibid, L19)

7 Early the following year, Mr Carter invited Mr Olsen to a conference at Mr Carter's office in South Melbourne, where Mr Olsen met Mr Moriarty. Messrs Carter and Moriarty told Mr Olsen, "We think that we've got something now that will address your concerns with the project". (Ibid, L25-26) He attended a meeting on 3 March 2007. (Ibid, L30) It was presumably at this meeting that Mr Olsen received the material quoted at [4] above in the form of a slide for a PowerPoint presentation.

8 This page was headed "Investment Ethos and Profit to You". According to Mr Olsen, Mr Moriarty said:

"Well, we've now addressed, I think, your primary concern; and that is that the funds will stay in Australia, they'll be in a non-depleting account, and the funds won't be allowed to leave that account." (T58, L6-10)

9 Mr Olsen said there was no disclosure as to how the promised high returns would be derived from this investment. He continued:

"I'm embarrassed to tell you that every time questions were asked on this, this was highly confidential. It - there were confidential documents everywhere, and we couldn't tell you this and we couldn't tell you that, and you would just have to take it from us that, you know, this has been done previously overseas and it's been successful and that's as much as you need to know." (Ibid, L14-21)

10 On the evening of 3 March 2007, Mr Olsen sent a detailed email to Mr Moriarty. He referred to pro forma documents which had been handed to him in late 2006 by Mr Graeme Robinson, an associate of Mr Carter. He sought clarification on some six points. One of them was as follows:

"4. The Extraordinarily Humanitarian doc states

Page 1 'the funds raised must be unencumbered' - see above

2 'the investor is the sole signatory' - I thought there were at least two.

'the investor can withdraw the investment at any time' - I thought the funds had to remain invested for 13 months but then at the bottom of the page it states for a minimum of 40 weeks." (CB 396)

11 That same day, Mr Olsen had sent an email to Mr Moriarty stating:

"Steve [Mr Moriarty's name is Stephen]

Would you mind confirming the following and adding anything that I have left out:

1. Amount

US$1.0m; A$1.280m

2. Term

13 months

3. Purpose

The capital does not leave the Australian bank account especially established for the purpose.

The cash is cross traded against a Stand By Letter of Credit as the operative instrument representing the cash held in the bank account.

4. Need

My/our nominated bank holds the cash

The cash cannot be released without three signatures;

mine/the syndicate, the debt provider and the nominated representative of the 'borrower'.

The borrower will need to prove the funds are in the nominated account.

5. Security

The funds, at all times, are entirely independent of the use of funds on the 'other side'. That is if the investment were unsuccessful there is never, at any time, any recourse to US$1.0m to meet any shortfall. At the end of the 13 month (sic) the US$1.0m is repaid in full." (CB 398-9)

12 Mr Moriarty responded "that's fine Jeff". (CB 398)

13 Mr Olsen's initial account of events was that he attended a further meeting in the third week of March, he believed on the 18th, at the Commonwealth Bank of Australia in Bourke Street, Melbourne, attended by Mr David James of the Commonwealth Bank, Mr Carter, Mr Robinson, Mr Lopez and Mr Tomanek. Mr Lopez and Mr Tomanek are the second and third defendants respectively.

14 Under cross-examination, Mr Olsen was willing to concede that there were only two meetings held in March, the first being on the 3rd and the second being on the 23rd. Insofar as Mr Olsen was describing the second meeting in his evidence-in-chief, in light of the concession in cross-examination, his references would appear to be to the meeting on 23 March.

15 According to Mr Olsen, Mr Lopez explained a number of aspects of the investment. First, how individual investors were to be dealt with and, secondly, whether it was possible to "gear this investment". (T90, L24-30)

16 Initially, it was considered that each investor might have his or her own account with the Commonwealth Bank "and they could have control over the account, and they could have 24/7 Internet access to assure themselves that the money was still remaining there". (T91, L7-10)

17 Mr James said that the bank would not welcome this arrangement. The bank would have to pay a nominal rate of interest to authorise it to lend the deposit "And secondly, it would be a lot easier, administratively, to pool all the investors into one account under the name of Apollo". (T91, L25-27)

18 The gearing proposal entailed an investor with a deposit of $100 in an Apollo account, borrowing $300 from the Commonwealth Bank, which would also be placed in the Apollo account. (T92, L1-6)

19 The proposal was that this money could be borrowed at a relatively low rate from the bank in 2007, perhaps 10 per cent, and earn 300 per cent over a nine-month period as part of this investment proposal. (T92, L12-17)

20 At that stage, Mr Olsen and his company were regarded as the "Carter group". He said Mr Carter and Mr Robinson were in partnership and he and his company were the other member of the group. (T93, L4-8)

21 A compilation of material was made by Mr Moriarty and given to the bank, including information as to the investment proposal and the participants. (CB 208-213, T94, L11-16) The opening sentence of this document said:

"A new group Company/Trust structure has been created being Apollo Development Enterprises Pty Ltd ATF Apollo Development Trust (ADE) for the purpose of combining the resources of a group of willing and sophisticated investors to participate in a commercial overseas private placement program accessed off critical mass."

22 The participants were shown as Fortuna Developments Enterprises Pty Ltd as trustee for the Fortuna Developments Trust, the directors of which were Mr Raymond Pryor and Mr Geoffrey Sullivan, Harstedt Pty Ltd as trustee of the Olsen Family Trust, and Valerosa Pty Ltd as trustee for the Lopez Family Trust, the directors of which were Mr and Mrs Lopez. The fourth participant was Aurora Development Enterprises Pty Ltd ("Aurora"), as trustee of the Aurora Development Trust. Its director was Stephen James Moriarty. The fifth participant was NGS Financial Solutions Pty Ltd ("NGS"), whose directors were Messrs Carter and Robinson. The document stated:

"NGS is a facilitator in these arrangements and an introducer of investors to the group. As such it is not required to put investment funds forward nor be responsible for any repayments." (CB 210)

23 Under the heading "Acknowledgement" the following appeared:

"The money cannot leave the account, and the interest is prepaid. The money is not used for collateral purposes (other than by the bank) and it is only used for scanning." (CB 211)

24 In the same section, there appeared a paragraph highlighted on the original and difficult to read in the Court Book, which seems to say:

"Any potential commercial risk has been eliminated because the investing group is committed to covering the differential between the interest paid to the bank by the investors and by the bank for the funds under deposit. Let us assume that this is no more than 1.5-2 per cent."

25 The arrangement is described as a "Private Placement Program" (PPP).

"The commercial opportunity itself is simple, the combined group has access to a [PPP] which allows borrowed funds to be used for scanning purposes only, and never put at risk. These funds never leave the local CBA account.

The placement program allows for the forward payment of profits from the private placement arrangement. The private placement arrangement insists that the funds cannot be accessed by any party and will be 'blocked off' for 13 months and not leave the account which is also consistent with the bank's collateral requirements." (CB 213)

27 Mr Olsen then went on holiday and left his power of attorney with his accountant, Mr Saltzman. (T100, L29-31) To brief Mr Saltzman on the matter of the investment, Mr Olsen sent him an email on Saturday, 24 March 2007. The email stated, inter alia:

"The funds, once invested, cannot leave the account. Instead it provides some basis for a Stand By LC which is then cross traded. (I have no idea how this could provide a return on the funds invested but am advised that this will be revealed after confidentiality agreements are signed.)" (CB 960)

28 On the face of it, one would have thought that the monies deposited would be held by the bank to enable it to indemnify itself if it were called to make a payment under the stand-by letter of credit. This eventuality would be at odds with the repeated assurances that the monies deposited would be held inviolate in a blocked or non-depleting account. It seems to have been a sticking point which ultimately led to the breakdown of negotiations with the Commonwealth Bank. (T101, L26 - T102, L1)

29 In April, there was an attempt to finalise the arrangements for the investment. Mr Robinson sent an email to Mr Olsen which stated, "All parties are cooperating fully and I would expect the formalities to be all in place today, certainly". (CB 971)

30 Mr Robinson raised the issue of holding some of the funds in offshore accounts in an email to Mr Olsen of 12 April 2007. (CB 970) Mr Olsen responded:

"However one thing that we must all be assured in taking this path is that we retain 100% of the funds at all times in exactly the same way that we have tried to ensure in Australia." (Ibid)

31 In a responding email to Mr Robinson, Mr Olsen said "I was wondering whether the simplest way would be to transfer the funds to an offshore account in the Trust's name care of CBA Bank in say London." (CB 969)

32 There was continued debate about whether approvals would be forthcoming from the Commonwealth Bank. On Saturday, 14 April 2007, Mr Robinson told Mr Olsen that, meanwhile, a meeting of investors was arranged at Mr Moriarty's residence in Geelong for Anzac Day. (T102, L25-31)

33 In attendance at that meeting, according to Mr Olsen, were "my group - there was Carter, Robinson and myself, and there were 25 other people in the room". (T103, L1-3)

34 Mr Olsen met his group at Mr Carter's house and the three of them, Messrs Olsen, Carter and Robinson, travelled to Geelong. (T105, L7-11) The members of the group took the opportunity to get to know one another during the journey. In particular, Mr Olsen had not been much acquainted with Mr Robinson. (Ibid, L14-27) Mr Robinson and Mr Carter and NGS "would receive 30 per cent [commission] of whatever profits were derived". (T105, L28 - T106, L1-2)

35 The Olsen group arrived at Mr Moriarty's residence around 10.15-10.30am (T108, L3-4) with the meeting lasting until 3.00pm. (Ibid, L5) According to Mr Olsen, "the only people I knew there when we first walked in were Carter and Robinson". (Ibid, L6-8) The 25 other people were not introduced to Mr Olsen. (Ibid, L12)

36 The meeting was said to be in confidence and a proposal from Mr Olsen for a sheet of paper to be circulated with the names and addresses of attendees being filled in was denied. (Ibid, L17-25) The denial was made by Mr Lopez and Mr Tomanek. (Ibid, L26) In due course they addressed the meeting, which was held in a dining room around the dining room table. (T108, L26 - T109, L8)

37 According to the introductions, Mr Tomanek was Mr Lopez' accountant and had known him for several years. (T109, L21-24) Mr Lopez was introduced as "a very successful businessman who was in property development, refurbishment of offices". (Ibid, L30-31) Mr Lopez explained that he worked:

"...with a US humanitarian program called Isaiah 61, and he had therefore come to understand the procedures, the steps, to these sorts of programs which were very common in Europe and America but unheard of in Australia. In fact, he made a statement that, to his recollection, the only Australian that had ever participated in one of these programs was Mr Rupert Murdoch, and he had participated and that that wasn't in Australia." (T110, L8-17)

38 As Mr Olsen saw it, of the investors present, more than half were elderly:

"...a third would be financially illiterate, the other third would not be financially illiterate at all, and the other third didn't seem to care, there were no questions, they were there, nothing was said, nothing was asked; it was quite an unusual meeting from that perspective. (T110, L28 - T111, L4)

... a third of the people asked sensible questions; ... another third asked silly questions ... and the final third didn't say anything ..." (T111, L5-12)

39 Mr Olsen said little or nothing was disclosed as to how profits were to be derived. He said:

"This was extremely frustrating because everything was 'confidential' and we weren't encouraged to ask questions because - I've signed documents with Isaiah 61 that prohibited me from saying anything, you can't ask those sort of questions." (Ibid, L16-20)

"The understanding that was put to the room was that there was only one person who could deal with the platform, [that is, the PPP opportunity] and that was Mr Lopez, because he was the only one who had signed these so-called confidentiality agreements." (T112, L9-13)

42 By way of further explanation, Mr Olsen said "the platform was, the money that had gone in as first collateral and the trader worked off that collateral for a period of time". (Ibid, L22-24)

43 Since a number of investors were committing relatively modest sums of money for the convenience of the Commonwealth Bank, the funds were to be pooled and held in the name of Apollo (T113, L15-26), though the investors may not have been clear on this point. (T114, L5-10)

44 Mr Olsen said there was a "forest" or "mountain" of documents circulating but they maintained matters at a high level of generality and were frustrating in their lack of specificity. (Ibid, L11-31)

45 Mr Olsen identified the documents contained in CB 402-518 [with the exception of page 472] as being documents circulated at the Anzac Day meeting.

46 The upshot of the meeting was that there were to be three signatories to the Apollo account, namely, Messrs Lopez, Tomanek and Moriarty. (T115, L20-21) This account, however, was, according to Mr Olsen, "always ... would be ... a non-depleting account". (T116, L30-31)

47 This raised the question in Mr Olsen's mind as to why, if the account was to be effectively blocked, three signatories were required. He was told, "That's just the way it is". (T117, L1-13) Mr Tomanek remarked, "You'll just have to trust us". (Ibid, L17)

48 Mr Olsen's response to the meeting, according to his evidence, was that "it was mandatory that my signature be on every cheque or withdrawal". (Ibid, L24-26) This led to a heated discussion. (Ibid, L28 & 29)

49 Mr Olsen said he persisted, despite opposition. He said that he was claiming this entitlement not for himself, separately, but for the investors, generally. (T118, L17-26) No payment out should be made, according to this principle, unless Mr Olsen signed the cheque or other authority. (Ibid, L27-31)

50 Mr Carter took Mr Olsen out of the room and told him, "your intransigence is jeopardising this discussion", but Mr Olsen was unrepentant. (T119, L2-5) Eventually, a vote was taken at the meeting, which decided that Mr Olsen's signature was to "go on the bank account". (Ibid, L17-18)

51 Mr Olsen said that at 8.30pm on 28 April, he received a telephone call from Mr Carter, saying that "a trader's been identified". It was essential "to get the money into place" and the trade would be "short-dated and would be concluded by the end of September". According to Mr Carter, this would prove to everyone that this arrangement was "a legitimate enterprise". He told Mr Olsen he needed to decide whether he would pursue this as an investor or not. (T120, L12-22)

52 Mr Olsen has said that he expressed his reluctance with arrangements not having been finalised, documents not having been signed and so forth. (Ibid, L23-31)

53 On 30 April, Mr Olsen sent an email to Mr Robinson stating "that the Olsen Group" would "deposit $250,000 immediately subject to everyone's approval of this email". The conditions were as follows:

"1. All written agreements between the parties are signed off and resolutions giving that person/s the approval to sign are noted by the Olsen Group. If this is not done then the Olsen Group would have the right to seek immediate return of all funds lodged in the Apollo Trust Account.

1. 2. That if the first 'trade' is not completed by June 30th 2007 then the Olsen Group has the right to ask return of its collateral/capital contributions to Apollo ie as verbally agreed previously its intention is to 'invest' for the full term of the 13 months providing the undertaking that the first trade will be completed by no later than June 30th.
2. 3. That Apollo provides a Statement on Apollo letterhead that it is satisfied that the purpose for the investment by the Olsen Group will offer material Corporate benefit to the Olsen Group.

eg it would determine that Olsens Group percentage unit/‌shareholding within Apollo. A letter would be prepared by the Olsen Group for the authorised signatory of Apollo to sign.

1. 4. That the CBA puts into place, as directed by Apollo, all signatory safeguards to the funds invested in the Apollo Trust Account." (CB 520)

54 Mr Olsen explained that the "Olsen Group" was Harstedt as trustee of the Olsen Family Trust, viz the plaintiff. (T121, L10-14) On 2 May 2007, Mr Olsen caused Harstedt to deposit $250,000 in a Commonwealth Bank account to the credit of Apollo Development Enterprises Pty Ltd. (Ibid, L22-24, CB 523)

55 Mr Olsen said he deposited the funds at a Commonwealth Bank branch in Exhibition Street, Melbourne using an account number furnished to him by Mr Carter. (Ibid, L27-30) The $250,000 was drawn from an account in the name of Harstedt. (T122, L11-12)

56 Following an exchange of emails between Mr Olsen's account and Mr Carter and Mr Robinson, (CB 534-540) Mr Olsen signed a letter on the letterhead of NGS (Mr Robinson's company). (CB 541-545)

57 In due course, Mr Olsen received a letter dated 31 May 2007 on Apollo's letterhead addressed to Mr Carter, a director of NGS, described as "Introducer of Harstedt Pty Ltd". The letter stated inter alia:

"We confirm that your client Harstedt Pty Ltd has completed all pre-qualification requirements in respect to the signing of the non-circumvention, non-Disclosure Agreement and we further confirm receipt of A$250,000 from Harstedt Pty Ltd into the CBA Apollo Development Enterprises Pty Ltd Account No 3866 1010 9876 on Wednesday May 2, 2007.

These funds will be held as a condition of the [PPP], in a Non-Depleting Account for thirteen months and will be blocked and reserved and under no circumstances can the funds in the account be depleted. The CBA has agreed to these clear instructions.

..." (CB 576)

58 The letter was signed by Mr Moriarty "on behalf of the directors of Apollo Development Enterprises Pty Ltd". The letter was headed "Confirmation of Receipt of Funds from Harstedt Pty Ltd by Apollo Development Enterprises".

60 Meanwhile, Mr Olsen said he spoke to Mr Wilson of the Commonwealth Bank seeking to have signature authorities prepared which would appoint him as an indispensable signatory for the Apollo account. According to Mr Olsen, the reply was:

"Well, Mr Olsen, that's going to be difficult at the moment because we don't have all of the documents in place between the CBA and Mr Lopez and, until we've got that sorted out, I'm not sending any documents to you." (T123, L25-29)

61 Mr Olsen said that there followed almost daily communications with Mr Carter and Mr Moriarty or Mr Tomanek. Mr Carter could not operate a computer and therefore needed to be contacted by mobile phone. Mr Olsen sent emails to Mr Carter care of Mr Robinson. (T124)

62 Mr Olsen said he heard nothing of any proposal to move the Apollo funds out of the account into which he had deposited the $250,000 from Harstedt until he was informed of a decision to this effect by Mr Carter in August. (T125, L1-6)

63 Mr Olsen sent an email to Mr Robinson on 27 August 2007 stating inter alia:

"...Noel [Carter] mentioned to me on Friday that the decision had been taken to send the funds from Apollo offshore. I was flabbergasted because it wasn't mentioned on Wednesday evening when he and I had a long chat regarding the options open to Joe [Lopez] and Steve [Moriarty] if the CBA didn't come to the party on the Thursday.

...

Could you please confirm with Noel that I need to know the following:

1. Where the funds are now; country, bank, account number

2. Under whose control: who the signatories are to the account

1. 3. The terms of the fund's deposit eg do they stay for the 13 months from now or from May?

What has happened is contrary to everything I originally said to the investors ie

- funds would stay in Australia

- funds would be under our (Olsen Group) control at all times - capital guarantee

- there would be a 10% penalty fee for a 'quick' transaction.

I have to be able to explain why all of this has changed.

Noel will understand the cause for these questions." (CB 713-714)

64 The "investors" to whom Mr Olsen referred in his email were the beneficiaries of the Harstedt Trust, viz his family. (T127, L6-12)

65 Mr Olsen said that when he challenged Mr Wilson of the Commonwealth Bank, he said that the arrangements allowed any three of the signatories to withdraw the funds. "The documentation that would be there to respect your signature in Harstedt hasn't been put in place and therefore I [viz Mr Wilson] had no obligation to ring you." (T127, L27 - T128, L5) Whilst Mr Olsen did not assert that Mr Wilson had ever promised him a role as the indispensable signatory, Mr Wilson was aware of the vote which had been taken. (T128, L14-18)

66 It appears that Mr Carter sent a letter on the letterhead of NGS stating inter alia, under the heading "Transfer of Funds Invested":

"We wish to avail ourselves of opportunities that you have in [PPPs] as soon as possible.

We are aware of the difficulties that have surrounded your attempts to negotiate flexible banking arrangements with the Commonwealth Bank, which would allow [PPP] to commence.

Due to the above, we are prepared to release our investor's funds from the Apollo Development Enterprises Pty Ltd (Apollo) account and transfer the funds to another account under the following conditions.

1. 1. The funds are still in an account under the name and control of Apollo.
2. 2. All other conditions in our agreement apart from the bank that hold (sic) the account remain the same." (CB 679)

67 The form of this letter was, it seems, provided by Mr Lopez himself and copied inter alia to Mr Ray Pryor, one of the other investors. (CB 679-681)

68 Mr Olsen said he saw this letter for the first time during the course of discovery in the present proceeding. This letter, he said, was not sent with Harstedt's approval or concurrence. (T130, L11-13, 17-19)

69 Mr Olsen sent an email to Mr Lopez on 27 November 2011 in which he referred to an arrangement whereby he (Mr Olsen) would provide €95,000 "as soon as possible" with Mr Lopez providing a personal guarantee and an ex gratia payment of AU$900,000. Mr Olsen continued:

"I advised Ray [Pryor, the organiser of the Ballarat investor group] over a week ago that the funds could be made available but they would come with conditions. Two of those conditions were:

(1) That the funds would be made available at the end of next January (2012);

(2) That the funds would be remitted directly to the European bank you nominated with a representative from the lender present to witness all transactions." (CB 844)

"So far no one has communicated to me your acceptance or otherwise of this offer." (CB 844)

71 Mr Tomanek sent a text message to Mr Olsen in reply, stating:

"End of Jan

Too late.

It. Is (sic) required now." (CB 843-4)

72 Mr Olsen said that he sent this email because he had been told by Mr Sullivan (another of the organisers of the Ballarat investor group) "that [the] money was sitting in the bank in Europe, and the bank, in order to release those funds to Apollo, wanted this money." (T131, L7-10)

73 Mr Lopez took it that this communication from Mr Sullivan originated with Mr Lopez. (T131, L7-10, 14-17)

74 Mr Olsen said he "couldn't believe what was being put to me". (T132, L2-3) Mr Olsen said he "got vague answers" and invited Mr Sullivan to put something to him in writing, which he did. Mr Olsen said he told Mr Sullivan it was non-commercial and he would redraft it and send it back. (T132, L24-29) The email was copied to Mr Tomanek. (T132, L31 to T133, L1) Mr Olsen said he never really intended to pay €95,000. His family would think he was "absolutely bonkers". (T133, L10-12)

75 The account into which Harstedt's subscription or investment of $250,000 was paid was debited with AU$4,772,185.98. (CB 530) On 7 September, the sum of US$4.2 million, which had been drawn from the original Apollo account, was transferred into a US dollar account kept by the Commonwealth Bank. (CB 715)

76 Finally, some US$4.1 million was transferred from that account to an account held in the name of "Back Away S.L. Banco Guipuzcoano" in Spain. (CB 715 and 719)

77 Despite a long stream of communications in the period January to July 2008, (CB 1001-1008) where it seems Mr Olsen and Mr Robinson continued to hope that the "trade" would take place and repayment of principal and interest or earnings would take place, ultimately nothing was ever recovered. (T539-40)

78 Despite the main action in this dispute having taken place as long ago as 2007, the Writ which commenced this proceeding was filed as recently as 28 October 2015. In its initial form, the Statement of Claim sought relief on behalf of Harstedt based on claims in contract and for damages for misleading and deceptive conduct. These claims were met, apart from substantive denials, with defences based on the Limitation of Actions Act 1958.

79 Some months later, in accordance with leave granted by a judicial registrar, Harstedt's solicitors filed an Amended Statement of Claim which sought relief on behalf of the plaintiff based upon an alleged fraudulent breach of trust. In opening the case at trial for the plaintiff, Mr Robertson QC candidly conceded that the change of front was dictated by a need to take the plaintiff's claims for relief outside the statutory regime of limitations of time. (T10, L30-T11, L2) Mr Robertson QC referred to s21(1)(a) of the Limitation of Actions Act. (T11, L9-19).

80 In its further Amended Statement of Claim, Harstedt alleged that Apollo invited members of the public to lodge deposits into its bank account on the basis that the deposits by the members of the public would remain identifiable, would remain in the relevant bank account for 40 weeks, and would be returned in full at the expiry of the term. It was said that a profit to the depositor "of a gross three times the amount of the deposit" would be payable and that this profit would be paid at first instance to a property called Aurora with that company administering the payment.

81 Mr Lopez was said to be the director and sole shareholder of Apollo and a signatory to the relevant bank account. The third defendant, Mr Tomanek, was the secretary of Apollo and a signatory of its bank account.

82 Given that the trial before me did not deal with the case against the fourth defendant, Mr Moriarty, I pass over the allegations made by the plaintiff against him.

83 It was said that on Anzac Day 2007, Messrs Lopez and Tomanek made oral representations promoting the investment, stating that there had been a lengthy and successful investment promotion business involving Mr Lopez, whereby PPP transactions were undertaken by him overseas as an employee of a humanitarian organisation approved by the United States Government, that the program would be conducted by the defendants or other persons investing with them "competently, professionally and according to law", and that this was assured by the lengthy and successful business relationship involving Mr Lopez. It was represented, according to the plaintiff's claim, that Mr Tomanek was "a qualified and practising accountant".

84 These representations were described as the "fidelity representations".

85 Next, it was said that in or about mid-April 2007, Mr Lopez made oral representations about the Commonwealth Bank, namely, that Mr Gary Wilson was employed by that bank, that Mr Lopez knew Mr Wilson through other ventures in connection with which he had dealt with him and, as a result, enjoyed a special relationship with him.

86 Mr Wilson, Mr Lopez was alleged to have said, would cooperate with the proposed deal, even although it was unusual, and the Commonwealth Bank would provide banking services.

87 Mr Lopez was said to have represented that Mr Olsen, Harstedt's director, would be added as a person authorised to operate the relevant account of Apollo despite not being a director of that company, and that the money deposited in the relevant account:

"...would not be, and could not be, withdrawn from that account, but instead would be used as quasi (non-recourse) security for other transactions which transactions would attract capital gains payable to [Harstedt] on the deposit."

88 These representations were said to have been made at several meetings, one of which was attended by Mr James of the Commonwealth Bank, Mr Lopez, Mr Olsen and Mr Carter, and "the meeting formed part of verbal contractual negotiations between [Harstedt, Apollo, Mr Tomanek as agent for Apollo, Mr Moriarty and the Commonwealth Bank]".

89 Alternatively, it was alleged that Apollo and the bank jointly warranted to Harstedt that in consideration of Harstedt depositing $250,000 into Apollo's bank account at the Commonwealth Bank in Box Hill, Mr Olsen would become a co-signatory of the account and the money would not be withdrawn from that account, but instead would be returned in full within 13 months of the deposit. In the interim it would be used as quasi (non-recourse) security for other transactions, "which transactions would attract significant capital gains payable to [Harstedt] on the deposit".

90 Next, it was said that on the evening of 28 April 2007, Mr Carter represented to Mr Olsen that there was an investment available to Harstedt for a maximum of seven months, with Harstedt being paid three times the amount it invested with Apollo. The invested amount would be safe and would be left in the Commonwealth Bank at Box Hill. Mr Carter's company would receive a commission of 30 per cent of the profit on the investment with the balance of the profit payable to Harstedt. Mr Carter was said to have represented that Harstedt could accept the offer on these terms by depositing $250,000 into Apollo's account at the Commonwealth Bank at Box Hill.

91 These matters were said to have transpired in a telephone conversation between Mr Carter and Mr Olsen on 28 April 2007.

92 On 2 May 2007, Harstedt deposited $250,000 into the Commonwealth Bank account of Apollo at Box Hill on the basis that none of the money would be withdrawn or removed from the bank account until it was returned to Harstedt and that it would receive a profit of three times the amount invested less 30 per cent commission payable to NGS.

93 Harstedt did these things in reliance on the terms offered and induced by the oral and fidelity representations.

94 According to the plaintiff's Statement of Claim, the fidelity representations were false or misleading "because there was no intention on the part of [Mr Lopez and Mr Tomanek] to offer true participation in an investment opportunity of the nature it represented". The Claim continued, alleging that the oral representations about the Commonwealth Bank were false or misleading because there was no intention on the part of Mr Lopez or Mr Moriarty to have Mr Olsen added to the list of authorised signatories on the relevant account or to refuse permission to the account holder "to withdraw all amounts deposited into the account".

95 It was said that when Apollo received the deposit of $250,000 into its bank account, it did so in the knowledge that Apollo and Mr Olsen believed that the deposit was safe, would not leave the account without the signature of Mr Olsen, and there would be interest or a capital return on the deposit equivalent to three times the sum deposited.

96 Accordingly, it was said, Apollo received the deposit "on or upon trust for [Harstedt]". Alternatively, Harstedt accepted the contractual terms offered by the defendants referred to above by depositing the $253,000 into the relevant bank account. It was said that at all material times the signature arrangements with the Commonwealth Bank required the signatures of all of Mr Lopez, Mr Tomanek and Mr Moriarty to make withdrawals from the relevant bank account. However, between July and September 2007, the deposit was withdrawn and ultimately paid into a bank account not owned by Apollo without the knowledge or consent of the plaintiff. This withdrawal, it was said, was effected by the defendants in breach of the trust on which the deposit was held for Harstedt. This breach of trust was said to be fraudulent and one to which all of the defendants were party.

97 Next, it was said that in September 2007, Apollo "through its agent Carter" told Harstedt that the deposit had been invested overseas and would be repaid with interest in October 2008. Between September 2007 and September 2011, Apollo acknowledged its indebtedness to Harstedt, it was said, by a series of emails. Despite demands, Harstedt had not received repayment of the $250,000 or any further sums by way of capital, growth or interest, other than one interest payment of $2,386.17 received into its bank account on 28 September 2007.

98 It was said that but for the fidelity representations and the oral representations and the oral contractual warranties offered by Apollo, Mr Lopez and Mr Tomanek, Harstedt would not have transferred $250,000 to Apollo's account with the Commonwealth Bank. It was said that Harstedt had suffered loss and damage, including $250,000 for loss of the deposit, and a loss of profit of $525,000 plus interest on that amount at the rate under the Penalty Interest Rates Act 1983 of $647,183.15.

99 Alternatively, it was said that Apollo, Mr Lopez and Mr Tomanek received $250,000 from Harstedt "under a mistake by [Harstedt] that profit or interest would be paid by [Apollo] for use of the money" and Apollo, Mr Lopez and Mr Tomanek "have had the use of [Harstedt's] $250,000 since 2 May 2007 and have failed to repay the money and have failed to account to [Harstedt] for any profits or interest...".

100 It was said Apollo was indebted to Harstedt for $250,000 plus interest from 2 May 2007. There was also a liability on the defendants to make equitable compensation to Harstedt for the deposit and interest at a commercial rate "on a compound basis" from 2 May 2007 until judgment.

101 Each of the first to third defendants filed separate Further and Amended Defences. These Defences included a number of denials and admissions. Specifically in the case of Apollo, it was said that the relationship between the Commonwealth Bank and Apollo "was one of banker and customer, the right of [Apollo] in respect [of] any money standing to the credit of [Apollo] was one of debtor and creditor".

102 Next, it was said that Apollo, shortly after its incorporation, was appointed and renamed trustee of the Apollo Development Enterprises Trust. Apollo's Defence set out the names or descriptions of the various beneficiaries under the terms of that Trust, which did not include Harstedt. Apollo's Defence referred to the deposit by investors into an account in its name with the Commonwealth Bank of various sums, including $250,000 deposited by Harstedt on 2 May 2007. It continued:

"notwithstanding that a sum of $250,000.00 was paid into the Premium Business Account by agents of [Harstedt], [Harstedt] (for reasons financially advantageous to [Harstedt] and by reason of agreements made between it and the trustee of the Aurora Development Trust and NGS Financial Solutions Pty Ltd ... in law, the payment of the said sum of $250,000.00 was made by the trustee of the Aurora Development Trust as a beneficiary of the [Apollo] Trust ... by reason of which any and all rights in law and/or equity attaching to the sum of $250,000.00 ... were held by the trustee of the Aurora Development Trust."

103 Next, the various banking transactions which led to some US$4.1 million [into which Harstedt's deposit of AU$250,000 might be traced] reached an account in the name of "Back Away, S.L." in a bank in Spain.

104 The rights in equity which attached to that money, it was said, were held by Apollo on trust for the beneficiaries of its Trust and not for Harstedt. Harstedt was not and never was a beneficiary of the Apollo Trust and therefore did not have any rights in equity with respect to this deposit. Any rights which Harstedt might have were "rights as against the trustee of the Aurora Development Trust and/or ... as against NGS Financial Solutions".

105 By reason of those matters, it was said, Harstedt was "estopped ... from asserting any rights as a beneficiary under the [Apollo] Trust or otherwise making claims against [Apollo] in respect of the sum of $250,000.00". The Defence said that Mr Moriarty was at all times acting on his own behalf and not as an agent of Apollo. Apollo admitted the occurrence of a meeting on Anzac Day 2007 but denied the allegations as to what took place made in Harstedt's claim.

106 Further, as to the Anzac Day meeting which was held at the residence of Mr Moriarty "to discuss mutual co-investment in a [PPP]", Apollo's Defence said that the attendees included Mr Lopez, Mr Tomanek and Mr Moriarty, along with Mr Geoff Sullivan, Mr Ray Pryor and Mr Olsen of Harstedt, Mr Noel Carter and Mr Graeme Robinson.

107 The Defence said that Mr Olsen was invited by Mr Moriarty and that the [PPP]:

"was proposing to raise 5 millions (sic) (USD) capital to provide funding to `The Humanitarian Foundation Anvaya International SA', a Spain based developer/contractor of humanitarian projects and its directors Mr D Angel Vazquez, Mr D Luis Moreno via a Trader named Mr Diego Moreno Romero ('the Trader')."

108 The proposal was for the participants in the [PPP] to deposit their contributions in a single bank account in the name of Apollo at the Commonwealth Bank "for non-recourse borrowings to fund developments for duration of twelve months and one day". It was said the possible yield on the investments could be in a range between 100 per cent and 300 per cent. It was said that any investment by Harstedt "would be made through the trustee of the Aurora Development Trust and NGS Financial Solutions". The Commonwealth Bank's involvement "extended to providing banking services to enable implementation of the PPP Investment Opportunity". All funds were to be deposited into and held in a single account "which money was to be held for the period of a year and one day subject to the terms of the conditions of the PPP Agreement".

109 In April 2007, Harstedt, through its director, Mr Olsen, Mr Lopez and Mr Tomanek and others agreed to participate in the PPP Investment Opportunity, which was partly oral, partly to be implied. It was, insofar as it was oral from conversations between the parties, as pleaded in the earlier parts of the Defence. To the extent that it was implied, it was implied by the need to give business efficacy to the arrangement.

110 Apollo denied that Mr Lopez made any representation on its behalf and said that it was agreed that Apollo's bank account "would require a co-signatory by any two of Mr Lopez, Mr Tomanek or Mr Moriarty". Apollo admitted that it was agreed that the Commonwealth Bank would hold the deposited funds as security for non-recourse borrowing.

111 Next, it was said that on 21 August 2007 the PPP Agreement was varied such that Apollo, with the consent of the Beneficiaries (of its Trust) and with Harstedt's knowledge (acting as Harstedt was through the trustee of the Aurora Development Trust and NGS Solutions), agreed to transfer part of the collective capital of the participants to be deposited to a bank account as directed by the Trader, viz Mr Romero. Mr Romero subsequently directed that the money be transferred to the account in the name of `Back Away' and the monies were accordingly deposited in an account at the Spanish bank, Banco Guipuzcoano. In July and August 2007, it was said "each participant was provided with the opportunity to either withdraw their participation in the PPP Investment Opportunity and have their funds returned or alternatively authorise the Transfer".

112 It was said that the transfer to the Back Away Account was made in reliance on representations from the bank and the trader's legal practitioner "that the money could not be withdrawn without the prior consent of [Apollo]".

113 Next, it was said that in or about July 2007, Harstedt voluntarily instructed the trustee of the Aurora Development Trust and/or NGS Financial Solutions to instruct Apollo to authorise the transfer of the money and the authorisation was deemed to have been made by the trustee of the Aurora Development Trust.

114 The transfer, when implemented, it was said, was with the knowledge of Harstedt. Despite the representations made on behalf of the trader, an employee of the bank or the trader's legal practitioner, misappropriated the funds. Apollo was said to have proceedings "on foot" in Spain seeking repayment or recovery of the misappropriated funds.

115 Apollo denied that it implemented a dishonest and fraudulent design to defraud the beneficiaries of its Trust. It denied that Mr Lopez, Mr Tomanek and Mr Moriarty knowingly assisted the implementation of the alleged dishonesty and fraudulent design to defraud. It said further that, in any event, Harstedt was not a beneficiary of the relevant Trust and had no rights in equity with respect to the Apollo Trust's property.

116 Apollo denied that it, Mr Lopez or Mr Tomanek acknowledged any indebtedness in any legal sense. It said that any cause of action for breach of contract, including breach of warranty, was barred by the operation of s5 of the Limitation of Actions Act. It said that Harstedt was aware of the withdrawal of the funds, which was completed with Harstedt's prior knowledge and consent. Apollo said further that Mr Olsen, as agent of Harstedt, attended meetings at the Commonwealth Bank in late July 2007, during which Harstedt became aware that the PPP Investment Opportunity could proceed without the involvement of the Commonwealth Bank by way of money held in an offshore United States Dollar account.

117 It said that any cause of action, based on a common money count for money had and received or the like, was barred by the operation of s5 of the Limitation of Actions Act. Apollo said that if Harstedt suffered loss and damage, Apollo had no obligation at law to compensate Harstedt.

118 The Further Amended Defence filed on behalf of Mr Lopez was generally to the same effect, as was the Further Amended Defence filed on behalf of Mr Tomanek.

119 At trial, the contest focused upon the banking transactions which led the subject money, as part of the pooled funds, being remitted from the original Apollo account with the Commonwealth Bank to the Back Away Account in Spain. In the plaintiff's pleadings, this was referred to as "the withdrawal". In the defendants' Defences, it was referred to as "the transfer". Both pleadings adopted a narrow focus upon the first move from one account in the Commonwealth Bank to another, both domiciled in Australia.

120 Over the objection of Mr Donald, counsel for the first to third defendants, I permitted the plaintiff to amend its Statement of Claim to broaden the definition of "withdrawal" and to extend to each of the steps which led the funds from the original Commonwealth Bank account in Australia to the Back Away Account in Spain. A similar amendment was consequentially adopted by the first to third defendants in their Defences.

121 Aside from placing a large volume of documents into evidence, only one witness gave viva voce evidence, namely, Mr Olsen. Mr Carter, who had at one stage been a defendant, was subject to a subpoena to give evidence and would have been available by video link from Morwell Courthouse. Mr Sullivan and Mr Pryor, who were investors and part of the so-called "Ballarat Syndicate", attended court on the second day upon subpoena, but Mr Robertson QC, senior counsel for the plaintiff, dispensed with their attendance and did not call them.

122 At the close of the plaintiff's case, Mr Donald, counsel for the first three defendants, made a no case submission. I heard the submission and then determined that I should put Mr Donald to his election. Following a stand down to enable him to obtain instructions, Mr Donald informed me that his clients elected to call no evidence.

123 I suggested that with the evidence closed, we should simply proceed to closing submissions. Mr Donald was agreeable to this, but only on terms that no adverse inference could be drawn against the defendants based upon their failure to call any viva voce evidence.

124 Ms Campbell, junior counsel for the plaintiff, was agreeable to this course, and so the matter proceeded to final submissions.

125 Mr Donald, on behalf of the first three defendants, stressed the seriousness of an allegation of fraudulent breach of trust, and of knowing assistance of such a breach of trust. He referred to Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 67 ALJR 170. He conceded that the standard of proof in a civil proceeding remained proof on the balance of probabilities, but submitted that the strength of the evidence necessary to establish a fact on the balance of probabilities might vary according to the nature of what is sought to be proven. The seriousness of the allegations made, and the inherent unlikelihood of the occurrence of such things, or the gravity of the consequences, all needed to be considered as to the strength of the evidence necessary to satisfy the burden of proof. Clear and cogent evidence, to prove matters of gravity and fraud, was necessary. Mr Donald referred to s140 of the Evidence Act 2008 to similar effect.

126 In the present instance, he submitted, the evidence of Mr Olsen should be treated as unsatisfactory and insufficient to provide the clear and cogent proof necessary for a finding of fraudulent breach of trust, or knowing assistance of such a breach.

127 Mr Donald contended that he had demonstrated the unreliability of Mr Olsen's evidence in the course of his cross-examination. Mr Olsen, he said, had given evidence that Mr Lopez and Mr Tomanek were present at meetings with the Commonwealth Bank of Australia in March 2007, when the fact was, he submitted, as his cross-examination demonstrated by reference to the written record, these gentlemen did not attend those meetings, and Mr Olsen made their acquaintance for the first time at the Anzac Day meeting in Geelong.

128 In the absence of clear and cogent evidence, he submitted, I could not properly draw the inference that there was a dishonest and fraudulent design based on purely circumstantial evidence. He referred to Transport Industries Insurance Co Ltd v Longmuir [1997] 1 VR 125.

129 He submitted that adverse inferences could be drawn in accordance with the principles enunciated in Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298, from the failure to call the available witnesses Mr Carter, Mr Pryor, and Mr Sullivan.

130 Mr Donald submitted that Mr Olsen's evidence that he regarded his being made a mandatory signatory for the relevant bank account was an essential requirement of his company's involvement, ought to be rejected. He said that it was obvious to Mr Olsen by 30 May 2007 that he would not be a signatory, and yet he failed to press this issue upon Apollo and the others involved in the transactions in June or July. (T436, L3-15)

131 Mr Donald submitted, further, that the plaintiff had no standing. It was not a beneficiary of the Apollo Development Trust. Its involvement in the investment venture was through an intermediate trust, namely the Aurora Investment Trust. Its interests as beneficiary were against Aurora Development Pty Ltd as trustee of that Trust. Mr Donald submitted it was jurisprudentially impossible to have one piece of property affected simultaneously by two inconsistent sets of trust obligations, and a consideration of the documentation relative to this "PPP" showed that Harstedt's rights, whatever they might be, were enforceable, if at all, against Aurora, and not against Apollo at all.

132 According to Mr Donald, Mr Olsen's credibility was of crucial significance to the determination of this proceeding because determination of the proceeding required findings as to "either his knowledge or consent to the changed arrangement or his acquiescence in that arrangement." (T549, L27-29) On this point, according to Mr Donald, "we rely on [Mr Olsen's] own words as expressed in his email ..." (T550, L9-10)

133 On the subject of knowledge, consent and acquiescence, Mr Donald referred to and relied upon the following authorities: Dal Pont and Chalmers Equity and Trusts in Australia (3rd ed, 2004) [27.120, 27.125] 764-5; Swan v Perpetual Executors and Trustees Association of Australia Ltd (1897) 22 VLR 293; Royal Bank of Canada v Fogler, Rubinoff [1991] OJ No 3390.

134 The emails which Mr Donald relied upon as being indicative of consent or acquiescence were to be found at CB 969, 1002, 1003-1004, 1007, 1012-1013, 1076-1077, 1078 and 1079. These emails indicated, he submitted, a desire on the part of Mr Olsen to "embrace the deal" and to continue doing business with whatever individuals or entities were behind the transaction the subject of this proceeding. Mr Donald said that Mr Olsen's denials of this plain fact were unconvincing and should be rejected, based upon the general unreliability of Mr Olsen as a witness. Further, submitted Mr Donald, many of his answers were non-responsive.

135 The attitude of acquiescence and acceptance by Mr Olsen was evident as late as 12 December 2007 (CB 1003-1004). Mr Donald said he also placed reliance on an email of Friday, 13 April 2007, at CB 969. The total effect of these emails was, according to Mr Donald, that Mr Olsen "wasn't ... chasing down his $250,000 ... [he] wants his $250,000 and then some, his 300 per cent, but he also wants to invest another $250,000." (T559, L11-14) These matters were, he said, established by the relevant emails and Mr Olsen's (unreliable, according to Mr Donald) answers in cross-examination at T146-156 and T232-237. Mr Donald noted that the emails upon which he relied were dated both before and after the alleged fraudulent breach of trust.

136 Mr Donald said that Mr Olsen's embrace of the "deal" effectuated by Apollo was so complete that in Harstedt's Prayer for Relief it sought damages based upon the returns which it was originally promised as part of the original investment deal. (T544, L9-18)

137 Mr Donald said to make good a claim based on the second limb of Barnes v Addy (1874) 9 Ch App 244, a plaintiff had to show "Moral turpitude, designed cheating, a designed object to cheat a man - or a person in this day and age - a deliberate and dishonest trick". (T547, L15-17) He submitted that nothing less would be sufficient to make good a claim such as the present.

138 He referred to Bahr v Nicolay (No 2) [1988] HCA 16; (1988) 164 CLR 604 and Sino Iron Pty Ltd v Worldwide Wagering Pty Ltd [2017] VSC 101. In this case, Hargrave J was considering an allegation by the plaintiff that the defendant both knowingly received and dealt with stolen funds and knowingly assisted a fraudulent and dishonest design in breach of trust. That is, both limbs of Barnes v Addy. At paragraph 29, his Honour said:

"While the balance of probabilities remains the standard of proof, the Briginshaw [Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336] standard requires the Court to feel an 'actual persuasion' as to an allegation made by a party. Actual persuasion does not, however, require that the Court exclude every rational inference which is inconsistent with a finding of serious impropriety."

139 The closing submissions for the plaintiff were commenced by Ms Campbell, its junior counsel, on the penultimate day of the trial and concluded on the final day by Mr Robertson QC.

"A breach of trust consists in an act by a Trustee in contravention of the duties imposed on him or her by the Trust or in excess of his or her powers. It is a fundamental duty of the Trustee to preserve the Trust property. The first duty of the Trustee is to get in the Trust property."

141 Inferentially, they submitted that in the events that had occurred, Apollo breached this fundamental duty by effectively losing the $250,000 Trust property. They continued, submitting that Mr Lopez and Mr Tomanek were liable for breach of trust as they had assisted Apollo "with knowledge of a dishonest or fraudulent design". They referred to Barnes v Addy (1874) 9 Ch App 244, 251-2 and Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [160].

142 They said that Mr Olsen, as Harstedt's sole director, received documents from Apollo to the effect that it would hold Harstedt's funds on trust "in a non-depleting account". Mr Olsen's stipulation that he be a signatory of the relevant non-depleting account was supported by majority vote at the investor's meeting on Anzac Day 2007.

143 The requirement that the $250,000 was to be held in a "non-depleting" account was established, they submitted, by the following documents that were placed in evidence:

(c) Private Placement Opportunity - How It Works (CB 406)

(d) Steps to complete Private Placement Transaction (CB 402)

(e) unsigned Memorandum of Understanding (CB 411-425)

144 They said that following a meeting at the Bourke Street offices of the Commonwealth Bank on 23 March 2007 "where the non-depleting nature of the account to which the investment funds could be paid was the understood basis of the discussion"; a document entitled "Apollo Development Enterprises Pty Ltd ATF Apollo Development Trust" was produced in response from requests from the Commonwealth Bank. (CB 208-213, T94, L7-10)

145 At the Anzac Day meeting at Mr Moriarty's home in Geelong, Mr Lopez and Mr Tomanek referred to the non-depleting nature of the investment bank account. (T116, L29 - T117, L16) They referred to Mr Olsen's evidence that Mr Tomanek told him, "You will just have to trust us". (T117, L5-17) They referred to Mr Olsen's evidence that he insisted on being a signatory to the relevant account. (T119, L9-18) They referred to Article 1.2 of an unsigned Memorandum of Understanding. (CB 418) The result, they submitted, was that the funds were to be held in a non-depleting account. They referred to the document styled "Extraordinarily Humanitarian". (CB 408-410)

146 They submitted that, when asked, if they remitted $250,000 to Apollo's account at the Commonwealth Bank, Apollo held that money on trust for Harstedt on terms that the account would be blocked and could not be depleted. They referred to CB 576 and T122, L24-29.

147 They submitted that this Trust was established separately from the Aurora Development Trust and Harstedt's beneficial interest in the $250,000 investment was held by a director and not through the Aurora Development Trust. They said a letter from Apollo dated 2 May 2007 confirmed receipt by Apollo not by Aurora. (CB 242)

148 They submitted, "Mr Olsen paid the money into the account on the basis set out by him at the Anzac Day meeting albeit that this was yet to be reduced to writing". They said the agreement, in the form of a letter on the letterhead of NGS dated 8 May 2007 (CB 541-545) :

(b) described Aurora as "the Trustee for income distribution";

(d) stated that Aurora was to "conduct the administration" and "distribute income";

(e) paragraph 2 (CB 542) showed Aurora dealing with income distribution as distinct from capital preservation or control of the investment;

(f) insofar as it stated that Aurora was Trustee for the administration of the "placement" for the Aurora Development Trust, this did not mean that Aurora was investing funds on behalf of Harstedt as a beneficiary of the Aurora Development Trust;

(g) a new Aurora account was to be established for revenue distribution; (paragraph 6, CB 543)

(h) the administration role of Aurora was consistent with Mr Moriarty signing the receipt on behalf of Apollo as distinct from directing a document to Apollo.

149 They submitted, as to the pro forma Memorandum of Understanding which was provided at the Anzac Day meeting (CB 411-425) that it was:

"scarcely intelligible but contemplates that 'the investor' is to have rights against Apollo. The investment as made should have led to such agreement being signed between Apollo and the plaintiff."

150 According to Mr Robertson QC and Ms Campbell, the fact that a consent letter was submitted to NGS Financial Services, the "introducer" of Harstedt, was inconsistent with the view that any entitlements as beneficiary against Apollo were vested in Aurora and not in Harstedt.

151 Accordingly, they submitted, Harstedt's consent "was required before the funds could be withdrawn from the account". Nevertheless, by the series of banking transactions described in the narrative above, $250,000 was paid into an account not controlled by Apollo without the knowledge or consent of Harstedt.

152 They submitted that Mr Lopez and Mr Tomanek knowingly assisted Apollo in committing this breach. They noted Mr Tomanek's statement, "You'll just have to trust us" (T117, L5-17) They said the debit to Apollo's account on 26 July 2007 was made with the authority of Messrs Lopez and Tomanek and they authorised a further transfer of a sum, including the $250,000, on 7 September 2017. Mr Lopez authorised the transfer on 10 September 2007 to the "Back Away Account" in Spain.

153 According to Mr Robertson QC and Ms Campbell, Harstedt never provided consent to these transactions. They noted that Mr Lopez was the author of the form of consent obtained by Apollo from NGS (CB 679), but what actually occurred was not in conformity with that consent because the Back Away Account was not controlled by Apollo.

154 The breach of trust committed was, they said, fraudulent. They conceded that the breach of trust and its fraudulent character needed to be proven to the standard prescribed in s140 of the Evidence Act. In this context, they submitted that "dishonesty" meant "not acting as an honest person would in the circumstances". This was, they said, an objective standard and dishonesty should generally be equated with conscious impropriety. They referred to Royal Brunei Airlines SdN BhD v Tan [1995] UKPC 4; [1995] 3 All ER 97, 105-6. They continued:

"Unless there is a very good and compelling reason, an honest person does not participate in a transaction if he knows it involves a misapplication of trust assets to the detriment of the beneficiaries. Nor does an honest person in such a case deliberately close his eyes and ears, or deliberately not ask questions, lest he learn something he would rather not know, and then proceed regardless."

"Acting in reckless disregard of others' rights or possible rights can be a tell-tale sign of dishonesty. An honest person would have regard to the circumstances known to him, including the nature and importance of the proposed transaction and the seriousness of the adverse consequences to the beneficiaries." (Ibid)

156 They said the following features revealed the transfer of funds as being dishonest or fraudulent:

(a) it destroyed the safety of the investor's money because it removed the money from the trustee's control;

(b) it was done with the knowledge that [Harstedt's] consent had not been obtained;

(c) it was done in the knowledge that [Harstedt] had been most insistent on [Mr Olsen's] being a necessary signatory for any dealing with the Commonwealth Bank account;

(d) it was done contrary to the terms of the 17 August 2007 letter, a letter drawn up by [Mr Lopez] (CB 680-81) to obtain consent to the very fund movement then under consideration. That the money was dealt with contrary to the terms of that document.

157 They referred to Bahr v Nicolay (No 2) [1988] HCA 16; (1988) 164 CLR 604, quoting from a number of passages. I put to Mr Robertson QC that the effect of his submission was:

"...even if I were to find that these defendants launched, to the extent that they did launch, this transaction in good faith, if at a later stage they decided that the only way to get to where they wanted to go was to radically change things and act in breach of the rule that had already been established, that that could constitute a fraudulent breach of trust even despite, in the hypothetical, the matter having commenced, at least as far as these defendants are concerned, on a thoroughly honest basis? (T513, L18-27)

158 As to the application of s21 of the Limitation of Actions Act which, they submitted, excluded this claim from the regime of time limitations in the statute, they submitted that the words "trust" and "trustee" extended to the meanings which they bore in the Trustee Act 1958, referring to s3 of the Limitation of Actions Act, and also extended to implied and constructive trusts. They submitted that a narrow view was taken of the word "fraud" and "fraudulent". They referred to Reader v Fried [2001] VSC 495 at [25]. They also referred to Rasmussen v Rasmussen [1995] VicRp 38; [1995] 1 VR 613, 635. In New South Wales, they submitted that some form of dishonesty or moral turpitude was essential: Hamilton v Kaljo (1987) 17 NSWLR 381, 386 with a requirement of a consciousness of wrongdoing: Seymour v Seymour (1996) 40 NSWLR 358, which cases were referred to by Warren J (as she then was) in Di Sante v Camando Nominees Pty Ltd [2000] VSC 2011 at [51].

159 They submitted, "Conduct following the transaction that has the effect of preventing a full and prompt disclosure of the nature of the breach and the consequences which might flow from it is a relevant factor for establishing fraud in the context of s21" (Reader v Fried [2001] at [25]). They submitted that no weight should be given to Mr Olsen's conduct following the withdrawal. They said it should be concluded that Mr Olsen's correspondence following the withdrawal "was sent in an effort to seek recovery of those funds from the defendants".

160 In final addresses, Mr Robertson QC and Ms Campbell disclaimed attempts to recover any interest or earnings or return upon the $250,000 which they allege was misappropriated by breach of trust based upon the original investment proposal. Rather, they sought recovery of interest at the rate from time to time prescribed under the Penalty Interest Rates Act pursuant to s58 of the Supreme Court Act 1986. (T516, L26-28)

161 They submitted that the $250,000 principal or capital was "a sum certain" for the purposes of s58. They relied on a decision of Ashley J (as he then was) in Anchen v Mendes Da Costa [2005] VSC 191. They also referred to Dimos v Willetts [2000] VSCA 154; (2000) 2 VR 170, in which Mr Robertson QC conceded the Court had held "that where damages in equity were sought, such damages did not come within s58(1)". (T517, L23-25)

162 If this submission were not accepted, Mr Robertson QC and Ms Campbell contended that interest was recoverable under the principles of equity. They referred to Giller v Procopets [2008] VSCA 236; (2008) 24 VR 1, where the judgment in question was an adjustment of property between de facto spouses under Part IX of the Property Law Act 1958. The award of interest in that case under equitable principle was from the date of commencement of the proceeding. The rate of interest was fixed at 8 per cent per annum as being "the trustee rate".

163 On the question of acquiescence or consent, Mr Robertson QC and Ms Campbell submitted that the Ontario Court of Appeal in Royal Bank of Canada v Fogler, Rubinoff (supra) held that there could be "no defensive acquiescence in the absence of full knowledge" of the circumstances of the relevant breach of trust. (T571, L10-14) They submitted that the full circumstances of this alleged breach of trust remained unknown 10 years on. (T572)

164 They drew attention to Mr Olsen's email of 4 September 2007 (CB 1079) where, in an email to Mr Graeme Robinson, Mr Olsen indicates that, whilst he is aware that the funds have moved, it would seem to a bank in Spain (CB 1078), he still believed that the account was in the name of Apollo. Moreover, they submitted that the formulation by the Ontario Court of Appeal in the Royal Bank of Canada v Fogler, Rubinoff case, at page 12 of the print from CanLII (the relevant online server), shows that mere knowledge of the relevant breach of trust is insufficient. Rather, the beneficiary must be shown to have approved of it. (T574, L16-31)

165 They said that whilst there might be evidence of the movement of the funds offshore having been accepted as an event that has occurred, there was no evidence of approval of that fact. (T575, L1-16) They said that Mr Olsen should be regarded as attempting to recover what could be recovered from the situation of breach and deferring until the final situation was known, taking action against the trustee. (T577, L1-13)

166 They then referred to Meagher, Gummow and Lehane's Equity Doctrines and Remedies (4th edition) as to the defence of acquiescence where the learned editors referred to the decision of Sir Samuel Griffith, sitting as a judge of the Supreme Court of Queensland in Cashman v 7 North Golden Gate Mining Co (1897) 7 QLJ 152, 153-4 where his Honour said that the term "acquiescence" is used in two well-known senses. One is where a plaintiff entitled to equitable relief has lain by for a long time and so conducted himself that it would be inequitable to permit him to complain of the defendant's action, in which case the court will refuse to grant relief. In the second instance where "acquiescence" in the other sense is a defence to an action for specific relief on the ground that the plaintiff cannot be reinstated in his regional position without doing injustice to the defendant, but "[that] it's not an answer to a cause of action already accrued". Here, they submitted, the cause of action had already accrued. Once the money had left Australia and left the control of Apollo, the damage was done. (T584, L15-20)

167 Insofar as Harstedt has alleged that there was never any intention on the part of these defendants (the first to the third) to offer true participation in an investment opportunity of the nature it represented (see [94] above), I do not believe that there is evidence which would support such a finding. I reject that part of the plaintiff's pleaded case. Indeed, the final submissions on behalf of the plaintiff said little about this and concentrated upon the steps which led to the plaintiff's investment of $250,000 passing from the control of Apollo.

168 Likewise, insofar as the plaintiff's claim alleged a fraudulent breach of trust based upon the failure to establish a regime in which no withdrawal of the $250,000 could be made from the relevant bank account without the signature of Mr Olsen, I likewise reject that. This does not seem to have been promised, represented or otherwise conveyed in any document emanating from any of the defendants. The most that can be said is that this was something which Mr Olsen pressed for on behalf of Harstedt and it was the subject of a vote at the investors' meeting on Anzac Day.

169 This meeting of investors had no particular contractual or statutory standing. It is not as if it were a meeting of shareholders held in accordance with a company's constitution or a meeting of unit holders held in accordance with the rules laid down in the Unit Trust Deed. This arrangement was not universally accepted at the meeting. Indeed, some of the investors complained that in demanding such an arrangement, Mr Olsen was wasting their time and obstructing the progress of the project. (T117-119) According to Mr Olsen, "The vote was that my signature go on the bank account" (T119, L17-18)

170 Given that some investors accused him of wasting time, this "vote" must have been carried by a majority over a dissenting minority. Given that there were no established rules as to how votes were to be counted, whether simply per capita or by reference to the amount which an investor might subscribe or promise to subscribe, there might be debate as to whether there was in truth a majority. Even if there were a majority, the evidence did not disclose that all persons present and voting in that majority ultimately subscribed monies. In all those circumstances, I do not accept that, if a trust was established, it included any mandatory provision as to who was to have authority to operate the bank account.

171 According to the learned editors of Ford and Lee's Principles of the Law of Trust, where money is paid from one person to another person, as occurred here on 2 May 2007:

"There will be a trust where one can see that the parties intended that Y [the putative trustee] is not to be free to use the money as Y's own but is to deal with it as a separate fund on behalf of X [the payer and putative beneficiary]." ([1.3410] Volume 1, p. 5053 update 132).

172 A number of authorities are stated for this proposition.

173 Here, the evidence indicated that Harstedt paid money to Apollo on terms acknowledged by Apollo which meant that Apollo was not free to use it as its own. The arrangements contemplated that the money was to be held inviolate in the sense of not being the subject of any debit, but it seems to have been contemplated that it could be pooled - as did indeed occur. This seems to have been the stipulation of the Commonwealth Bank in the interests of convenience. On the face of it, therefore, a Trust was established with Apollo as trustee, Harstedt as beneficiary and the Trust property being a capital sum of $250,000.

174 Apollo, according to the evidence, was trustee of an express trust constituted by a Trust Deed. The parties were agreed that Harstedt was not a beneficiary of that Trust. What separated them was the view that, according to the defendants, Harstedt's equitable rights were derived indirectly through its being a beneficiary of a Trust known as the Aurora Development Trust, of which a company known as Aurora Developments Pty Ltd (not a party to this proceeding) was trustee. The Deed for the Aurora Development Trust was not put into evidence before me.

175 The existence of the Apollo Development Trust is indicative of the contemplation and perhaps an intention on behalf of promoters, such as the defendants, that the structure which they allege should be employed as the means to receive a subscription from Harstedt. A Memorandum provided to the Commonwealth Bank in which a quotation appears at [21 above], also supports this view.

176 The question in this proceeding is not whether there was an intention or a contemplation on the part of one or more of the parties to proceed in this manner, but whether this was in fact the way in which the investment proposal was carried into effect.

177 Here, there was no evidence of the Aurora Development Trust or the allocation to Harstedt of a unit if that Trust Deed contemplated the issue of units, or it being named as a beneficiary in a schedule or as a potential object of the exercise of a discretion. The money went directly from Harstedt to Apollo, and Apollo's letter to Mr Carter of NGS (the introducer of Harstedt) makes no reference to Aurora.

178 I accept the submissions made by Mr Robertson QC and Ms Campbell that the relevant document does appear to provide for a routing of income earned from the investment through Aurora, which is tasked with administering that income in some fashion. It might be thought to be a contrivance introduced to enable Aurora to "clip" its share of the income.

179 Again, I agree with the submission of Mr Robertson QC and Ms Campbell that the letter quoted at [66] over Mr Carter's signature on the letterhead of NGS appears to have been solicited by Mr Lopez of Apollo on the basis that NGS was speaking as agent for Harstedt. Once again, Aurora is left out of the chain of communication, which is inconsistent with Aurora being the capital beneficiary for the $250,000 subscribed by Harstedt. I reject the contention that the $250,000 is not held on trust by Apollo for Harstedt.

180 At all times, a term of that Trust was that the $250,000 would be held "in a non-depleting account ... locked and reserved and under no circumstances [could] the funds in the account be depleted" (see [57] above). This was stated in a letter signed by Mr Moriarty on behalf of Apollo and addressed to Mr Carter of NGS on behalf of Harstedt. This letter was entirely consistent with all of the discussions which had gone before. Apollo breached its obligations as trustee in parting with this $250,000, which the evidence clearly establishes that it did.

181 The next question is whether this breach of trust can be characterised as fraudulent and dishonest, as Mr Robertson QC and Ms Campbell submit that it should be.

182 In summarising the submissions on behalf of the plaintiff, I have already quoted from the advice of the Privy Council in the Royal Brunei Airlines case. Speaking for the Board, Lord Nicholls of Birkenhead said:

"Imprudence is not dishonesty, although imprudence may be carried recklessly to lengths which call into question the honesty of the person making the decision. ...

This type of risk is to be sharply distinguished from the case where a trustee, with or without the benefit of advice, is aware that a particular investment or application of trust property is outside his powers, but nevertheless he decides to proceed in the belief or hope that this will be beneficial to the beneficiaries or, at least, not prejudicial to them. He takes a risk that a clearly unauthorised transaction will not cause loss. A risk of this nature is for the account of those who take it. If the risk materialises and causes loss, those who knowingly took the risk will be accountable accordingly." [1995] UKPC 4; [1995] 3 All ER 97, 107

183 A possible interpretation of the actions of Apollo and those assisting it, is that the investment transaction which they were promoting could only go forward if the rules upon which subscriptions from investors were accepted were breached. Apollo and those who assisted it took that risk. No evidence has been given on behalf of the defendant which would put a different complexion on matters. A trustee who proceeds in this way is acting fraudulently and dishonestly.

184 Lord Nicholls said that in these circumstances "fraud includes taking 'a risk to the prejudice of another's rights, which risk is known to be one which there is no right to take'." (Ibid)

185 I conclude, therefore, that Apollo's breach of trust ought to be characterised as fraudulent and dishonest. It may also be regarded as attended by what is a somewhat antique and censorious turn of phrase characterised as "moral turpitude".

186 In common with the statues establishing the Torrens system of land conveyancing in the other States of Australia, s68 of the Transfer of Land Act 1893 of Western Australia provided that, except in the case of fraud, the registered proprietor of land held it subject only to the encumbrances notified on the Certificate of Title. Section 134 provided that knowledge of an unregistered interest was not, of itself, to be imputed as fraud.

187 The decisions of the High Court of Australia on provisions such as these established that a person seeking to impeach a registered title based on the fraud exception, must establish "actual fraud, personal dishonesty or moral turpitude". (Bahr v Nicolay (No 2) [1988] HCA 16; (1988) 164 CLR 604, 614 per Mason CJ and Dawson J)

188 In that case, a registered proprietor, in order to raise funds to develop his land, sold it to another person who leased it back to him for three years. The contract provided that, upon expiration of the lease, the vendor would enter into a contract to re-purchase the land for $45,000 payable by a deposit of 10 per cent and the balance within 30 days. The land was thereafter sold under a contract containing a provision by which the purchaser acknowledged the existence of the re-purchase provision of the earlier contract. The purchaser, upon becoming registered as proprietor, told the original owner that he recognised the re-purchase clause and would agree to sell the land for $45,000 with a 10 per cent deposit and a 30 day settlement, but eventually refused to sell.

189 The High Court held that the registered proprietor could not resist the claim for specific performance. This fell within the fraud exception to indivisibility of title which the Torrens system grants to registered proprietors of interests.

190 Wilson and Toohey JJ approved the formulation of the fraud exception by the Privy Council in Waimiha Sawmilling Co v Waione Timber Co [1926] AC 101, 106-7, where their Lordships said:

"If the designed object of a transfer be to cheat a man of a known existing right, that is fraudulent, and so also fraud may be established by a deliberate and dishonest trick causing an interest not to be registered and thus fraudulently keeping the register clear. It is not, however, necessary or wise to give abstract illustrations of what may constitute fraud in hypothetical conditions for each case must depend upon its own circumstances. The act must be dishonest and dishonesty must not be assumed solely by reason of knowledge of an unregistered interest."

"In the context of s.68 there is no difference between the false undertaking which induced the execution of the transfer in Loke Yew and an undertaking honestly given which induces the execution of a transfer and is subsequently repudiated for the purpose of defeating the prior interest. The repudiation is fraudulent because it has as its object the destruction of the unregistered interest notwithstanding that the preservation of the unregistered interest was the foundation or assumption underlying the execution of the transfer." [1988] HCA 16; (1988) 164 CLR 604, 615

The other justices decided the case against the registered proprietor on the basis of a finding of the existence of a constructive trust.

192 The analogy with the present facts is clear enough. The assumption on which Harstedt made its subscription was that the $250,000 would be held inviolate in a "non-depleting" account. For its own reasons, whatever they may be, Apollo repudiated that obligation. Its action can be properly stigmatised as fraudulent, even upon the assumption that this investment arrangement was launched in good faith and with the intention of Apollo, and those assisting it, performing in accordance with the terms of the investment arrangement.

193 It also follows that this finding of fraud and moral turpitude brings the plaintiff's claim within the ambit of s21 of the Limitation of Actions Act, even on the most conservative view of that section's operation. There is, therefore, no statutory time bar upon the bringing of the proceeding.

194 What, then, of the liability of the alleged knowing assistors?

195 Mr Lopez signed the request for the wire transfer to the Spanish bank to an account in the name of "Back Away SL". (CB 716-18) The evidence shows that Mr Lopez was involved in negotiations relative to this proposal, at least on and after Anzac Day 2007. I conclude that he was well-aware of the requirement that the money be held in a non-depleting account and not removed from the control of the trustee. In the Royal Brunei Airlines case, Lord Nicholls said:

"...their Lordships' overall conclusion is that dishonesty is a necessary ingredient of accessory liability. It is also a sufficient ingredient. A liability in equity to make good resulting loss attaches to a person who dishonestly procures or assists in a breach of trust or fiduciary obligation." [1995] UKPC 4; [1995] 3 All ER 97, 109

196 In its latest consideration of the liability of persons alleged to have knowingly assisted trustees in fraudulent breaches of trust, the High Court of Australia formulated the criterion of liability in this way:

"As conventionally understood in Australia, the second limb makes a defendant liable if that defendant assists a trustee or fiduciary with knowledge of a dishonest and fraudulent design on the part of the trustee or fiduciary." (Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89, 159 [160]

197 The findings made in this proceeding establish both a dishonest or fraudulent design on the part of Apollo and the requisite assistance by the second defendant, Mr Lopez.

198 Mr Lopez was aware of the requirement to hold the investment deposit inviolate. When he contemplated moving the bank account, he solicited a consent to what would otherwise have been a breach of trust albeit he sought this from the wrong party, NGS, the introducer, not Harstedt the trust beneficiary. Then he signed documents to move the money to the `Back away' account which was not in accordance with the consent sought. It might be thought that Mr Lopez and Apollo took this course hoping for the best. A trustee and anyone who knowingly assists him to use his trust fund on a wager is no less dishonest because they hope the bet will be successful. They know the transaction is a breach but do it anyway. This is what Apollo and Mr Lopez did.

199 In the case of the third defendant, Mr Tomanek, Mr Robertson QC and Ms Campbell relied on admissions which he made during examination by the Australia Securities and Investment Commission on 14 April 2008. In answer to questions during that examination, he admitted that investors were told that their money would be held securely in the Commonwealth Bank. (CB 492-94) He admitted that initially "... the money was supposed to stay in an account in the Commonwealth Bank in the name of Apollo ..." (T494, L13-15)

200 Mr Tomanek said he was not involved in the transfer of the money. (CB 1502, L7) He said he did not enquire as to the precise destination of the money at that point, remarking "I trust Jose [that is, Mr Lopez]". (Ibid, L14)

201 Mr Tomanek agreed that once the money was moved offshore, it was not "in Apollo's name". (CB 1516, L26-27) He appeared to believe that the position was secured by some sort of "bank guarantee". (Ibid)

202 The problem, according to Mr Tomanek, was "the Commonwealth Bank couldn't - wouldn't - couldn't or wouldn't do the transaction". (CB 1493, L23-24)

203 When the prospect of remitting the money overseas and therefore, ultimately, out of Apollo's control was mooted, according to Mr Tomanek:

"The money that was going overseas was going to be placed in a private placement account so that people who have put money in with us would get a return ... I spoke to my people and what everybody else - what Steve said to his, I don't know." (CB 1515, L40-46)

204 The reference to "Steve" seems to be Mr Moriarty.

205 With respect to "his people", Mr Tomanek was asked:

"Did you say their moneys were going to be held in the name of an account of Apollo? - Privilege. Initially, yes. Before we went overseas.

So then, when overseas, did you tell them that it was not going to be held in it [presumably the name of Apollo]? - Privilege. Yes." (CB 1516, L11-15)

206 As I understand the evidence, Harstedt was amongst the group that Mr Tomanek regarded as controlled by "Steve" (viz Mr Moriarty).

207 His evidence of the transfer and knowledge and consent relative to it is perfunctory, but I take it to mean that "his people" knew and approved of the transfer and he assumed that Mr Moriarty had informed and obtained express or implied consent from "his people", including Harstedt.

208 With some hesitation, and in light of what I will be saying below about consent and acquiescence, I believe this evidence does not establish knowledge of the dishonesty of Apollo's breach of trust.

209 As a result, the claim against the third defendant, Mr Tomanek, must fail.

210 In support of his contention that Harstedt acquiesced or consented to Apollo's breach of trust so as to bar it from obtaining any relief relative to that breach of trust, Mr Donald relied on a number of emails from Mr Olsen (CB 969, 1002, 1003-1004, 1007, 1012-1013, 1076-1077 and 1078):

"Dear Graeme,

Thank you again for keeping me involved.

I was wondering whether the simplest way would be to transfer the funds to an offshore account in the Trusts (sic) name care of the CBA Bank in say London.

I have never had experience in this before so I will defer to the experts. Perhaps Mark Saltzman could give an opinion from his experience for all our benefit.

I look forward to talking to you normally and not via email shortly.

Warmest regards,

Jeff" (CB 969)

"Graeme,

Thank you.

I appreciate the feedback very much.

At each juncture I just want to make sure that the three of us are all on the same wave length (as I feel we are) so that there are no surprises later on from either the client or the Steve/Joe end.

Lets (sic) hope that we can assure investor's (sic) that the first transaction is complete, or at least nearing completion, by no later than month end.

Best regards,

Jeff" (CB 1002)

"Dear Graeme and Noel,

(Graeme, can you please pass this onto Noel - thanks).

Thank you for making the effort to meet this morning in the city. I enjoyed our discussion and thank you both for bringing me into the fuller picture.

I think that we have now agreed to do the following:

1. 1. Finalize the one outstanding transaction so that I can say that we do indeed have a successful transaction to verify our bona fides.
2. 2. Confirm with Joe that he want's (sic) and support's (sic) an arrangement with your syndicate along the lines that we discussed this morning.
3. 3. That Joe will assist us with any offshore question that may arise in relating to

- establishing a bank account

- gearing the individuals' possible investment - etc

(This will be important because I know of at least two of my possible investors that will be seeking this arrangement.)

Once armed with a positive response to each of these 3 points above I would then welcome the opportunity of us getting together and preparing our mutual 'plan'.

Based on your responses this morning I would expect this to be around mid January when I return from leave (but knowing you two I would expect you will have given it a great deal of thought well before then.)

Would you mind letting me know if this correspond's (sic) with your thinking and my understanding of where we left the discussion this morning.

I certainly hope that Steve can give you some positive news on the first transaction very shortly.

With best regards,

Jeff

Wednesday." (CB 1003-1004)

"Graeme,

I just wish to make sure that I understood the key terms of the opportunity Noel outlined to me late Friday pm.

* a Primary trade - a spot opportunity

* a 45 Bank day period (not sure of the implications of this)

* commencing middle Jan; funds back by max of middle March

* amount is a minimum of $250k with the return of capital 3 times the capital

ie capital of $250k is 'returned' and the return on that capital is $750k

* capital is guaranteed but I'm not sure how this is done.

In principle I appreciate, very much, you and Noel making this opportunity available to me, as distinct from my clients, and would like to participate with the two of you.

Could you just take a minute and fill me in with the details and especially how the capital guarantee is to work. I also presume that the funds will flow through Apollo and then through your structure to me.

It is these types of things I would like to more fully understand.

(Jo will be just as concerned as Carol to ensure that these funds are not at risk.)

With best regards,

Jeff

Sunday" (CB 1007)

"Dear Graeme and Noel,

Following our further conversation this week this email is to confirm that I am pleased to work with you as a contributor to the Noel/Graeme syndicate that will make up the minimum of $250k.

I do this not so much on the performance of the Humaritarian (sic) Program (which has yet to be proved) but on my assessment of you two and your respective ethics.

As a minimum I confirm that I can only participate in the knowledge that the promised returns from the first will be paid under the following two conditions:

* that the deposit monies will be paid back ($250k) ideally by December 31st (or otherwise advised) and

* the stated return will be paid 30 days after the Bank Guarantee is invoked and that the date from which this starts (triggered) will be advised beforehand.

Please note that we still do not know what this stated return will be because know (sic) one it seems knows whether the penalty of 10% will still apply.

So in summary I would only enter the second trade when the outcomes of the first and initial trade are at least known.

You have advised that the Primary Trade will be 90 days after the trade commences and therefore I have assumed the following:

- our syndicate enters the trade around mid Jan

- trade commences beginning February

- 20 bank days per month

- 90 days ='s mid June

- lose 10 bank days for Easter and public holidays = end June 2008.

So my expectation is payment by 30th June. Would you mind advising if your duration is any different.

Finally and again as we discussed, I would like to ensure that the paperwork on this second transaction is superior to the first - to everyone's advantage. How we do this can be discussed later but as a minimum I feel we need:

* acknowledgement that the funds have been received

* full details of where the funds have been placed

* confirmation of how the funds can be deemed 'capital protected'

* acknowledgement from the financial institution of receipt of those funds

* confirmation of the terms including the expected returns

* etc - as per my previously issued 'flow chart'.

I look forward to talking to you and Graeme either tomorrow, Friday or Monday.

With best regards,

Jeff

Thursday December 20th" (CB 1012-1013)

"Graeme,

Noel and I touched based this morning - thank you.

Noel advised that you are both meeting with Joe and Steve on Friday pm before Joe leaves for overseas.

Below are the questions that I would like you both to ask Joe. (Could you please pass a copy of this email to Noel so that you both can discuss it on your way down to Geelong.)

They are not intended in any way to raise Joe's blood pressure; instead for the Olsen Group to be better informed regarding the current transaction and to be better prepared for the next one; as Noel and I discussed last Wednesday night.

Existing Transaction.

____________________

* Where have the funds been deposited

Bank

City

Name of account

Signatories to the account

* Interest on the funds deposited with Apollo

What has been the outcome with the CBA

Where is the interest they have paid at the moment

How and when will this be paid/allocated to each investor group

Will the foreign bank/institution be paying interest

If so, at what rate and from what date

* The investment return formulae was 3 times by 0.7 less a 10% penalty

for early settlement

This is no reflection on Joe or Steve whatsoever but settlement has taken at least four months - does the 10% penalty still apply?

* Timing for completion of doc's (sic) with the trader and terms of remittance

When does Joe feel everything will be in place for the trader to commence remitting funds

What will be the remittance schedule ie will it be paid all at once or over a period of months.

* The original deposit had to remain invested for 13 months . from what date will this now apply

ie From May when they were first deposited or from August when they were remitted overseas.

Proposed Future Transactions.

__________________________

* Is there likely to be another transaction given all the angst connected with the present one

* If so:

* Is it likely to be using a bank in Europe rather than Australia or

* The present bank/institution

* Does this bank or institution have a prior history with the program so that the troubles we've had in Australia will be avoided in future

* Can the Olsen Group open an account with this institution

* How easy or difficult is this for an Australian Pty Ltd company

* What documents are necessary to open the account

* Does it have to be opened in person or by posting Application papers

* Will the institution allow IT networking so that if there are five entities in the Olsen Group they can all be IT linked so the trader can view a consolidated Olsen Group which in turn is IT linked to a Noel/Graeme Group etc etc

* Will the institution allow gearing - if so on what basis

I'm sure there are other questions that you have that I hav'nt (sic) even considered.

Your feedback on Friday evening or Saturday would be very much appreciated.

With best regards,

Jeff

Wednesday 29th August." (CB 1076-1077)

"Graeme,

I had a chat with Noel Sat morning on the outcome of your meeting with Joe and Steve.

Noel could'nt (sic) remember the name of the Spanish bank in which the funds are now sitting. He said that you had written down the name of the bank and the name of its parent.

Could you please provide this as well as the address of the bank so that I can let my people know where the funds are located.

With thanks and regards,

Jeff

Saturday" (CB 1078)

211 In the Royal Bank of Canada case relied on by Mr Donald, Dubin CJO, speaking for himself and Blair and Tarnopolsky JJA, said:

"The nature of the defence of acquiescence in cases of breach of trust is that, in effect, the beneficiary was itself a party to the breach.

As stated by Waters, Law of Trusts, supra, at p. 1009:

'If a beneficiary consents to, or concurs in, a breach of trust prior to its being carried out, or he releases the trust from liability, or in some other way acquiesces in the breach after it has been carried out, he may not subsequently claim from the trustee any compensation to the trust for the loss arising.'

Before a beneficiary can be held to have consented to a breach of trust, it must be shown that the beneficiary was fully informed of its rights and of all the material facts and circumstances of the case."

212 According to his Honour, the question of knowledge of the beneficiary was a question of fact in all the circumstances of each case. His Honour also approved a statement in the work by Waters:

"However, knowledge itself is not sufficient to constitute consent or acquiescence. There must be some positive act or words which demonstrate that the beneficiary not only knew, but also approved of what was proposed or had been done. A man cannot be said to consent or acquiesce because, though he knows, he does not interfere."

In the particular case before the court, his Honour said:

"The bank was never advised that the monies were not to be used for the purpose for which they were advanced, nor was there any act by the bank demonstrating that the bank not only knew but actually approved of what had been done with the monies. It cannot be said, in my opinion, that the silence of the bank constituted consent to or acquiescence in the manner in which the monies were distributed."

213 In the work, Equity and Trusts in Australia by Dal Pont and Chalmers (3rd ed 2004) the learned authors state:

"[27.120] A beneficiary who instigates, consents or concurs in a trustee's breach of trust cannot succeed in an action upon that breach of trust.

"The acquiescence of a beneficiary to a past breach is a defence to a claim of breach of trust. Acquiescence may consist of a positive act, such as adoption of the breach or in the beneficiary remaining inactive with knowledge of the breach."

215 They referred to a decision of the Privy Council in National Trustees Co of Australasia Ltd v General Finance Co of Australasia [1905] AC 373 where the Privy Council rejected a plea of acquiescence because the beneficiaries lacked full knowledge of their rights.

216 More pertinently, the High Court of Australia has recently considered this matter in Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253. In that case, as part of a family dispute, the husband was determined to have held a piece of real estate as trustee. He was sued by his wife's son inter alia for amounts of rent which the son alleged the husband had failed to collect from his own son who had been a tenant of the property. The High Court accepted that a Trust had been created and that the husband was under a duty to let the property and collect rent. The Court held in the circumstances that the wife had not consented to the failure to collect rent nor acquiesced in the husband's conduct as trustee.

"The term "consent", when used with respect to breach of trust, expresses the principle that "[t]here is no reason for a court of Equity to enforce an equitable obligation in favour of a party who consented to its breach against a party who acted with knowledge of that consent". The words are those of Handley JA in Spellson v George. [(1992) 26 NSWLR 666 at 669] His Honour added that while consent may take various forms, and while consent may operate as an estoppel, it means "something more than a state of mind", and that "[t]he trustee must know of the consent prior to the breach". [(1992) 26 NSWLR 666 at 669-670]

218 As to the defence of acquiescence, their Honours said it was:

"...best understood as requiring calculated (that is, deliberate and informed) inaction by her [viz the wife] or standing by, which encouraged Mr Kendle reasonably to believe that his omissions were accepted or not opposed by her." [(2011) [2011] HCA 26; 243 CLR 253, 279-80 [79]]

219 French CJ, having noted findings in the court below that the wife did not press the husband "for the sake of matrimonial harmony" [(2011) [2011] HCA 26; 243 CLR 253, 266 [24]], his Honour continued:

"Mrs Byrnes' unwillingness to insist upon collection of the rent did not amount to a consent to Mr Kendle's inaction. Nor was there any finding that Mr Kendle, in failing to enforce collection of the rent, was induced by, or relied upon, Mrs Byrnes' position." [(2011) 243 CR 253, 267 [26]]

220 Again, he found a failure to press the issue based on a desire to maintain matrimonial harmony did not constitute acquiescence. His Honour said:

"Mrs Byrnes' inaction, if it can be called that, is to be understood by reference to the matrimonial relationship and the fact that a member of Mr Kendle's family was at the centre of his ongoing failure to insist on the rental payment. There was no acquiescence in the relevant sense, there was no evidence of reliance by Mr Kendle upon Mrs Byrnes' inaction. In any event, given the circumstances, it could not be said that it was not fair and equitable for Mrs Byrnes to be permitted to complain of a breach of trust by Mr Kendle." [(2011) 243 CLR 353, 268 [30]]

221 Heydon and Crennan JJ referred to the judgment of Deane J in Orr v Ford [1989] HCA 4; (1989) 167 CLR 316, 337 and remarked:

"Deane J then said that the word 'acquiescence' is commonly used also to refer 'to a representation by silence of a type which may found an estoppel by conduct'. The respondent did not attempt to establish the ingredients of an estoppel by silence." [(2011) [2011] HCA 26; 243 CLR 253 [135]]

222 Informed by those principles, I now turn to the various items of correspondence relied on by Mr Donald in support of his contention that Harstedt, through Mr Olsen, consented to the breach of trust or acquiesced.

223 The email of 13 April 2007 (CB 969) refers to the transfer of funds "to an offshore account in the Trust's name care of CBA Bank in say London." This was merely a tentative suggestion. Crucially, the reference to the monies being "in the Trust's name" presumably should be taken as meaning in the name of the trustee, viz Apollo. Even if it were not for the tentative nature of this suggestion, it could scarcely be regarded as a consent in advance to the transfer of the $250,000 as part of a larger sum to a foreign bank, of which Harstedt had never heard, in the name of an account party other than the trustee.

224 The suggestion (CB 1002) on 12 December 2007 that "the three of us were all on the same wave length" and that "there are no surprises later on", is not indicative of consent or acquiescence.

225 The email (CB 1003) addressed to Mr Robinson and Mr Carter is not a communication to Apollo at all or to any of the present defendants. It is not evident to me that Messrs Robinson and Carter are to be regarded as the agents of any of the defendants. This communication is made after the relevant breach of trust. It is indicative of an attempt to rescue the situation once the trustee had lost control of the $250,000 as part of the larger amount remitted to the Back Away account. This correspondence should be seen as not a consent to what had happened but merely an acceptance of the fact of its occurrence and an attempt to make the best of the situation. Court Book 1005 is a repeat of the same email and therefore adds nothing.

226 The email of 15 December 2007 appears to relate to a further investment opportunity. There is no suggestion in this email that Apollo was to lose control of the capital amount invested. In any event, this appears to be a proposed separate transaction which never proceeded. Court Book 1007 is a repetition of this email and adds nothing.

227 As to the email at CB 1076 of 29 August 2007, it is to be noted that this is an email, again to Mr Robinson, not to Apollo or Mr Lopez. Mr Donald submitted that this letter indicated "the prospect that the money will be transferred into an account not in the name of Apollo". (T585, L18 & 19). There is nothing in the text of the letter which would appear to raise that possibility. The foothold used by Mr Donald for this submission was an answer given by Mr Olsen during cross-examination as to this email, where he replied:

"So when I ask for, where has the money gone, please give me the bank, please give me the account number, please give me the name of which the account is in, is that a question that says whether the transaction is going to conclude? (T150, L12-16)

228 In my view, this answer represents a slip by Mr Olsen in the course of a lengthy and hostile cross-examination, rather than an indication that he knew in advance that the monies were to be moved offshore into an account in the name of an entity other than Apollo (the trustee). Queries about "proposed future transactions" cannot be read as a consent in advance to the breach of trust which took place relative to the present and only transaction which occurred.

229 The document at CB 1079, again a communication by Mr Olsen to Mr Robinson, indicates that Mr Olsen was unaware of a transfer to an account in the name of an entity other than Apollo. There is nothing in it to suggest a consent either prospectively or retrospectively to the breach of trust.

230 It is fair to say that when one surveys this and other correspondence emanating from Mr Olsen at the time, it is moderate in its tone. Mr Olsen said that he avoided using extravagant or confrontational language because he judged that it would be counterproductive. This might be thought to be similar to the approach of the aggrieved wife in Byrnes v Kendle, who bit her tongue in the interests of matrimonial harmony, but was not held as a result to have consented or acquiesced.

231 It follows that, insofar as I have found that Apollo committed a fraudulent breach of trust and that Mr Lopez was knowingly concerned with it, there was no consent or acquiescence on the part of Harstedt which would immunise Apollo and Mr Lopez from liability for what they did.

232 I should record that I have made all findings referred to above in accordance with s140 of the Evidence Act, and having regard to the "Brigginshaw standard".

233 The leading authority on the point is Dimos v Willetts (supra). The Court of Appeal there determined that a beneficiary of a trust is not for that reason a creditor of the trustee and therefore no entitlement to interest arose under s58 of the Supreme Court Act 1986.

234 Mr Robertson QC and Ms Campbell relied on Anchen v Mendes Da Costa (supra), a decision of Ashley J (as he then was). His Honour concluded that an entitlement to interest under s58 did exist where the Court impressed property with a constructive trust and ordered its disgorgement. [16]. His Honour referred to similar determinations by Hansen J in Farrow Finance Company Ltd (in liq) v Farrow Properties Pty Ltd (in liq) [1999] 1 VR 584 (another constructive trust case). He noted that Osborn J in Maher v Millennium Markets Pty Ltd [2004] VSC 195 would have awarded interest under s58 of the Supreme Court Act had it not been for the fact that there was no evidence of any demand being made before the commencement of the proceeding. [12]

235 In the present case, the trust in question is an express trust and the authorities such as Anchen, and the cases referred to therein, pertain to constructive trusts. The general rule, as stated by the Court of Appeal in Dimos, excludes the possibility of the award of interest under s58 of the Supreme Court Act.

236 Where damages or compensation are awarded in accordance with the principle of equity rather than on a common law basis, there is power to award interest from the commencement of the proceeding until payment. (Giller v Procopets (No 2) (supra, 128 [37]-[38]) As in that case, there was no evidence before me as to the commercial rates of interest over the relevant period and I accordingly adopt the rate of 8 per cent per annum simple, which was adopted in that case by the Court of Appeal.

237 I will direct the parties to bring in short Minutes to give effect to these reasons within 14 days of this day.

238 I have heard no submissions on the question of costs and so I will reserve them.