John Ljubomir Atanaskovic and the persons named in Schedule A trading as Atanaskovic Hartnell v Birketu Pty Ltd

John Ljubomir Atanaskovic and the persons named in Schedule A trading as Atanaskovic Hartnell v Birketu Pty Ltd - [2019] NSWSC 1006 - NSWSC 2019 case summary — Zoe

[4]

Introduction

Brody Jack Clarke (Clarke) was a solicitor of this Court. He is a fraudster and a thief. He is in prison.
Clarke started working for the Sydney city law firm Atanaskovic Hartnell (AH) in December 2013. My impression was that he was treated by some as the young "hot shot".
Mr John Ljubomir Atanaskovic (Atanaskovic or JLA), is one of AH's principals.
AH has a London office where each year Atanaskovic spends some months.
Birketu Pty Ltd (Birketu) is Mr Bruce Gordon's private investment vehicle and holding company. WIN Corporation Pty Ltd (WIN), which has interests in the television industry, is controlled by him.
Bruce Gordon and his companies (the Gordon interests) were important clients of AH. Atanaskovic started doing legal work for Bruce Gordon in the mid-1980s and maintained a professional relationship with him over the years. The Gordon interests regularly retained AH.
Mr Andrew Gordon (Bruce Gordon's son) is Executive Chairman of WIN, and a director of Birketu.
Mr Andrew Lancaster (Lancaster) is the Chief Executive Officer of WIN. He was appointed Chief Executive Officer of Birketu in about February 2018.
Until late 2018, Mr Daniel Collis (Collis) was WIN's Chief Financial Officer. Birketu did not have a chief financial officer. Collis performed that function for it. Collis also assisted Bruce Gordon with his personal financial affairs.
From the start of his employment at AH, Clarke did work for the Gordon interests.
Over the period 16 June 2016 to 1 September 2017, Clarke perpetrated a number of callous frauds.
Clarke induced Birketu and WIN to make a number of payments totalling more than $1 million, on behalf of Bruce Gordon, to Clarke's own bank account, Westpac Bank account number 554-779 Leura Branch BSB 732-828 (Westpac Account), by telling them, falsely, that the Westpac Account was AH's trust account (the disbursement frauds).
Twice Clarke duped Deutsche Bank Aktiengesellschaft (Deutsche) into paying him money (totalling over $7 million) held by Deutsche to Birketu's account (the Deutsche frauds). To achieve this, Clarke committed forgery.
Clarke's villainy was exposed on 28 September 2017.
Birketu, then represented by AH, commenced proceedings and obtained urgent orders freezing Clarke's assets.
Two actions in the Court were heard together, evidence in one being evidence in the other.
In the first action (the fraud case), Birketu, WIN, and Bruce Gordon sued AH and Deutsche. They also sued Clarke, but he did not make an appearance to defend himself and they did not move against him for judgment.
Bruce Gordon sued AH for damages equivalent to what was paid into the Westpac Account and not recovered, claiming that AH was vicariously liable for Clarke's actions. AH disputed that Clarke acted within the course and scope of his employment with AH.
Birketu sued Deutsche to restore to its account the amounts which Deutsche debited as a consequence of Clarke's conduct, claiming that Deutsche had no mandate to affect its account. Deutsche raised only one defence to this claim, namely, that Clarke had ostensible authority from Birketu to conduct the dealings with Deutsche that led it to debit Birketu's account. Birketu contended that if Clarke had (which it denied) ostensible authority, AH was vicariously liable to it for Clarke's actions. Deutsche said that if Clarke did not have ostensible authority, it was entitled to recover whatever it had to pay Birketu, from AH, because AH was vicariously liable to it for Clarke's actions. AH's position was that Clarke did not have Birketu's ostensible authority. AH disputed that Clarke acted within the course and scope of his employment.
Thus, on any scenario, a principal question in the fraud case was inevitably going to be whether Clarke acted in the course and scope of his employment with AH.
In the second action (the fee case), AH sued Birketu and WIN for unpaid fees and disbursements in six matters totalling (after minor adjustments conceded by AH) $1,093,648.33. The fees are covered by seven invoices: Legal Fees Matter no. / invoice no. Date of issue Description Amount claimed after adjustment 5869/B10557 22 January 2018 WIN Affiliation Agreement Advice $44,371.22 5870/B10580 19 February 2018 NEC / Ten / Prime Share and Swap Advice $23,710.50 5944/B10559 25 January 2018 Ten Guarantee Advice $61,878.30 5971/B10528 14 November 2017 Ten Litigation $710,393.81 5 March 2018 (corrected version issued) 5971/B10561 7 February 2018 Ten Litigation $14,869.96 5983/B10582 28 February 2018 Investigation retainer/invoice $172,686.27 5991/B10579 19 February 2018 Network Investments Decontrol Advice $65,738.27 Total $1,093,648.33

[5]

Under an engagement letter dated 16 November 2017 (the investigation retainer), Birketu retained AH to advise and assist it in connection with the Deutsche frauds. This entailed investigating the circumstances in which AH's own employee had perpetrated frauds on the Gordon interests for which AH might be, and was ultimately established to be, vicariously liable. For this work, AH rendered Statement of Account / Tax Invoice B10582 (the investigation invoice) for $172,686.27 to Birketu. [1] Of all the invoices, this is the most controversial one.
Birketu denies liability for the investigation invoice because it says that, on 9 January 2018, Atanaskovic orally undertook not to charge for the work covered by it. Atanaskovic denies the undertaking. AH says that, if Atanaskovic gave it, Birketu gave no consideration for it and its terms are uncertain. AH says that such an undertaking is ineffective to inhibit it from enforcing its legal entitlement to its fees under its costs agreement with Birketu.
As well, Birketu and WIN argue that AH's fees are unfairly and unreasonably excessive to the extent of $303,606.51, of which $75,845.17 pertains to the investigation invoice.
It is apt to note that in the fraud case Birketu and WIN argued that, if they were otherwise liable to AH for the investigation invoice fees, they were entitled to recover the equivalent amount from AH as part of the damages suffered by them as a result of Clarke's conduct. AH's answer was that the costs covered by the investigation invoice were not claimable as damages but were legal costs in the fraud case, given that those proceedings had been initiated by AH on Birketu's behalf. They argued that those costs should be dealt with by the Court exercising its discretion as to costs.
The trial occupied 13 hearing days.
Before the trial, the parties attended an unsuccessful mediation.
Mr B Walker SC opened the fraud case for the Gordon interests. The hearing was thereafter conducted by Mr M Ashhurst SC, leading Mr A Vincent. Mr P Brereton SC, leading Ms A Horvath, Ms K Boyd and Mr J Entwisle, appeared for AH in the fraud case. Mr P Wood, with Mr T O'Brien, appeared for Deutsche. Mr J Hutton appeared for AH in the fee case. On behalf of the Gordon interests, the fee case was conducted by Mr A Vincent. There was, inevitably, some crossover in the evidence and submissions in the fee case and the fraud case.
The case was fact heavy. The Court Book comprised 30 volumes, running to over 10,000 pages. When the trial began, the Court Book was in an unsatisfactory state. This resulted in the case starting in earnest a few days late. The flow on effect was that after two weeks of hearing the case was adjourned and resumed two weeks later. The parties' written submissions, which include schedules and footnotes, exceed 300 pages.
The Court made it clear, on more than one occasion (although it was obvious), that findings on credit would be required and that such findings could have ramifications beyond the Court room. On more than one occasion, the Court conveyed the desirability of the parties settling the fee case.
On 24 June 2019, I reserved judgment. I made it clear that no further argument would be permitted without leave.
On Friday 19 July 2019, at 2.39 pm, I received from AH, by email, a Notice of Motion and supporting affidavit, which had been filed in the Registry, seeking leave to adduce further argument in the fraud case. The Registry allocated the Motion a return date of 26 July 2019. I informed the parties that I would deal with the Motion on Monday, 22 July 2019, at 2.00 pm. At 3.41 pm, I was informed by email that the fraud case had settled in principle but no agreement had been reached in the fee case. At 4.00 pm, I informed the parties that my judgment was complete and that I was in a position to deliver it. The judgment that had been prepared ran to 113 pages. The parties were directed to appear at 2.00 pm on Monday, 22 July 2019.
On 22 July 2019, the parties appeared. Shortly before then, I received proposed consent orders intended to dispose of the fraud case. I was informed that the fee case had not settled. I made it clear that the fee case involved matters of credit, and that matters pertinent to the fraud case were relevant to that assessment. I informed the parties that unless I was informed by 4.00 pm on 22 July 2019 that the fee case had settled, I would deliver judgment in that proceeding at 9.15 am on Friday, 26 July 2019.
However, on 23 July 2019, I received an email from AH attaching a Notice of Motion seeking leave to make further submissions and requesting that I hear the Motion that day or the following day. The Court was not able to accommodate this request, having regard to other judicial commitments. I fixed the Motion for hearing on 26 July 2019. The consequence was that I was not able to deliver this judgment on that day as planned.
Over opposition, I gave AH leave to address additional submissions with respect to Atanaskovic's credit. Birketu and WIN did not wish to have an opportunity to respond. I have had regard to the additional submissions.
The work needed to recast the judgment has been considerable.

[7]

Over-charging

Birketu and WIN argue that AH can only recover those costs which are fair and reasonable. They presently do not ask the Court to resolve the extent to which the amount claimed is excessive. They move the Court to appoint a referee under Uniform Civil Procedure Rules 2005 (NSW) r 20.15 to inquire and report into that question. They argue that there is sufficient material before the Court to conclude that there is a serious question that AH's fees are unreasonably excessive.
They identify a number of bases for the contention that AH is restricted to recovering an amount of costs which is fair and reasonable. These are:

the fiduciary relationship between the parties which imposes a duty on AH not to prefer its own interests over that of Birketu and WIN;
section 298(d) of the Legal Profession Uniform Law (NSW) which provides that conduct capable of constituting unsatisfactory professional conduct or professional misconduct includes charging more than a fair and reasonable amount for legal costs in connection with the practice of law;
the supervisory jurisdiction of the Court in the case where, as is the case here, WIN and Birketu have no right to a costs assessment under Part 4.3 of the Legal Profession Uniform Law (NSW);
a custom of the profession in this State; and
an implied term of the retainer.

Each invoice is covered by a written retainer agreement. Each retainer agreement contains the following clause 4 headed "Fees": Unless we agree a different basis, we will charge by reference to the time spent on your matter by our professional staff. The hourly rates of the staff who will initially be involved in your matter are described in the Engagement Letter. These hourly rates will be applied proportionately for work involving shorter periods less than an hour. We review our hourly rates from time to time to reflect changes in the level of experience and expertise of our lawyers and the market for legal services generally. Accordingly, the rates we charge for your matter may change from those described in the Engagement Letter. We will notify you of any change in our hourly rates for your matter, usually in the first bill after the new hourly rates have taken effect. If after having regard to: • the complexity of the matter or the difficulty or novelty of the questions raised; • the skill and specialist knowledge of the professional staff involved; • the risk and responsibility we are undertaking; • the amount of time and effort likely to be involved and, in particular, whether we are likely to have to work substantial periods of time outside normal working hours or away from the office; • the amount or value of any property involved; • the importance of the matter to you; and • (to the extent the law permits) the success achieved in the matter, we consider that our hourly rates do not fairly reflect our contribution to a matter, we may adjust our fees appropriately to reflect that contribution.
Birketu and WIN served two expert reports of Mr Christopher Phillip Wall (Wall), a specialist costs assessor and costs review panellist. The reports were referred to but not formally read, presumably on the footing that Birketu and WIN only seek to establish sufficient prospect of over-charging to warrant reference of that issue to a referee. Wall's approach was to consider each of the invoices and available back up material, and to assess whether the costs charged were fair and reasonable.
AH relied on an expert report of a costs assessor, Valerie Edith Higginbotham.
Birketu and WIN have not established that the rates charged by AH are excessive in relation to the work which the invoices purport to cover.
Birketu and WIN are substantial and well-resourced commercial entities. Bruce Gordon is undoubtedly an experienced and sophisticated businessman.
The matters, which were often complex and involving significant amounts of money, all required high level and high quality legal services.
They agreed to pay AH a specified hourly rate for these services. There is nothing which takes the retainer agreements (excluding, perhaps, the investigation retainer) beyond, or even near, the bounds of professional propriety.
The fact that an expert assessor may assess an amount as being that which would be recovered on an assessment does not mean that, in particular circumstances, any amount above that is unfair and unreasonable, let alone being beyond the bounds of professional propriety.
I should say that there appear to be some charges which are not adequately supported by primary documentation. Wall says that although he has had access to electronic and hard copy files, he has seen almost no files notes dealing with attendances on other solicitors outside AH, other solicitors within AH, barristers, or representatives of the client or any other persons. The charges are reflected in AH's internal accounting system called 'Affinity'. Wall, however, approached the matter on the footing that where there was insufficient information to find the charges unreasonable or excessive he accepted them.
Paul Springthorpe, a solicitor at AH, gave evidence to sustain the time spent on the various matters and was hardly challenged. As mentioned below, he conceded one error and some minor adjustments.
In these circumstances, and leaving aside the investigation invoice which is dealt with later, I am not persuaded that WIN and Birketu have demonstrated sufficient prospect of establishing excessive charging so as to warrant reference to a referee.
The investigation invoice is an entirely different position for three reasons. First, Birketu says that Atanaskovic undertook not to charge for work covered by it. Second, some of the work charged for concerned AH dealing with the position of conflict in which it undoubtedly was. Third, some of the work concerned issues, such as ostensible authority, on which AH took a specific forensic position in the fraud case in its own interests. This gives rise to the possibility that AH took the benefit of work for which it wishes Birketu to pay in circumstances where they were adverse to one another.

[8]

Investigation invoice

On 16 November 2017, Birketu formally engaged AH in relation to the Deutsche frauds. AH allocated number 5983 to this matter.
The investigation retainer states, relevantly: Dear Mr Gordon Engagement Letter - Deutsche Bank AG and Purported NEC Swaps Agreements Variations re Alleged "$7m Loan" You have requested us to provide you and your company with legal advice and assistance from about 18 October 2017 in connection with the above, including the possibility of dispute with Deutsche Bank AG, Sydney Branch (DB). The purpose of this letter is to confirm our engagement and the terms and conditions on which we act on this matter. 1. Responsible Partner John Atanaskovic will be the partner primarily responsible for this matter. 2. Fees and disbursements We will charge professional fees for all services rendered by reference to the time spent by our lawyers in working for you on this matter. We will also charge for any out-of-pocket expenses we incur on your behalf in accordance with our standard Terms of Engagement attached. The partners and employed solicitors who will or may primarily be involved in this matter and their current hourly rates (exclusive of GST) are: Name Level of Lawyer Hourly Rate John Atanaskovic (JLA) Partner $900 Michael Sophocles (MJS) Partner $675 Lawson Jepps (LAJ) Senior Solicitor $650 Paul Springthorpe (PYS) Senior Solicitor $625 JLA will be attending to most of the work, certainly initially. MJS and PYS are litigation specialists, and it may be that the matter does not proceed to that stage, in which case they are not likely to do much, if any, work on the matter. If additional partners or employees are required to work on this matter, they will be charged for at hourly rates that are commensurate with their experience and expertise. We may adjust our hourly rates and overall fees in accordance with our standard Terms of Engagement attached. […] 5. Terms of Engagement and Possible Conflicts of lnterests and/or Duties Attached are our standard Terms of Engagement. These form part of the terms and conditions of our engagement on this matter. It has been suggested, in particular by DB, and officers and external lawyers of DB, that this firm suffers a conflict of interests and/or duties in acting for Birketu and/or you on this matter. We presently do not consider that such a conflict has in fact arisen directly in relation to this matter since, based on your instructions and the information known to us to date: (a) we do not see why Birketu or you would have a liability to DB in the circumstances of this matter, for example in relation to the alleged $7m loan asserted by Ashley Seeto of DB, and (b) if Birketu does not have, and/or you do not have, such a liability to DB, we cannot see why this firm would have obligation or liability to Birketu or you in relation to the matter. (It is possible, however, that conflicts of interests and duties may still possibly arise or exist by reason of other matters and circumstances, such as referred to (and some of which are expanded on) below, although most are not related to this matter.) On the other hand, if (contrary to our views) Birketu and/or you does have a liability to DB in relation to this matter then, as we have explained to you, this firm may suffer from a conflict of interests and/or duties in relation to this matter (and conflicts of interests and/or duties may also arise as a result of other matters and circumstances, such. as referred to above (in brackets) and below). If this is the case, subject to the waivers/consents referred to below, we should not act as lawyers for Birketu or you, and instead another lawyer or law firm should act for Birketu and you in relation to this matter. You have indicated that you understand the above, but that you nevertheless have confidence in this firm, and there are practical reasons why Birketu and you would still desire this firm to act as lawyers for Birketu and you in relation to this matter. In consequence of your indication, and at your request, we have informed you that, even if conflicts of interests and/or duties exist as between a lawyer and a client, the lawyer may still act for the client, if the client on a "fully informed" basis gives its consent to the conflict of interests and/or duties. There is no precise formula that will determine "full information", but for this purpose, we briefly confirm below aspects of our oral advice as regards some of the main ways in which such conflicts may arise in the present case, some of the consequences thereof, and the operation of the applicable rules regarding consent to such conflicts, as follows: (a) As you know, Brody Clarke (BJC) was formerly an employed solicitor at this firm. His employment was immediately terminated on 28 September 2017 when the background to this matter became known to JLA and MJS. But this does not remedy or remove all (or even most) of any conflicts issues as may exist or arise. (b) It is reasonably clear that BJC acted reprehensibly, and fraudulently, including as follows (but the following is not exhaustive): (i) in apparently suggesting that moneys should be paid by Birketu and/or you and/or other of your companies (such as WIN Corporation Pty Ltd) into a personal bank account of BJC at the Leura branch of Westpac (BJC Account), although on the misleading basis that BJC represented that such account was a general client trust account of this firm (notwithstanding that we do not have, and have never conducted, a general client trust account, and we regularly, such as in engagement letters like this one, disclose the former); and we understand that some moneys were then placed into the BJC Account by Birketu and WIN, and that material amounts of such moneys have subsequently, in one way or another, been dissipated or largely dissipated by BJC. This firm may arguably be liable to reimburse some or all of such moneys or other damage incurred by Birketu, you and/or your other companies in relation to such wrongs, and we have indicated to Birketu, you and WIN that you should take separate independent legal advice on this; (ii) one of the payments which was apparently made was a payment of about $2m by WIN, apparently loosely relating (in ways which even now we have not had explained to us by WIN, and we do not understand) to liabilities once owed by WIN to Ten Network Holdings Limited, which payment only became known to the partners of this firm on 28 September 2017; (iii) BJC appears to have fraudulently procured DB to enter into certain alleged agreements, and forged documents, which make it appear that Birketu has entered into agreements with DB, and assumed liabilities to DB under those agreements, on the basis of which DB alleges it advanced two tranches of money into the BJC Account, which money (save about $1.5m thereof) BJC has subsequently dissipated; (iv) DB claims that, in the process of the foregoing, Birketu has become liable inter alia for the moneys so advanced by DB; (v) in the foregoing circumstances, it may be argued by DB and/or by Birketu that this firm may have a liability to Birketu for any liabilities which Birketu would have incurred to DB for the moneys so advanced, and for other moneys and obligations also, such as interest, fees and expenses payable to third parties, and certain Birketu pre-emption obligations to DB; (c) in addition to contractual and other obligations and duties to carry out with competence, etc the legal work entrusted to him, a solicitor has fiduciary and other duties, including duties of loyalty and honesty, to the solicitor's clients, including a duty to avoid conflicts between his own interests with his duties to his clients, and the interests of his clients; (d) a solicitor has a duty to place the interests of his clients and his duties to his clients above his own interests, and to avoid the solicitor's client's interests being in conflict with his own interests; and (e) by virtue of what is described above, this firm may arguably have practical interests in seeking to avoid liabilities and duties, or seeking to avoid satisfying duties and liabilities, to Birketu or you or your other companies, or even to DB and other third parties, and thus may therefore not give the advice, or act in a way, which this firm would properly otherwise do, were we not to have those possible interests which arguably conflict with our duties to Birketu, you or your other companies. Birketu and you have requested that this firm nevertheless act as lawyers for Birketu and you in relation to this matter, on the footing that Birketu and you, on an informed basis, consent to such conflicts of interests and/or duties this firm may have in so acting for Birketu and you. We have agreed to do so, on the following footing: (a) that in the time available to date, we have explained in a general way, and some of the specific ways, the conflicts of interests and/or duties as may presently exist, or come to exist, such as those described above, that you on an informed basis so consent to any conflicts that may exist in us acting for Birketu and you, and have offered further to explain the general and specific ways to you, as and when requested; (b) that we have recommended (and continue to recommend), that Birketu and you also obtain independent legal advice inter alia as follows: (i) as to the advisability of you appointing us as your legal counsel in this matter, and on the issue of the potential conflicts of interests/duties that we do or may in future face, and that we meet your legal expenses in you so doing; and/or (ii) even if we do act for Birketu and you, you receive independent advice on a continuing basis on the legal work we do for you on this matter (ie in a sense "audit advice" or "looking over our shoulder advice"), (c) that the relevant conflicts issues be kept under review, and if necessary, Birketu and you do thereafter take additional independent legal advice on those issues, or that Birketu and you thereafter take legal advice and assistance more generally from another lawyer or law firm (including as referred to above); and (d) that Birketu and/or you understand that you are each at liberty at any time to seek and take legal advice and assistance from another lawyer or law firm, either in lieu of, or in addition to, this firm's advice and assistance (but on the basis that Birketu and you are still liable for our fees and disbursements that are then or thereafter payable by Birketu or you for or in connection with legal work already done, as set out in this letter and its attachments). We take this opportunity again to thank you for your instructions, and also your continuing confidence in this firm (despite the events and circumstances involving BJC which have so far come to light and become known to us and you), and look forward to working with you on this matter. Yours faithfully ATANASKOVIC HARTNELL
The terms of the investigation retainer reflect an acute awareness on the part of AH of the position of conflict or potential conflict in which it was. It is, however, mostly concerned with the position of AH in relation to a conflict asserted by Deutsche. Deutsche's assertion was apparently in the context of a claim foreshadowed by it against Birketu. The investigation retainer has little to say about the acute conflict or potential conflict involved where Birketu itself had or might have had a claim against AH, in circumstances where Birketu may not recover its loss on the '$7m Loan' referred to in the caption of the investigation retainer.
On 9 January 2018, Lancaster and Bruce Gordon had lunch with Atanaskovic at Q Dining restaurant in Sydney.
Lancaster gave evidence that Atanaskovic said words to the following effect: The total claim against AH as a result of this is roughly $1.025M. I am currently talking to my insurer with a view to having this resolved by next week. Now if they do not pay the $1.025M or only agree to pay part of it, then whatever the shortfall is, I will make it good. WIN/Birketu will not be out of pocket as a result of this conduct.
Lancaster says that Atanaskovic went on to say: AH will not charge Birketu for any of the work done by AH in defending Birketu against Brody and the Deutsche fraud situation because this whole matter was created as a result of one of my staff members.
Atanaskovic denies this conversation. He says that he recalls the lunch reasonably well. He says that at the time of the lunch he had no expectation that AH's insurer would act in such a fashion - particularly not in January, when many legal and insurance people are on vacation. He says that he had already formed the view that at least part of each of Bruce Gordon, WIN or Birketu's loss was caused by the incompetence, recklessness or gross negligence of Collis and Lancaster and that he had no intention of paying for their conduct (he did not reveal this to his clients).
Atanaskovic says that he did observe that AH had not, and did not propose to, charge WIN, Birketu or Bruce Gordon for seeking an immediate freeze of Clarke's bank accounts, or the extensive internal investigation AH had conducted and the extensive reporting to Bruce Gordon on these and directly related subjects.
I believe Lancaster that Atanaskovic gave the oral undertaking. His evidence is to be preferred over that of Atanaskovic, not only with regard to the oral undertaking but wherever their evidence conflicts. I do not accept Atanaskovic's evidence, except where it is corroborated by objective contemporaneous material.
My assessment of their credit has, of course, been made on the basis of the evidence as a whole. It follows that, although the prolixity of this judgment will be increased, it is necessary in order to expose my reasoning to deal with evidence extending significantly beyond the oral undertaking itself.
Between 9 January 2018 and 28 February 2018, Bruce Gordon and Birketu decided to change solicitors in the matter.
On 28 February 2018, AH rendered to Bruce Gordon and Birketu the investigation invoice, under cover of the following letter: Dear Sir Deutsche Bank AG - Purported NEC Swaps Agreements Variation re Alleged "$7m Loan" Given the time that has passed since we commenced acting in this matter, and (based on correspondence we have recently received from HWL Ebsworth) your now apparent desire to change solicitors in the matter, we enclose our account for professional costs and disbursements in respect of the matter for the period ended 28 February 2018. On a strictly solicitor work time costing basis, fees of over $173,000 have accrued. In the circumstances, however, we have charged professional fees of $150,000, although if the bill is paid within our standard payment time (ie within 7 days), we will accept $120,000 (plus 10% GST) in satisfaction to our fees, disbursements being payable in addition to such fees (and GST). If you have any queries in relation to this memorandum of fees, please do not hesitate to contact us. Thank you for your instructions in this matter. Yours faithfully ATANASKOVIC HARTNELL

[10]

The apartment

Bruce Gordon and his wife, Mrs Judith Gordon, owned apartment 1102 in the fashionable Pullman Quay Grand building at 61-69 Macquarie St, Sydney, known as "the toaster".
They wished to buy apartment 1101 next door (the apartment), and break through the common wall.
Bruce Gordon apparently has the practice of presenting a prospective vendor with a cheque for the deposit he will pay if the vendor will sell to him. It seems he may have conveyed to Clarke an intention to do this with the owners of the apartment.
On 2 May 2016, Clarke sent Bruce Gordon a draft letter to the owner under cover of the following email which was copied to Atanaskovic: Bruce, JLA asked that I prepare a letter for you to send to your neighbour following your lunch tomorrow. See attached a draft letter for this purpose. Subject to hearing from you beforehand, I will call you at approximately 8.45am tomorrow to discuss the attached and will subsequently finalise the letter and have the final version delivered to you tomorrow morning. If you would like to speak before then, please don't hesitate to call me on 0410 508 139. Kind regards, Brody Clarke
Atanaskovic gave evidence that he had not asked Clarke to prepare any letter for Bruce Gordon. He says that he spoke to Clarke very sternly, telling him that this sort of behaviour was not acceptable at AH. He says that he instructed Clarke not to initiate further contact with Bruce Gordon and that he told Clarke expressly that AH would not have anything further to do with the Gordon's Quay Grand purchase, if any purchase was in fact to occur. I do not believe his evidence.
Far from being corroborated by it, the objective contemporaneous material undermines this, as does Atanaskovic's own behaviour at the time.
Not only did Clarke's involvement with the Quay Grand purchase not cease, it intensified over time to Atanaskovic's knowledge and with his participation.
Lancaster says that Clarke was actively involved with the acquisition of and building works and body corporate issues surrounding the apartment and that Clarke spent much time dealing personally with Bruce Gordon, so much so that it became a bit of a running joke between WIN and Birketu senior executives and AH personnel, including Atanaskovic. At Christmas 2016, Clarke sent a "Merry Christmas" email to Bruce Gordon, Lancaster and Collis with a photograph of a hard hat with the words "Bruce's Foreman" written across the front of it. The hat had apparently been given to Clarke as part of the AH Kris Kringle.
On 9 May 2016, Clarke emailed Atanaskovic: John, If you get a spare moment today, could you please call me to discuss and to obtain your guidance on Mr. Gordon's proposed acquisition at Quay Grand? Kind regards, Brody Clarke
Atanaskovic did not react to this email, and did not give an adequate explanation for why he did nothing in the face of what he says was a breach of his instructions.
Moreover, on the same day, Clarke instructed a specialist conveyancing lawyer, Mr Julian Peters (Peters) of Aitken Lawyers, to attend to the conveyance on behalf of the Gordons. It is clear that the name of Aitken Lawyers as a candidate to help the Gordons with the conveyance was introduced by Atanaskovic himself.
Clarke's email to Peters commenced with the statement: 'we are acting for Bruce Gordon in relation to the acquisition of lot 103 on Strata Plan 58857'. On the same day, Peters emailed Clarke thanking him for his instructions in the matter.
An issue to which the proposed acquisition of the apartment gave rise concerned the Gordons' estate planning. They wished to leave the apartment to their daughter Genevieve. This necessitated changing their wills.
The following demonstrates that Clarke was becoming involved in the matter with Atanaskovic's imprimatur.
The Gordons were imminently to leave Sydney for London.
On 11 May 2016, Clarke emailed Venetia Brown (Brown), a solicitor working in AH's London office, copied to Atanaskovic: Venetia, I hope that you're settling in well. Remember, one should not attempt to open a front-loader door whilst the machine is in operation. AH Sydney is presently advising Bruce and Judith Gordon in relation to the acquisition of a Sydney property that will ultimately be left to Genevieve. As the property will be acquired in Bruce/ Judith's name, as joint tenants, this will need to be dealt with via testamentary disposition (together with the existing Sydney property holding). I understand from JLA that Bruce and Judith will be leaving Sydney on or around 17 May and will spend some time in London. I sense that this is your chance to unleash your ribbon crafting skills, and also reunite with Bruce and Judith, but more importantly, there may be some legal work to be completed prior to then to update the will(s). Will send through the final contract once executed and we can discuss further if you have any queries. Best, Brody Clarke
Contracts for the purchase of the apartment were exchanged on 18 May 2016, with settlement due to occur on 22 June 2016.
On 19 May 2016, Clarke emailed Atanaskovic: JLA - Bruce called at approximately 10.50am this morning (nearly 2.00am LDN time), to follow up on an aspect of his purchase of 1101 Quay Grand. I was able to assist Bruce with his query, but Bruce immediately asked that I meet a more important request. Bruce asked that I convey to you that he is looking forward to catching up in London and that he is also very much looking forward to your hosting him at the Mark's Club. Brody Clarke
On 23 May 2016, Peters wrote a fairly lengthy letter to the Gordons, care of Clarke, confirming that the contracts had been exchanged and noting a number of things with respect to the contract, including that stamp duty of $570,510 would be payable on the contract (Clarke recast this letter somewhat in an email which he sent to the Gordons, copied to Brown, the following day).
On the same day, Clarke informed Brown by email of the exchange and anticipated settlement date. Brown emailed Atanaskovic: Dear John, Attached are the wills for Judith and Bruce amended to include unit 1101, which Brody informs me they have purchased, with settlement to occur on 22 June. I have included it by reference to unit number only as was done for 1102, but have the title searches for both properties if you would prefer me to include folio identifiers as well. I imagine we should wait until after settlement for these amended wills to be signed - do you know how long Bruce and Judith are intending to spend in London? Furthermore, I believe you will be bringing with you some of the 'will paper' and ribbon - will that arrive suitably soon, or should I procure some from somewhere in London..? Venetia
On 24 May 2016, Atanaskovic emailed Brown, copied to Clarke, amongst others, relevantly: Venetia, I think it best that the wills change be effected immediately while B and J Gordon are in London, because it is convenient for you to attend to this while they are there, and they usually worry about what might happen on travel between London and Bermuda. I think that the issues can be satisfactorily dealt with by amending your changes to the wills as per the attached. I am sure they have will paper and pink tape in London, so I think it best that you acquire some there, and we will add it as a disbursement in the client bill. […] I am not sure of their movements but I think they are there till the end of this week, possibly some of early next week. So why do you not phone them and find out/arrange things on your Tuesday. JLA
On 24 May 2016, Clarke emailed Brown, copied to Atanaskovic: Thanks, Venetia. I have just spoken to Mr. Gordon in relation to his Sydney 'jigsaw' puzzle and the tribulation of dealing with the owners corporation. At the end of the call, I advised Mr. Gordon that you had revised their wills and would need to meet them for the will-signing ceremony. Mr. Gordon indicated that early next week would suit best (there are apparently dentist appointments and the like prior to then), but he will call you today to agree a time. Given Mr. Gordon has a lot on his plate, I wouldn't be surprised if his day gets away from him and therefore you should put a call through tomorrow if you haven't heard from him. Mr. Gordon asked after JLA as it relates to his arrival and the Chelsea Flower Show. In usual AH fashion, I indicated that I "know nothing" of JLA's impending departure or whether he will make the show (given that the Queen has already had her tour). Mr. Gordon seemed quite excited about the build-up, including a one hour documentary that was on BBC last evening and which covered various matters including a 'train carriage' that has been transported to the event and will be filled with plants and the like. I suggested to Mr. Gordon that I would pass this on to JLA but his talk of gardens, plants and flowers was rather boring for me, Mr. Gordon agreed and noted that he will be heading out of town for the weekend along with Judith and your new best friend (junior Gordon). In terms of my identification request - OSR has decided that it wants additional information to meet their new National electronic Conveyancing System (NECS) requirement. No need to worry the Gordons, but if you simply advise them that we will need to verify identification for purposes of the property transfer and that they should bring that to the AH office (or make a copy in Judith's office if you call upon them at home). We will require copy of passports (and if Judith has it with her, copy of visa), driver's licence (Australian if possible) and will require you to certify that we have true copies of original documents, ie. "I certify that I have sighted the original document and this is a true copy of it". We can then work out a way to get the original certified copies to Australia. I suggested that I speak to Bruce and Judith via Skype but JMK was a stickler in this plan (which is a solid plan I have previously used at Ashurst, and involves Mr. Gordon holding up the original passports of himself and his wife over Skype video so I can view the originals and then take copies of each passport and email to me for certification). Call me if any queries. Thanks, BJC
On 25 May 2016, Brown emailed the Gordons, copied to Clarke and Atanaskovic: Dear Bruce and Judith, I confirm the following will be required for OSR: - A copy of both of your passports; - Judith, a copy of your Australian visa; - A copy of both of your Australian driver licences (if possible). As discussed, I will call on Tuesday morning to see if it is convenient to come to Sloane Square to certify the copies of the above documents, and also to witness the signing of your revised wills (which now include reference to Unit 1101). The wills require two witnesses; Jon Skene has indicated that he is available to attend as well. Kind regards, and I hope you have a lovely Bank Holiday, Venetia
On 31 May 2016, Clarke emailed Bruce Gordon: Hi Bruce, Hope you're well. Just a brief update below on a few items relating to the Quay Grand acquisition: 1. On Monday morning, we arranged for a 'purchasers' caveat to be registered on the title to apartment 1101 to protect your interest. 2. On Monday evening, the Body Corporate Executive Committee met and approved an extraordinary general meeting for Thursday, 14 July to consider the proposed change to the by-laws necessary to commence the alteration works. I will prepare the necessary resolution for circulation prior to the EGM. For your reference, the AGM was also held last night and apparently there was no increase in the strata levies. 3. The tenant has indicated that she will be moving out of apartment 1101 on 14 June. This is slightly later than what was initially agreed but I have confirmed to Morton, on your behalf, that this won't be a problem and it will ensure that the tenant leaves on positive terms (as it allows her to move her possessions out after the Queen's Birthday long weekend). 4. I have spoken with Dan Collis in relation to the scheduled payments - stamp duty and then purchase price on settlement - and will liaise with Dan closer to the payment date(s). I have obtained David's email (Quay Grand Concierge) and propose to keep him apprised of key developments in relation to the Body Corporate process. Obviously, I will not share any of your information with David that is not relevant to the process or his role in same. Don't hesitate to call me on +61 410 508 139, at any time, should you have queries. Best, Brody Clarke
Perhaps the first real portent of what was to happen occurred on 16 June 2016, when Clarke requested Collis to transfer $570,510 to the Westpac Account for the payment of stamp duty and some associated costs. Clarke's email to Collis of that date read: Hi Daniel, Further to our discussion on Tuesday, we have now arranged with the London office to have replacement copies of Mr and Mrs Gordon's identification couriered to Sydney by tomorrow. Accordingly, if you could please arrange for the funds to be transferred by COB today we will arrange for the contract to be stamped tomorrow. The amount required is $570,510.00, being $570,490 (see attached OSR calculation) plus $10 for the duplicate agreement for sale of land and $10 for the associated real property transfer. See below recipient bank details: Institution: Westpac Bank BSB: 732-828 Account No.: 554-779 Let me know if any issues. Kind regards: Brody Clarke The email attached a computer printout which included the logo of the Office of State Revenue (OSR). Stamp duty had to be paid by 18 August 2016.
On 16 June 2016, Collis arranged for the transfer of $570,510 by Birketu to the Westpac Account. Clarke was no doubt testing the waters for what he was later to do because, on 19 July 2016, he arranged for payment of stamp duty to be made to the OSR from the Westpac Account.
On 20 June 2016, Collis emailed Clarke asking him to provide settlement details. Clarke did this, attaching a settlement sheet which, presumably, he had obtained from Peters.
On 30 August 2016, Clarke called Collis. Clarke told him that the OSR had determined that Bruce Gordon had to pay a surcharge purchaser duty on the purchase of the apartment because he was considered a foreign person as he had a residence in Bermuda. Clarke told him that they should appeal the assessment, but that it would be prudent if the money was paid into trust pending determination of the appeal. Clarke said he would send an email to confirm.
On 31 August 2016, Clarke emailed Collis: Dan, As discussed yesterday, if you could please arrange for the transfer of the duty amount. You will recall that $570,510.00 has been paid previously, being $570,490 (see attached OSR calculation) plus $10 for the duplicate agreement for sale of land and $10 for the associated real property transfer, and therefore the amount to be paid by this transfer is $360,000 (the surcharge purchaser duty). See below recipient bank details: Institution: Westpac Bank BSB: 732-828 Account No.: 554-779 Let me know if any issues. Kind regards, Brody Clarke. The email attached an OSR printout showing a surcharge purchaser duty of $360,000.
On 31 August 2016, Collis arranged for WIN to transfer $360,000 into the Westpac Account.
In fact, no surcharge purchaser duty was payable. Clarke kept the money and never paid it back.
On 15 September 2016, Clarke called Collis again. Clarke told Collis that the OSR had determined that a further final surcharge duty of $160,000 was payable on the purchase of the apartment. He told Collis that they had objected to the duty, but the objection had not yet been dealt with and that to avoid general interest charges it would be prudent to pay this amount into trust. He told Collis that they would hold funds until the OSR ruled on their objection. He said he would confirm in an email.
On 15 September 2016, Clarke emailed Collis: Dan We now have confirmation of the amount, if you could please arrange for $160,600 to be paid to the account below pending resolution of the duty and land tax exemptions. Note that previous duty payments were as follows: - $570,510.00 to OSR; - $360,000, to be held pending exemption application. Let me know once processed. Kind regards Brody Clarke
On 16 September 2016, Collis arranged for WIN to pay $160,600 into the Westpac Account.
In fact, no further surcharge purchaser duty was payable. Clarke kept the money and never paid it back.
On 16 December 2016, AH rendered Invoice B10352 to Bruce Gordon for professional costs of acting for him between 1 May 2016 and 30 November 2016. That work included the review and amendments to the wills of Mr and Mrs Gordon and advice in relation to strata fees payable on the apartment. A number of the attendances charged for were in relation to work done by Clarke. Minor disbursements clearly incurred in relation to the conveyance itself, such as for searches, were charged for. Clarke's direct work on the conveyance and renovation, it seems, was not.
On 10 January 2017, Bruce Gordon apparently called Clarke to invite him to the apartment for lunch to see the end result.
On 20 April 2017, Clarke called Collis. He told Collis that they had initially sought an exemption from land tax on the basis that the apartment would be Mr Gordon's principal place of residence. He told Collis that the OSR had determined that Bruce Gordon was not entitled to the exemption and must pay $74,138 in land tax. He told Collis that Bruce Gordon had asked that they appeal the ruling and that, pending resolution of the appeal, the funds should be paid into trust to avoid any general interest charges if the appeal was unsuccessful. He said that he would email Collis to confirm.
On 21 April 2017, Clarke emailed Collis: Morning Dan, As discussed yesterday, if you could please arrange for the transfer of the assessment amount in respect of the adjoined Quay Grand apartments. Please end through the confirmation once done, so I can provide to contact at the OSR today to indicate the funds are being held by us pending their determination. Please also send bank account details for the funds to be returned assuming we are successful in obtaining the exemption. Assessed Land Tax payable (including land tax surcharge payable): $74,138.00 See below recipient bank details: Institution: Westpac Bank BSB: 732-828 Account No.: 554-779 Reference: #5632 - Land Tax Let me know if any queries. Brody Clarke
On 21 April 2017, Collis arranged for payment by WIN of $74,138 into the Westpac Account.
In fact, the OSR had exempted Bruce Gordon from payment of land tax. Clarke kept the money and never paid it back.

[11]

Fort Street Advisers

Birketu was a shareholder in Ten Network Holdings Ltd (Ten), a television station. Ten's major financier was the Commonwealth Bank of Australia (CBA). Birketu had, as had other shareholders in Ten, guaranteed a proportion of Ten's liability to CBA under a $66 million Loan Facility Agreement entered into on 16 October 2013.
Illyria Pty Ltd (Illyria) is a company associated with members of the Murdoch family. Illyria was also a shareholder in Ten and guarantor to CBA.
In 2017, Birketu and Illyria formed an alliance with respect to the potential future of Ten, including a capital restructure which they called Project XII. Illyria introduced Fort Street Advisers (Fort Street) as an independent specialist corporate advisory firm to be retained to advise the allies. Atanaskovic was not too impressed with what he saw was the imposition by Illyria of Fort Street on Birketu.
Ms Linda Norquay (Norquay) was CFO of Illyria. Mr Jim McKnight (McKnight) and Mr Ben Keeble (Keeble) were two of Fort Street's principals.
In early April 2017, meetings between Birketu, Illyria and Fort Street took place. On 5 April 2017, a meeting was arranged to take place in Bruce Gordon's apartment on 10 April 2017. Before the meeting, Atanaskovic emailed Lancaster (copied to Clarke), confirming that the meeting would take place 'with Brody Clarke present from AH as a chaperone'. The email included the following: Brody Clarke, however, is working up with a one page note on fee rates/conditions for FS with Linda Norquay of Illyria, to be discussed between you, Linda and Brody on Tuesday of next week, assuming things go well at the meeting (Brody will do the legal language of the fee letter terms).
On 10 April 2017, Bruce Gordon, McKnight, Norquay and Clarke attended the meeting as planned. Although his earlier email seems to suggest that he would not be there, Atanaskovic was apparently there too.
Lancaster met with Norquay and Clarke later that day, and they were then joined by McKnight and Keeble. Atanaskovic did not attend.
Over the month of April 2017, the terms of Fort Street's engagement were negotiated. Emails passed between Clarke, Norquay, Lancaster and Collis. Ultimately, a formal engagement letter was signed by Fort Street in early June 2017. It made provision for the payment to Fort Street of a monthly retainer by Birketu and Illyria of $125,000, commencing from 13 March 2017 (being the date on which Fort Street commenced its work) and capped at four months. Birketu's half share was $62,500 per month.
Lancaster recalls a telephone conversation with Clarke one evening in late April 2017, when Lancaster was at his daughter's soccer training. Clarke told him that they were "just about there" in their negotiations with McKnight and Illyria. Clarke said that, while they were sorting out the final negotiations, it would be a good idea to put monies in AH's trust account for the Fort Street payments as this would show good faith to Fort Street and would help finalise the negotiations. Clarke said that if Birketu paid the funds to the AH trust account, AH would direct payments from there. Lancaster suggested they speak again in the morning and would finalise.
On 27 April 2017, Clarke called Collis. He told him that Illyria had agreed to the Fort Street fee proposal. He said that Birketu should agree to the fee proposal and that it involved retainer fees of $125,000 per month. Clarke said it had been agreed that two months' retainer should be paid in advance. Birketu's share for two months was $125,000. Clarke said that the letter of engagement had not yet been executed, but as a sign of good faith Birketu should pay the amount into the AH trust in preparation for the agreement being signed. Clarke said that he would follow this up with an email to confirm.
On 28 April 2017, Lancaster instructed Collis that they were happy with Fort Street's retainer and for the first two months' payments to be paid into trust. Later that day, Clarke emailed Collis attaching an invoice from Fort Street: Dan, If possible, break into two separate payments of $62,500.00. See below recipient bank details: Institution: Westpac Bank BSB: 732-828 Account No.: 554-779 Reference: Fort Street Regards, Brody Clarke
Also on 28 April 2017, Collis arranged for Birketu to pay $125,000 into the Westpac Account.
On 25 May 2017, Clarke emailed Collis and Lancaster: [2] Dan, We are holding off on finalising the engagement letter to avoid association. Could you please transfer a further $62.5k to trust today for the period commencing start of May? Same details as before. Give me a call on mobile (+61 410 508 139) if any queries. Regards, Brody Clarke
The following day, Clarke emailed Collis repeating the request. On 26 May 2017, Collis arranged for payment by Birketu of $62,500 into the Westpac Account.
On 9 June 2017, Clarke forwarded the Fort Street retainer by email to Lancaster and Collis for execution.
The Fort Street retainer was signed on behalf of Birketu on 9 June 2017.
On 14 June 2017, Ten was placed under voluntary administration. Receivers were appointed to a number of companies in the Ten group. Solicitors King and Wood Mallesons (KWM) were retained by the receivers and managers.
On 21 June 2017, Clarke forwarded to Collis an email, dated 20 June 2017, from Fort Street concerning fees incurred by KWM. Clarke stated that the fees were ultimately indemnified by Illyria and Birketu.
On 23 June 2016 Collis arranged for Birketu to make a payment into the Westpac Account which included $62,500 for Fort Street.
Birketu later found out that on 9 August 2017 and 4 September 2017, Clarke caused payments of $69,433.20 and $180,566.80 (i.e. $250,000), respectively, to be paid to Fort Street from the Westpac Account.

[12]

The legal fees payments

A meeting of creditors in the Ten administration was scheduled for 26 June 2017.
On 23 June 2017, Clarke sent Lancaster a text informing him that Birketu's Proof of Debt for the meeting would 'include guarantor fees and the Fort Street fees to increase the figure (even if administrator later contests).' He asked Lancaster to approve payment of the amounts into trust.
On 23 June 2017, Clarke emailed Collis: Dan, As discussed just now, if you can sign and scan the second page of the attached we will then finalise. If you could then arrange for the amount of $249,026.60 to be paid into trust (details below), consisting of: - AH legal fees facility: 119,641.50 (inc GST) - KWM legal fees (per CBA indemnity) 66,885.15 (inc GST) - Fort Street retainer: 62,500 (inc GST) Send through the remittance to me once done as I will attach with the date and time (i.e. prior to lodgement of proof of debt). Will forward you AH invoice and KWM invoice this afternoon/Monday. See below recipient bank details: Institution: Westpac Bank BSB: 732-828 Account No.: 554-779 Reference: Adviser fees Give me a call if any queries. Brody Clarke A formal Proof of Debt was attached.
On 23 June 2017, Collis arranged for payment by Birketu of $249,026.65 into the Westpac Account in three separate payments (this included $62,500 in respect of Fort Street). Later that day, he emailed Clarke with confirmation of this.
On 26 June 2017, Clarke emailed Collis: Hi Dan, As discussed, see attached proxy forms for this afternoon's meeting. If you could please sign (at step 4 on the bottom of page 1), scan and return each of the attached to me by email. I've left a message for Max Cowley and Andrew Gordon, but let's proceed on the basis that they are unlikely to be available this morning. At this stage we are uncertain who will be available to attend out of JLA, LAJ and myself, but the proxy as completed provides for that. Thanks, Brody Clarke
Clarke was appointed proxy for the meeting.
AH never rendered an invoice for $119,641.50 (incl. GST). It did not have work in progress in that amount in respect of work carried out for Birketu in relation to its dealings with Illyria, Fort Street and Ten.
In fact, Ten was responsible for payment of all fees legal fees incurred by Birketu in relation to its commercial dealings with Illyria, Fort Street and Ten. Ten was also ultimately responsible for payment of KWM's fees.
In an email to Collis on 18 September 2017 Clarke confirmed that Birketu would be reimbursed for payment of the KWM fees, but it never was. Similarly, Clarke did not pay any amount to AH in respect of its purported legal fees. The monies paid on supposed account of AH fees and KWM fees into the Westpac Account were never paid back by Clarke and were lost.

[13]

Ten Program Supply Agreement set-off

WIN and Ten were parties to a Program Supply Agreement (Ten PSA) executed on 22 May 2016, under which Ten agreed to supply programs to WIN to be broadcast within the area of WIN's television broadcast licence.
Under the Ten PSA, WIN had to pay Ten an affiliation fee for the supply of the programs and WIN agreed to supply Ten with the Television Shopping Network (TVSN). Ten had to pay a data-casting fee for the supply of TVSN. The affiliation fee and data-casting fee were calculated on a monthly basis.
The Ten PSA provided that every payment payable by a party under it may be set‑off against any amount due and payable by the other party.
As at late June 2017, Ten owed WIN $2,016,666.63.
Collis sought advice from AH as to the availability of a set-off of that amount against what WIN owed Ten.
On 26 June 2016, Lawson Jepps (Jepps), a senior solicitor (subsequently a partner) at AH, [3] advised Collis by email, copied to Atanaskovic and Lancaster, that set‑off was available.
On 29 June 2017, Clarke emailed Collis a draft letter to Ten electing to take advantage of a set-off. The email also said: We think it is problematic to claim a set-off for the June payment before data casting for the month of June is complete (i.e. presumably midnight on Friday). There is possibly also a question as to whether the invoice for May is valid since it was issued in the middle of May, but I am inclined to include it in the set-off as the Agreement doesn't expressly provide for invoices prior to payment. Will call shortly to discuss.
Later that day, Clarke emailed Collis a slightly revised version of the proposed letter. Clarke enlisted the assistance of Springthorpe in preparing the letter.
On the afternoon of 30 June 2017, Clarke called Collis. Clarke said words to the following effect: The law of set-off requires the amount being set-off to be held in trust for a statutory period of 14 days. Ten has a period of 14 days to challenge the set‑off. We can hold the money in the AH trust account and return it thereafter.
Lancaster also recounts a conversation between Clarke, Collis and himself, in which Clarke said: The law of set off requires the amount being set off to be held in trust for a statutory period of 14 days. This is to ensure that if Ten challenges the set off they have 14 days to do so. Ordinarily this is ignored by most but under the circumstances, with Ten being under administration, it would be wise to do so as a precautionary measure. Holding it in the AH trust account for 14 days is the best option and the funds will be returned thereafter.
Lancaster says that as Ten was in administration he was conscious to ensure that they did everything that they were advised to do. He says that he was comfortable with the advice he had received. Accordingly, on 30 June 2017, WIN wrote to Ten claiming the set-off. In fact, the law of set-off required (and requires) no such thing.
On 30 June 2017, Clarke emailed Collis relevantly: Can you send me the remittance for the $2,016,666,63 [sic] in order that I can arrange for the amount to be entered into our trust receipt on our side?
On the same day, Lancaster authorised Collis to transfer the claimed set-off amount of $2,016,666.63. Collis says that he arranged for WIN to pay the amount into the Westpac Account. He believed that the Westpac Account was a trust account maintained by AH.
At this point it is apt to mention that Paragraph 11 of AH's Standard Terms of Engagement is headed 'Trust Moneys' and states: We do not maintain a trust account and therefore cannot hold money on your behalf.
There then followed a period during which Birketu tried, unsuccessfully, to get the deposited money back.
On 14 July 2017, Collis emailed Clarke requesting an update on the return of the money. Clarke did not respond. He called Clarke, who told him that there had been an administrative mix up and that the AH accounts clerk had placed the funds into a 30 day term deposit. Collis told him to break the term deposit, and that they needed the funds repaid. Clarke's response was that he would try.
On 17 July 2017, Clarke called Collis. Clarke told Collis that the money was in a 30 day term deposit that he could not break. Collis told him that of course he could break it, they would just miss out on some interest. Clarke said he would see what he could do and would talk to the CBA. Collis told him that he could not pay outstanding AH invoices for legal fees without the money being returned. Clarke said that he would speak to the CBA and get back to Collis. Clarke called back about an hour later, he told Collis that he had not had any success with breaking the term deposit and was continuing to negotiate with the CBA to break it so as not to suffer any penalty for early termination. Collis told him to break it regardless of any early termination fees.
On 24 July 2017, Clarke emailed Collis, relevantly: Hi Dan, […] All monies including interest will be returned directly to WIN on 1 August unless you otherwise direct us to withhold payment in respect of any of the attached invoices. Best, Brody Clarke
In early- to mid-August 2017, there were a number of email exchanges between Clarke and Collis concerning repayment of the money.
On 15 August 2017, Clarke called Collis. He told Collis that the bank had agreed to release the funds with no penalty, and that the funds would be returned in the next 48 hours.
On or about 17 August 2017 (18 August 2017 in Sydney), Lancaster was in California. He had a telephone conversation with Atanaskovic and Jepps. He says that the conversation was in relation to the payment of outstanding AH invoices and return of the set-off monies. His version of the conversation is as follows: Atanaskovic: Ahh I don't know whether I should take your call Andrew. We don't generally speak to clients who don't pay their bills. Lancaster: John well we don't pay bills when we are owed $2M which your lawyers don't seem to be able to get back to us from your trust account. Atanaskovic: (with Jepps laughing) Hahaha - Andrew I don't know what you are talking about. We don't have a trust account. Lancaster: Well we will pay you when you repay us.
Lancaster says that he found it a little odd that Atanaskovic and Jepps joked about not having a trust account and having no knowledge of the funds, but because Atanaskovic had a quirky sense of humour he did not think much more about it. Lancaster says that this conversation did not affect his assumption that AH operated a trust account and that AH had received payment of the set-off amount and was required to pay it back to WIN.
Collis says that on or before 17 August 2017 he received a call from Lancaster, who had returned from overseas. He says a conversation to the following effect took place: Lancaster: I just got off the phone to John Atanaskovic and Lawson Jepps. I asked John specifically 'when are you returning the funds?' John's response was 'what funds?' I said the 2 million dollars paid into trust for the Ten set-off. Collis: What did he say? Lancaster: John chuckled and Lawson also laughed and John said 'but we don't have a trust account.'
Atanaskovic and Jepps have a different version of the conversation with Lancaster.
Atanaskovic says that the call related only to the Ten set-off and that the matter of unpaid AH invoices was not raised. He says that Lancaster asked whether $2 million should be paid into a trust account as part of the proposed set-off. He says that he asked Lancaster why he thought that a trust account payment should be made, and that Lancaster responded that it was to show good faith. He says that Jepps joined the conversation after the call had already commenced, and was likely laughing because he was incredulous at the alleged virtue and manner of WIN placing money on trust. Atanaskovic disputes that Lancaster told him that he believed that an AH trust account was holding $2 million for either WIN or Birketu.
Jepps' version is that, having joined the conversation after it started, he heard Lancaster ask whether they had to put money on trust to show good faith. Jepps says that he answered no, and that either he or Atanaskovic then queried why Lancaster thought money should be paid into trust. Jepps says that Lancaster said that it was an idea but it had not been implemented. He says he chuckled slightly because he did not think that the idea of putting money into trust was a considered proposal. Jepps disputes that there was any discussion of AH billing or the fact that WIN had actually transferred money to any person in respect of the amount of the set‑off during the call.
Lancaster's version is to be preferred to that of Atanaskovic (and Jepps), where they collide. Lancaster, I consider, was an entirely truthful witness - as was Collis.
Jepps gave an honest account to the best of his recollection, but he was not present for the whole conversation. He says he walked into his office and, to his irritation, found Atanaskovic in his chair and on the phone. I infer that Jepps may not have heard the part of the discussion that is in dispute.
Lancaster's version is supported by objective contemporaneous material.
First, by the time of the conversation some time had elapsed since WIN had deposited over $2 million and, as a fact, AH had invoices outstanding. It is inherently probable (even leaving aside Collis' unchallenged evidence that he told Clarke he could not pay those invoices without the money being returned) that they would have discussed both.
Second, on 18 August 2017, the following email exchange took place between Lancaster and Collis in relation to the sum $2 million which had been paid by WIN: Lancaster to Collis (8.47 am): Hi. Has this been returned yet? Collis to Lancaster (8.57 am): Today I'm told Lancaster to Collis (11.09 am): JLA didn't know anything about it. Said they don't have trust accounts. Collis to Lancaster (11.09 am): So did he ask about the invoices? Lancaster to Collis (11.12 am): Joked about clients not paying their bills…hence my $2m comment Collis to Lancaster (11.17 am): Are you good for a quick call? Lancaster's reference to Atanaskovic mentioning clients not paying their bills would be inexplicable if it had not been discussed.
Atanaskovic obviously did not take seriously Lancaster's assertion about paying money into trust because he did not do anything about it.
On 18 August 2017, at 11.35 am, Collis sent an email to Clarke with the subject line "Heads up JLA is now aware of the $2m and Bills being held due to". There was no text in the body of the email.
Lancaster was justified in continuing to hold the belief that they were joking about not having a trust account because on 18 August 2017, $2,016,666.63 and $8,739 were deposited, by way of two bank cheques sourced from the Westpac Account, into the WIN bank account.
On 18 August 2017, Collis emailed Clarke: Hi Brody, We have a winner !! funds received and two months interest by my calcs at a rate of 2.6% See what we can do with moving some of the AH invoices
Clarke replied: Excellent; the interest is but small consolation for the delay and inconvenience. Let me know if you need any info in relation to the invoices.
There was a direct connection between these payments and the fraud perpetrated by Clarke in relation to Deutsche. Clarke used the proceeds from the Deutsche frauds to repay the deposited sum plus interest.
I am satisfied that each of Lancaster and Collis did not know that AH did not operate a trust account.

[14]

The Deutsche frauds

A cash settled share swap (swap) is a contract under which an investor either gives or receives cash payments from its swap counterparty equivalent to any decrease or increase in the price of an underlying parcel of specified shares between the start date and the termination date of the swap. The swap must be settled in cash. It cannot be settled by a delivery of the underlying shares. As consideration, the investor pays the counterparty a financing charge.
As at February 2016, Birketu held 14.9% of the issued shares in Nine Entertainment Co Holdings Ltd (NEC or Nine), a television station. Under broadcasting legislation, this was as much as it could hold. The use of a swap would enable Birketu to increase its economic interest in NEC to the legal limit, under corporations legislation, of 19.9%.
Bruce Gordon was introduced to Mr Ashley Seeto (Seeto) of Deutsche on 13 January 2016. They discussed the possibility of a swap. Seeto was then introduced to Lancaster and Collis. Negotiations ensued. Seeto sent Lancaster and Collis a presentation document called 'Swap accumulation'. Lancaster passed it on to Atanaskovic, who passed it on to Clarke.
On 10 February 2016, Birketu and Deutsche agreed the commercial terms of a swap referenced to shares in NEC.
Birketu placed its first order on 11 February 2016. The end date was extended on several occasions, first to 25 July 2016, then to 20 January 2017 and finally to 20 July 2017. It is necessary only to deal with the extension to 20 July 2017. This is dealt with below.
On 14 March 2016, Birketu and Deutsche entered into another swap, this time with respect to shares in Ten (Ten Swap). It too was signed by Andrew Gordon and Collis on behalf of Birketu.
Birketu proceeded to place orders with Deutsche for NEC "shares" and Ten "shares", under the NEC Swap and the Ten Swap respectively.
Deutsche needed Birketu's bank account details to make payments (of dividends) to Birketu under the NEC Swap.
On 19 April 2016, David McKay, of Deutsche, emailed Seeto and Collis: Hi, Before we can proceed with the payment we need the following information: • A signed copy of the clients bank account details on letterhead and signed by an authorized person of the company. • A copy of the company's authorized signatory list to valid the person signing the document is authorized to do so. Once the documentation is received I will need to perform a call back verification. Thanks David
Collis responded: Hi David, Attached is the letter with bank account details signed by myself the company secretary. Not sure what you need in terms of the authorised signatory list? can you send through an example Regards Dan
Attached to Collis' email was the following letter: BIRKETU Pty Limited ABN: 80 003 831 392 19th April 2016 Mr Ashley Seeto Deutsche Bank Level 14, 126 Phillips Street Sydney NSW 2000 Dear Mr Seeto, Please find below settlement bank account details as requested: Bank: NAB AC Name: Birketu Pty Ltd BSB: 082053 AC No: 751016943 If you require anything further please let me know.
In mid-April 2017, Seeto discussed with Bruce Gordon the possibility of a "collar" for the NEC Swap. This was an idea to use put and call options for NEC shares to limit Birketu's exposure under the swap. However, it would also limit Birketu's upside potential. On 19 April 2017, Seeto emailed Atanaskovic with respect to this idea. He referred to his earlier discussion with Bruce Gordon.
On 6 June 2017, Atanaskovic and Clarke exchanged emails about Clarke participating in a call with Birketu regarding the NEC Swap. The exchange ended with Atanaskovic emailing Clarke, copied to himself, relevantly (original emphasis): Brody, I spoke top [sic] Bruce, who confirmed inter alia that he had read my note and was content with it. […] The only thing Bruce asked me to do was to request Ashley Seeto of Deutsche to phone him, and give Bruce's Monaco phone number (which I later did before proceeding home), and then have a talk with Ashley by phone in the morning. I am copying this email to remind me to do the last in the morning.
On 7 June 2017, there was a telephone conference involving Atanaskovic, Jepps, Clarke, Seeto and Tim Earlwood (from the loan department at Deutsche). Clarke took notes. Atanaskovic's evidence was that Clarke's role was simply as a note taker. It is apt to recount the following exchange between counsel for Deutsche and Atanaskovic: Q. You emphasise his note taking capacity because you don't want to give him, do you, any greater role involved in this telephone conference because it could be dangerous to your case? A. No, it's just the fact that he did not speak, he only took notes, and in fact we'd agreed before the conversation began that his presence would not be mentioned, and it's - what I recall, because Mr Clarke at the end of the call expressed annoyance that his role was so confined. Q. So-- A. And almost kicked the furniture as I recall. I have a very clear recollection of that. Q. So should his Honour take it that you discussed with Mr Clarke that he would not say a word during this, that he would appear as a note taker and he had no role to play other than that in this conversation, and you didn't mention any of this in your affidavit? A. Absolutely correct.
On 6 July 2017, Seeto emailed Atanaskovic: John, Given we're on a roll, I would respectfully suggest Bruce puts a collar on his NEC swap with us. This would provide him with a price floor, in exchange for giving away upside above a cap. That is, we guarantee that Bruce can sell us the Swap shares for the Floor price, but we have the right to buy the swap shares off him for the cap price. Doing this would allow him to release some money from the NEC swap as well - we would give him this as free and clear cash. That cash could be useful. The license fee removal and TEN going into administration is now in the price - so I think timing looks attractive. What do you think?
Within an hour, Atanaskovic forwarded this email to Bruce Gordon, with blind copies to a number of people at AH including Clarke, under cover of the following email: Bruce, please see Ashley Seeto's (ie your friendly snake oil salesman's) latest new and improved snake oil offer below. JLA
On the morning of 10 July 2017, Clarke responded to Seeto by forwarding Atanaskovic's email, but first deleting the contents so that Seeto did not see Atanaskovic's pejorative "snake oil salesman's" reference. Clarke said: Morning Ashley, Could we please speak this morning regarding this? I have a meeting early but should be free by 9:30am. Regards Brody Clarke
Seeto and Clarke then exchanged emails trying to set up a meeting. In one email, Clarke mentioned that he "was just on call to Bruce."
On the morning of 10 July 2017, Clarke called Seeto. Seeto's recollection of the conversation is as follows: Clarke: I am Brody, I work very closely with Bruce. I have even done some work for him in respect of his house at Quay Grand. I am one of his confidants and key legal advisers, and I am a member of the team from Atanaskovic Hartnell working for Bruce on a proposed joint bid, with Lachlan Murdoch, for TEN. John has asked me to help out with the work on NEC swap you have referred to in your email of 6 July. I have been working daily with Bruce on the bid for TEN (joint with Lachlan). Bruce is looking to raise short term funds to seed the TEN JV bid vehicle, somewhere around $2.5m. Seeto: Bruce could sell down some of his NEC swap to raise the funds, however I suspect he won't like that since he invested so much time building up the position in the first place - so why would he sell down the position to raise the money. It might just be easier to raise money against the NEC swap position. We've been having conversations to that effect in respect of the TEN transaction in any event. Clarke: Also because of the TEN situation, there is a Chinese wall arrangement in place. I will be working on the NEC work and John in place. I will be working on the NEC work and John will be looking after the TEN side.
On the afternoon of 10 July 2017, Seeto emailed Clarke: So Brody as discussed I see two paths: 1. Sell Shares under the Swap - really easy to do - Bruce can just send me an email specifying how many swap shares he wants to sell and any other order instructions (eg price limit, volume limit etc.) - we could work the order for 25 bps exit commission - main downside is reduction of exposure, both economically and strategically 2. Have some collateral return - the NEC swap is essentially 100% cash collateralised via an initial exchange amount - we could return Bruce the ~2.5 - 3m he needs via reducing this collateral requirement to ~95% - we would charge a 1% fee + an annual rate of ~4.5% pa on the funds released - we would look to extend the accommodation for say 6 months, unless the shares fall to 50% of the current value, in which case we would need the money repaid sooner - Bruce avoids selling any exposure this way, with his main risk being an unlikely 50% fall in NEC shares forcing him to either come up with the funds sooner or having to sell some NEC swap shares at that point in time to bring the margin back to 100% As flagged, I am keen to do this as an act of goodwill to Bruce, as well as to open the door for a larger financing discussion. Feel free to call me if you want any further information. Ash
Thereafter, and until 20 July 2017, there were a number of email exchanges and telephone discussions between Seeto and Clarke. In an email dated 12 July 2017, Clarke asked Seeto for a summary of Birketu's existing NEC holding. In another email of the same date, Clarke asked Seeto if he "could also take a look at actual termination date etc, will be relevant."
Seeto says that he had a telephone conversation with Bruce Gordon on 14 July 2017, during which he mentioned that he had been speaking to Clarke about the NEC Swap and the Ten Swap. He says that Bruce Gordon said: [O]h yeah Brody is one of John's guys. He did work for me on my house and he's done some good work for us.
On 14 July 2017, Clarke emailed Atanaskovic with regard to shares in NEC held by Oaktree which AH was looking into on Bruce Gordon's behalf: Ashley Seeto is trying to find out who purchased.
On or about 14 July 2017, Seeto had a discussion with Clarke to the following effect: Clarke: Bruce needs $2.5 million as seed capital for the potential TEN Takeover Bid. Seeto: If we are going to make a relationship loan to Bruce, we would want the Nine shares held under a Deutsche Bank sponsorship agreement because my previous experience with Bruce is that he has put transactions through other brokers who are sponsors of the relevant shares. If we want to put through a loan against the Nine swap we would want to avoid any sale of Nine shares being done through another broker. Clarke: Okay I will work on that.
Seeto then emailed Clarke explaining how to extend the NEC Swap or sell some shares under it.
On 18 July 2017, Collis informed Clarke (by forwarding an email from Lancaster) that Bruce Gordon had agreed to a three month extension of the NEC Swap.
On or around 27 July 2017, Andrew Gordon, on behalf of Birketu, signed an Amendment Confirmation to the NEC Swap, extending it to 14 November 2017. Another director of Birketu, Mr Edwin Maxwell Cowley (Cowley), signed it on 28 July 2017. Clarke arranged for an AH paralegal, Ms Rosemary Enderby (Enderby), to attend Cowley's home to obtain his signature.
On 31 July 2017, Clarke emailed Seeto: Hi Ashley, […] Was going to give you a call today on Nine, but was also hoping that you could confirm a couple of matters in relation to the Ten swap in order that we can obtain instructions for you in relation to Birketu's position: 1. when is the relevant decision date (i.e. termination date) for the Ten swap? 2. one of the Birketu directors has asked whether Deutsche has charged fees to Birketu in relation to the Ten swap from the date of appointment of the administrator? Best, Brody Clarke Seeto replied: Hi Brody Happy to chat. I'm pretty sure the Ten swaps expire 16 August. As flagged previously, we unilaterally agreed to stop charging fees from the date of administration. That said, we have accrued fees that are owed once we settle the swaps. Ash And in a further email stated: It's smaller than I expected: ~$48.3K
Later that day, Clarke emailed Collis: Hi Dan, Confirming our discussion just now, Deutsche Bank unilaterally agreed to stop charging fees on the swap from the date of administration. Fees have, however, accrued up to the date of the appointment of the administrator and these apparently amount to $48.3k. Not as substantial as I had feared. I will still in any case test the 'brokerage of NEC shares' concept with DB as it may allow you to put an alternative to BG for his consideration when the time comes. Kind regards, Brody Clarke
On 31 July 2017, Clarke emailed Atanaskovic (original emphasis): JLA I've made initial inquiries with DB and Drummond in relation to Ten swap and will report separately (including a proposal I have that may possibly result in DB waiving fees on Ten swap up to the point of administration). Dan confirmed that he is paying the below invoices today. I queried when the remaining bills will be paid and Dan indicated that BG is in 'cash perseveration phase' at the moment and did not confirm approval on Thursday/Friday. I suggested that we should set in place in a schedule, something which I will revisit with Dan tomorrow or Wednesday. 810454 $3,396.91 810456 $13,311.47 810439 $266,502.98 Regards, Brody Clarke
On 9 August 2017, Seeto emailed Clarke and a number of others at Deutsche setting out his thoughts on releasing "c. $2.5m for Bruce, which would be documented as an amendment to the NEC Swap".
On 14 August 2017, Clarke emailed Bruce Gordon, copied to Collis: Dear Bruce, Thanks for your time just now; was good to speak. Confirming that we will work with Dan (copied) in the morning (Sydney time) to effect an extension of the Ten swaps. This will ensure that Birketu may participate in any 'upside' achieved via the proposed recapitalisation of Ten (in addition to the Birketu P/L and Birketu Investments P/L direct holdings in Ten). As foreshadowed, Dan and I have confirmed that Deutsche Bank will waive all fees on the Ten swap from the date that voluntary administrators were appointed (14 June 2017). Best regards, Brody Clarke
Seeto recalls conversations with Clarke, which he believes took place on 14 August 2017, during which Clarke told him that Bruce Gordon needed the money quickly (by the end of the week) in order to meet the deadline for when bids for Ten were due. Clarke told him that Bruce Gordon had asked for the trade to be done as soon as possible and that he had been berated by Bruce Gordon for not progressing it until then. Clarke told Seeto that if the funding did not come through there was going to be a problem at Bruce Gordon's end.
Seeto recalls that around this time Clarke made the point in a telephone call with him that the loan needed to be $4.5 million (rather than the initial $2.5 million they had discussed). His recollection is that Clarke explained that this was because the funding had been underestimated by Clarke and the team.
On 16 August 2017, at Clarke's request, Andrew Gordon met Clarke at a coffee shop in Elizabeth Street, Sydney, next door to AH's offices. Clarke had a manila folder with him. Clarke presented Andrew Gordon with a document for signature. Andrew Gordon says that Clarke said words to the following effect: [Y]ou are familiar with the NEC Network Swap and the extensions we've recently done. This documentation is for a further extension to the NEC Share Swap with Deutsche Bank.
Andrew Gordon signed, thinking that the document was to achieve a further extension of the NEC Swap.
Seeto recalls a conversation with Clarke, which he thinks took place on 16 August 2017, during which Clarke told him that the funds for the proposed Ten takeover bid were to be paid into an AH trust account and were to be held on behalf of the joint venture vehicle for the takeover.
Seeto replied, stating that Deutsche would need to do a call back to confirm the account details.
On 16 August 2017, Seeto emailed Clarke: We have Birketu account details on file, so we'll need a payment direction, signed by a Director, specifying the account details where we are to pay the funds.
On 17 August 2017, Seeto emailed Clarke: [4] Thanks Btw, the sooner I get that payment direction the better. The person who signs from Birketu needs to have their contact details on the letterhead because we'll need to do a callback to confirm the account details.
Deutsche prepared an Amendment Confirmation to the NEC Swap, and emailed it to Clarke. The Amendment Confirmation introduced the notion of a "Financing Amount" of $4.5 million representing, in effect, a reduction in the total equity notional amount of the Swap, by way of a payment to Birketu and provided for Birketu to pay Deutsche a "Financing Fee Amount" of $45,000. In substance this is a loan at interest.
At 5.37 pm on 17 August 2017 (the 17 August email), Clarke emailed Seeto copied to Andrew Gordon: Hi Ashley, Please see attached ASIC organisational extract downloaded just a moment ago confirming directors of Birketu. I have spoken to Andrew (copied) who is able to make himself available for a call now if you are able to have someone call him on the mobile. Also attached are as follows: - Sponsorship agreement executed by directors. Note that there are a few details such as TFN that we will need to confirm tomorrow. - Amendment confirmation executed by directors incorporating the wording that you sent through this afternoon. - Confirmation letter to DB confirming the NEC arrangement and also including wording in relation to proposed move of physical NEC shares. - Payment direction. Note that Andrew's contact details are included therein as requested. Regards, Brody Clarke
The documents referred to were attached. The sponsorship agreement appointed Deutsche to be Birketu's sponsor for physical trades of shares under the Australian Stock Exchange's CHESS transfer system.
The amendment confirmation bore, on its last page, what appeared to be the signatures of Andrew Gordon and Max Cowley, on behalf of Birketu. The payment direction was in the form of a letter on Birketu Pty Ltd letterhead, addressed to Deutsche, in the following form: BIRKETU Pty Limited ABN: 80 003 831 392 17 August 2017 Deutsche Bank AG Deutsche Bank Place Level 16, corner of Hunter & Phillip Streets Sydney NSW 2000 Dear Sir / Madam Direction to Pay We hereby direct you to pay the amount of AUD 4,455,000.00 to the trust of Atanaskovic Hartnell, per the following details: Bank: Westpac Bank BSB: 732-848 Account No: 554-779 For an [sic] on behalf of Birketu Pty. Limited
The mobile phone number on the payment direction was not that of Andrew Gordon but was, in fact, the mobile phone number of a junior lawyer at AH, Anthony Farag. The evidence established that Andrew Gordon did not sign the document. Clark apparently scanned Andrew Gordon's signature on to another document and used it.
Seeto asked Mr Paul Lusinovski (Lusinovski), an associate at Deutsche, to do the callback. On the evening of 17 August 2017, Seeto emailed Clarke, telling him that Lusinovski would call Andrew Gordon. Lusinovski called the number given and spoke to whom he thought was Andrew Gordon. But it was Clarke, using Anthony Farag's phone, pretending to be Andrew Gordon.
On 18 August 2017, Deutsche (via the National Australia Bank) paid $4,455,000 into the Westpac Account. Deutsche charged Birketu fees of $45,000 in relation to the amendment of the NEC Swap. The National Australia Bank beneficiary advice shows the beneficiary account name as "Atanaskovic Hartnell Trust A.C"
On 28 August 2017, Seeto had a telephone discussion with Clarke, during which Clarke told him that additional funding of $2.5 million was needed to "seed" the Ten takeover bid vehicle. Seeto then emailed Clarke about the possibility of providing a loan or selling shares under the NEC Swap. He suggested selling a short-dated call option on some of the NEC Swap.
On 31 August 2017, there was an exchange of emails between Seeto and Clarke in relation to amending the NEC Swap.
Deutsche prepared a further Amendment Confirmation increasing the Financing Amount to $7.026 million and the Financing Fee Amount to $70,260.
On 1 September 2017, Deutsche received from Clarke the amendment confirmation purportedly signed on behalf of Birketu by Andrew Gordon and Max Cowley on 1 September 2017, and a direction to pay in the following form: BIRKETU Pty Limited ABN: 80 003 831 392 31 August 2017 Deutsche Bank AG Deutsche Bank Place Level 16, corner of Hunter & Phillip Streets Sydney NSW 2000 Dear Sir / Madam Direction to Pay We hereby direct you to pay the amount of AUD2,500,740 to the trust of Atanaskovic Hartnell, per the following details: Bank: Westpac Bank BSB: 732-848 Account No: 554-779 For an [sic] on behalf of Birketu Pty. Limited
The evidence established that Andrew Gordon did not sign the document. Once again, Clark apparently scanned Andrew Gordon's signature on to another document and used it.
On 1 September 2017, Lusinovski did another callback and again, thinking he was speaking to Andrew Gordon, spoke to Clarke.
On 1 September 2017, Deutsche paid $2,500,740 into the Westpac Account with a Financing Fee Amount of $25,260.

[15]

The law

An employer is vicariously liable for a tort committed by an employee in the course and scope of her or his employment. But there has been recent development in relation to how the concept of course and scope is to be viewed and applied.
In State of New South Wales v Lepore (2003) 212 CLR 511 (Lepore) at 535, Gleeson CJ said: 40 An employer is vicariously liable for a tort committed by an employee in the course of his or her employment. The limiting or controlling concept, course of employment, is sometimes referred to as scope of employment. Its aspects are functional, as well as geographical and temporal. Not everything that an employee does at work, or during working hours, is sufficiently connected with the duties and responsibilities of the employee to be regarded as within the scope of the employment. And the fact that wrongdoing occurs away from the workplace, or outside normal working hours, is not conclusive against liability. 41 The antithesis of conduct in the course of employment is sometimes expressed by saying that the employee was ''on a frolic of his own''. […]
An employer's vicarious liability may extend to intentional and criminal wrongdoing, engaged in solely for the benefit of the employee, even where the wrongdoing is a flagrant breach of the employment obligations. [5] It is the nature of that which the employee is employed to do on behalf of the employer that determines whether the wrongdoing is within the scope of the employment. [6]
In Lepore, Gaudron J said: [7] 130 The only principled basis upon which vicarious liability can be imposed for the deliberate criminal acts of another, in my view, is that the person against whom liability is asserted is estopped from asserting that the person whose acts are in question was not acting as his or her servant, agent or representative when the acts occurred. And on that basis, vicarious liability is not necessarily limited to the acts of an employee, but might properly extend to those of an independent contractor or other person who, although as a strict matter of law, is acting as principal, might reasonably be thought to be acting as the servant, agent or representative of the person against whom liability is asserted (193). 131 Ordinarily, a person will not be estopped from denying that a person was acting as his or her servant, agent or representative unless there is a close connection between what was done and what that person was engaged to do. That was the focus of the attention of the House of Lords in Lister. However, that is not, of itself, the test of estoppel. Ultimately, the test is whether the person in question has acted in such a way that a person in the position of the person seeking the benefit of the estoppel would reasonably assume the existence of a particular state of affairs (194). In the case of vicarious liability, the relevant state of affairs is simply that the person whose acts or omissions are in question was acting as the servant agent or representative of the person against whom liability is asserted.
More recently, however, the High Court considered vicarious liability in Prince Alfred College Incorporated v ADC (2016) 258 CLR 134 (Prince Alfred).
The case concerned sexual abuse of a pupil by a boarding housemaster employed by a school. The Court said: [8] The relevant approach 80 In cases of the kind here in question, the fact that a wrongful act is a criminal offence does not preclude the possibility of vicarious liability. As Lloyd v Grace, Smith & Co shows, it is possible for a criminal offence to be an act for which the apparent performance of employment provides the occasion. Conversely, the fact that employment affords an opportunity for the commission of a wrongful act is not of itself a sufficient reason to attract vicarious liability. As Deatons Pty Ltd v Flew demonstrates, depending on the circumstances, a wrongful act for which employment provides an opportunity may yet be entirely unconnected with the employment. Even so, as Gleeson CJ identified in New South Wales v Lepore (113) and the Canadian cases show, the role given to the employee and the nature of the employee's responsibilities may justify the conclusion that the employment not only provided an opportunity but also was the occasion for the commission of the wrongful act. By way of example, it may be sufficient to hold an employer vicariously liable for a criminal act committed by an employee where, in the commission of that act, the employee used or took advantage of the position in which the employment placed the employee vis-à-vis the victim. 81 Consequently, in cases of this kind, the relevant approach is to consider any special role that the employer has assigned to the employee and the position in which the employee is thereby placed vis-à-vis the victim. In determining whether the apparent performance of such a role may be said to give the "occasion" for the wrongful act, particular features may be taken into account. They include authority, power, trust, control and the ability to achieve intimacy with the victim. The latter feature may be especially important. Where, in such circumstances, the employee takes advantage of his or her position with respect to the victim, that may suffice to determine that the wrongful act should be regarded as committed in the course or scope of employment and as such render the employer vicariously liable.
Lloyd v Grace, Smith & Co [1912] AC 716 (Lloyd) and Deatons Pty Ltd v Flew (1949) 79 CLR 370 (Deatons) are well known cases.
In Lloyd, the managing clerk of a solicitor's firm fraudulently induced a client of the firm to provide to him the deeds to the properties for their sale and procured her signature on two documents which she believed she had to sign the documents to effect the sale of the properties. In fact, the documents were a conveyance of the property and transfer of the mortgage to the clerk. The House of Lords held the firm liable for the clerk's fraud as being conduct in the course of his employment. The case represented a significant development in the law. Previously, vicarious liability of an employer for the unauthorised fraud of an employee had been confined to conduct engaged in for the benefit of the employer. [9]
In Deatons, a barmaid threw a glass of beer, and then the glass itself, into the face of a patron. He lost an eye. The High Court held that the employer was not vicariously liable because what the barmaid did was not incidental to the work she was employed to do. What she did was described as 'a spontaneous act of retributive justice.' [10]
Lloyd was followed in Uxbridge Permanent Benefit Building Society v Pickard [1939] 2 KB 248 (Uxbridge), where the defendant was a solicitor practising in London with a branch office at Slough which was managed by a clerk. The plaintiffs were induced, by the Clerk's fraud, to advance money, on mortgage of freehold property, to a person alleged by the clerk to be a client of the branch office. The supposed title to the property was fictitious and the title deeds were forgeries. The defendant was held vicariously liable. At 253, Sir Wilfrid Green MR said (citation omitted): With regard to that part of the office activities, there is no question of the relationship of solicitor and client between the solicitor and the third party. Nevertheless the authority of a clerk occupying the position of the principal to deal with third parties in circumstances where the third parties are going to change their position as the result of the transaction in progress, or which appears to be in progress, cannot be denied. Accordingly I cannot see how the principle of Lloyd v. Grace, Smith & Co. can be confined to the narrow case where the authority which the clerk is purporting to exercise is an authority to treat with a client. It seems to me it must extend to cases where the authority which the clerk purports to exercise, and which upon the face of it he has got, is one which involves leading third parties to change their position on the faith that the business which brings them into contact with the firm is genuine business.
The commencing words of para [80] of the High Court's statement in Prince Alfred '[i]n cases of the kind here in question' may, on one view, be viewed as limiting the 'relevant approach' identified by the High Court to cases of vicarious liability of institutions for conduct of employees where the victim is under their care and control and is, by virtue of the relationship, vulnerable to that misconduct.
A close reading of the passage makes it clear, however, that no such limitation is intended.
The exercise required, whatever the nature of the case, is to assess the closeness of the relationship between the employee's role and responsibilities, on the one hand, and the wrongful acts, on the other. The requisite closeness required for the wrongful acts to be considered within the scope of the employee's employment will be present if, fairly looked at, the employment provided both the opportunity, and was the occasion, for wrongful acts.
Whilst the relevant circumstances to be considered in making this assessment will differ from case to case, and whilst the features identified by the High Court in Prince Alfred as important in that case will be different to which will be important in cases of a different kind, the relevant approach remains constant. Depending on the circumstances, the very role given to the employee and the nature of the employee's circumstances may justify the conclusion that the employment provided both the occasion and the opportunity.
It is to be observed that para [80] in Prince Alfred refers to both Lloyd and Deatons with approval.
The statement in Lepore by Gleeson CJ that the aspects of the scope of employment are functional, geographic and temporal, and the articulation by Gaudron J that '[o]rdinarily, a person will not be estopped from denying that a person was acting as his or her servant, agent or representative unless there is a close connection between what was done and what that person was engaged to do', are reflective of the same approach.
In Ffrench v Sestili (2007) 98 SASR 28 (Ffrench) the Full Court of the Supreme Court of South Australia approved of a statement made by Diplock LJ in Rose v Plenty [1976] 1 WLR 141 that the notion of scope of employment must be looked at broadly, not dissecting the servants task into its component activities.
None of the cases to which the Court was referred is quite like this one, but the relevant approach identified by the High Court fits just as easily to this case as to any other.
One further observation is merited. In Lepore, Gummow and Hayne JJ said at [239]: For present purposes, it is enough to conclude that when an employer is alleged to be vicariously liable for the intentional tort of an employee, recovery against the employer on that basis should not be extended beyond the two kinds of case identified by Dixon J in Deatons: first, where the conduct of which complaint is made was done in the intended pursuit of the employer's interests or in the intended performance of the contract of employment or, secondly, where the conduct of which complaint is made was done in the ostensible pursuit of the employer's business or the apparent execution of the authority which the employer held out the employee as having.
However, in Prince Alfred, at [79], the plurality took the following, different, view (citation omitted): Gummow and Hayne JJ considered that recovery against an employer should not be extended beyond what was to be taken as the two kinds of cases identified by Dixon J in Deatons Pty Ltd v Flew, namely where the employee acted in intended pursuit or performance of the contract of employment or where the conduct occurred in the ostensible pursuit or apparent execution of authority which the employer held out the employee as having. With respect, that may be too narrow a view of what was held in that case. As has been explained, there is another aspect to Dixon J's approach, which draws from Lloyd v Grace, Smith & Co. The other basis for liability to which his Honour referred was the "occasion" which the apparent performance of the employment provided for the wrongful, intentional act to be committed. It is that aspect of Deatons Pty Ltd v Flew which is of particular relevance here.
It was submitted on behalf of AH that to be within the course and scope of employment, the relevant act has to be 'in pursuit of what it is that the employee was employed to do.' As is apparent from what is said above, this is too narrow a view.

[16]

Clarke

Before joining AH, Clarke worked for investment bank Goldman Sachs and then solicitors Ashurst.
Clarke was offered employment by AH on 22 November 2013 as a salaried lawyer. He signed acceptance on 2 December 2013. His starting salary was $225,000 per annum.
His time was charged out by AH at $575 per hour (plus GST).
One indication of his seniority is that at least one partner, Jon-Thomas Skene (Skene), was charged out at $675 per hour (plus GST). [11] Jepps, then a senior solicitor and shortly to become a partner, was charged out at $600 per hour (plus GST). Junior solicitors were charged out at $325 per hour (plus GST).
Another is that whilst AH's employment structure did not formally use the designation "Senior Associate", a number of documents emanating from AH describe Clarke as such.
One such document was a letter, apparently written by Mr Jeremy Kriewaldt (Kriewaldt) an AH partner, to a potential client on 29 July 2016 providing a statement of AH's capabilities to assist and described Clarke as a Senior Associate.
Another such document was an engagement letter dated 30 May 2017, written by Kriewaldt, to Bruce Gordon and Birketu in connection with the proposed CBA facility with Ten. Clarke was listed as a Senior Associate at an hourly rate of $575 (plus GST).
Atanaskovic's explanation (which I found unconvincing) for the later letter was: Mr Clarke writing this letter and Mr Kriewaldt not adequately editing it, possibly on the basis that we don't use the expression "senior associate" at AH and never have. It also, I think there's a special name for this sort of thing, "title inflation"? As I understand it the word senior associate is still used with big firms, but it's a long way from its use when I was practising law in big firms, and I suspect when his Honour was practising law in big firms. It now means something like someone who has managed not to get sacked for two or three years, or maybe three or four years, depending on what sort of law firm you're at. I think it's about three or four years at Mallesons and less at other firms. So it's a, it's a now debased currency, the expression "senior associate". I'd have to say when I first saw it, it was brought to my attention by Mr Lancaster. I did ask people within the office what senior associate meant these days and was given the information that it had been the subject of title inflation and was next to meaningless. Certainly as against Mr Farag who only just joined us and hadn't been a solicitor for more than a few months it may indicate a - that Mr Clarke was senior to Mr Farag but it didn't mean very much.
Atanaskovic gave evidence that at no stage did he regard Clarke as a senior lawyer. It is not necessary to consider whether there is a point at which a lawyer may first be described as senior or whether Clarke met such a threshold. The level of responsibility he was given and the nature of the relationship he had with clients of AH can be observed by reference to the work he did and the contact he had with clients of the firm and other persons with whom he came into contact in acting for the clients.
Clarke was plainly entrusted with matters of significant importance to clients of AH. He built up a close working relationship with those associated with the Gordon interests.
As Lancaster pointed out in the context of the meeting with Fort Street and Illyria on 10 April 2017, which Clarke was to attend as a chaperone: So at no stage did Mr Atanaskovic tell me that Brody Clarke or any of his other lawyers were not up to a job. If he had have, they wouldn't have attended. I'm not in the habit of paying $550 an hour for someone who's not up to it.
On 12 December 2013, Tamim Rahman, a solicitor with AH who apparently had carriage of WIN related matters, wrote the following in an email to Lancaster, Collis and a number of other people, including Clarke and Kriewaldt: Dear All I would like to introduce Brody Clarke to the team with all WIN related matters going forward. […] My last day at AH will be on Friday 13 December 2013. I will be leaving all active WIN matters in the very capable hands of Brody, who I am sure you all will get to know in due course. […]
Lancaster says that Atanaskovic promoted Clarke as someone with considerable experience in commercial media transactions. He says that Atanaskovic told him that Clarke had joined them from Goldman Sachs and that he had a wealth of commercial experience and a lot of exposure to Nine's deals.
Collis attributes to Atanaskovic words to the same effect.
Atanaskovic's evidence was that he tried to be complementary, but he never said these things to Lancaster or Collis. It was put that if Atanaskovic had said these things they would not have been true and that it is improbable that the witnesses would have recalled Atanaskovic's statement in the same terms.
I prefer the evidence of Lancaster and Collis. There is no evidence of the extent of Clarke's work at Goldman Sachs. Atanaskovic was no doubt spruiking his abilities. The fact that Lancaster and Collis recall the effect of the conversation in the same terms is, in my view, likely the consequence of the fact that that is what he said. I am not persuaded that Atanaskovic would not have said it, even if it was not true.
Lancaster made the point that Birketu and WIN do not have internal, in-house legal Counsel. He says that, as a result, partners and senior lawyers at AH at times acted like a quasi-in-house legal team for WIN and Birketu in that they were heavily involved in advising on legal matters but also provided commercial advice to assist WIN and Birketu.
Atanaskovic took issue with the suggestion that he saw Clarke as a young "hot shot" because he saw him as of only modest legal talent, he did not receive any increase in remuneration while at AH and was not considered for partnership. I think Atanaskovic thought better of Clarke than he now says.
An inkling of how Atanaskovic, in truth, regarded Clarke is given by the following two events. First, in January 2015, Clarke suffered a default judgment (apparently for rent) at the suit of a lawyer at another firm. Atanaskovic encouraged him to take third party legal advice, put him in touch with other lawyers, and from his own personal company, Habeas Corpus Pty Ltd, paid those lawyers $5000 on account of fees for work done for Clarke on that dispute. Atanaskovic says that he had in mind the firm reimbursing it and that he paid the money to avoid Clarke being distracted by the matter. Second, in February 2016, Clarke said he needed a salary advance to provide his mother with some immediate funds to handle a few matters. He asked Atanaskovic for early payment of his salary. On 19 February 2016, Atanaskovic emailed him: Brody, reluctantly, I will (by this email) ask EMK to arrange this. (Bear in mind that, in the whole history of AH, we have only ever done this once before, and it was again for you.) JLA
The following are some of the matters on which Clarke worked for the Gordon interests.

[19]

Nine Program Supply Agreement

WIN and Nine were parties to a television affiliation Program Supply Agreement (Nine PSA) which they had entered into in 2013. Under the Nine PSA, Nine gave WIN the right to broadcast its premium content and channels across regional Australia. The Nine PSA was plainly a very important agreement for WIN. In about October 2015, WIN and Nine started negotiating a variation of the Nine PSA. WIN retained AH under an engagement letter dated 29 October 2015, it refers to Clarke as one of the employees who will primarily by involved in the matter and gives his charge out rate. On the same day, Birketu retained AH to advise and assist it in connection with the proposal by Birketu to acquire approximately 13.4% of the ordinary shares in Nine. Clarke is referred to as an employee who will be primarily involved in the matter.
Atanaskovic had a significant involvement in the negotiations, which included various email exchanges with Nine executives. Emails were written by Atanaskovic and copied to Clarke.
Lancaster says that Clarke worked directly with Nine's general counsel into the night of 30 December 2015 and the early hours of 31 December 2015 to "get the deal over the line" with Atanaskovic's intermittent assistance. No other AH lawyers were involved. He described Clarke as the lead lawyer working on the transaction.
Lancaster recalled that at about 10.00 pm on 30 December 2015, Atanaskovic said that he was "off to bed" for the evening and that Clarke kept going with the negotiations and amendment of the transaction document on his own.
On 30 December 2015 at 11.20 pm, Clarke emailed revised versions of the proposed transaction documents, copied to Atanaskovic, to Nine's representatives. Atanaskovic responded by email at 11.46 pm with some slight corrections marked-up in red.
The deal was closed on New Year's Eve 2015. Lancaster said that Clarke was the only lawyer he dealt with from about 10.00 pm on 30 December 2015 to the finalisation of the deal.
In answer to a suggestion that his affidavit was apt to give a quite misleading role played by Atanaskovic, Lancaster responded: I'm not discounting John's involvement in the discussions prior to this day, and it was a single day, designed to try and bring about a resolution before Nine turned off the signal. So he played a role. He just decided to go to bed, conscious that they were turning us off the next day.

[25]

Directorship nomination

In January 2016, the question of Birketu nominating a director to the board of Ten arose. Apparently, Bruce Gordon proposed to nominate Clarke for that directorship. At the time, the Chairman of Ten was Mr David Gordon (apparently no relation).
On 12 January 2016, Atanaskovic emailed Clarke: Brody, I had a call from Andrew Lancaster late yesterday morning, and intended to tell you what he said when you were next in the AH office. Putting things very briefly, apparently David Gordon was not enamoured with your nomination, said you were too close to WIN, and asked for another nominee. (Curiously, however, he also apparently said (seemingly implicitly invalidating his stated basis of objection to you) that even AL would be preferable to you.) DG has apparently now gone on vacation overseas for 10 days, and the next Ten board meeting is not till mid February. Bruce Gordon thinks it is best "just to sit out" Ten, that DG will be back (BG and AL both holding the view that Ten if stuck with appointing a Birketu nominee, given their promises to ACMA/ACCC), and (at this stage at least) he intends that Birketu will likely press your appointment then, at least unless itself comes up with some alternative acceptable to Birketu. JLA
He followed up shortly thereafter with another email: BTW Brody, BG apparently mentioned that if you bought a new suit based on your need for one to attend Ten board meetings he is prepared, if the appointment does not occur, to discuss compensation for the cost of the excess suit, since he agrees that no young man should really be expected to own more than one respectable business suit! JLA
Clarke responded: Thanks for the update John. A mild disappointment as it may have been a useful experience, but I am nevertheless honoured that you and BG saw fit to nominate me. A very generous offer from BG but, as you may have surmised, I have not been near a tailor / haberdashery yet, given that I am in a regional area. Based on the feedback from DG, I will adjourn any further suit acquisition until such time as the need arises. Best regards, BJC

[28]

Conclusion on vicarious liability

Much time during the trial was devoted to debating Clarke's level of seniority.
It was evident that Atanaskovic had an acute awareness that Clarke's role and position were critical matters in the assessment of whether Clarke's employment provided the opportunity and was the occasion for his frauds.
A recurrent but unconvincing, and in my view contrived, theme of Atanaskovic's evidence, especially that given under cross-examination, was that Clarke was a junior, mediocre, employed lawyer with no future at AH, who played no meaningful role in any matter on which he was engaged. In one instance Clarke was said to be no more than a "note taker", in another his function was described as "post-box".
There is nothing which suggests that the work Clarke did, including on significant conveyancing transactions, was in any way inadequate or incompetent. As the frauds he perpetrated demonstrate, he was astute as a dishonest lawyer.
I reject Atanaskovic's description of Clarke, and I do not accept that the view he now says he held was the view he held at the time.
Clarke was paid a large salary, almost on par with some AH partners. He was described on a number of occasions by AH as a "senior associate". Clarke was left largely, if not entirely, unsupervised on significant transactions for the Gordon interests, including the Perth property, Crown Street, and negotiation of the Fort Street retainer. He was left alone to finalise negotiations of the terms of the Nine PSA, when Atanaskovic went to bed. He was deputed (in place of Skene) by Atanaskovic to do, with Jepps, research on comparison of past announced swap terms.
Clarke worked on other substantial matters for the Gordon interests. He was involved, with Atanaskovic, for the Gordon interests with respect to the Ten convertible notes and, in particular, the confidentiality agreement.
Clarke conveyed to Birketu financial information provided by Ten. The advice which Clarke gave, from time to time, about the price-sensitivity of the information is hardly "mechanical" or "post-box".
Clarke was nominated to be a director of Ten. In evidence, Atanaskovic made light of the proposal. The following exchange occurred during his cross-examination: Q. It is the case, isn't it, that you promoted Mr Clarke as a potential director of Ten? A. Absolutely not. Q. Who do you say was responsible for promoting Mr Clarke? A. Mr Bruce Gordon against my advice. Q. In saying that Mr Bruce Gordon to your understanding didn't share your views with Mr Clarke as to a junior solicitor with average ability whose career at Atanaskovic Hartnell had, effectively, stalled? A. Could you repeat the question? Q. To your understanding was it that Mr Bruce Gordon did not share your views as to Mr Clarke being a junior solicitor with average ability whose career at Atanaskovic Hartnell had, effectively, stalled? A. Mr Ashhurst, I think you're looking at things in far too confined set of - perimeter. Mr Gordon is a very cagey man. He outwitted people like Silvio Berlusconi, Rupert Murdoch and others regularly. Mr Gordon's views on matters take into account lots of things which ordinary businessmen don't. On the other hand, I did not mind this proposal put forward because I thought it had a snowball's chance in hell of happening. It was just not going to occur. I knew Mr David Gordon for many years. He thought it - I suppose I shouldn't be too direct about Mr Gordon, Mr David Gordon, but he was rather proud of himself being chairman of Ten. He thought very well of his board. He was a bit precious about it. He didn't seem to realise that the board and the company weren't performing that well. I had no doubt that Mr Gordon would think it even offensive that Mr Clarke was suggested as a director, and it just wasn't going to happen. The whole thing, frankly, was just going through the motions. I didn't mind doing it. Mr Clarke was a bit disappointed, but you may have seen some other emails that I might have made light of it, but that's life. I have to say other of my former associates, for example, David Haslingden, who used to work for me at Allens became chairman of Channel 9, so, you know, strange things happen, but I didn't expect this would have any chance of happening and therefore if Mr - have indulged Mr Gordon to let it occur, I warned Mr Clarke the prospects of it occurring were low, as I think is demonstrated by other emails in the chain that this has been taken from. Mr Clarke seemed to live with it and joined with me in the humour of Mr Gordon offering him a free suit. Q. In any event, the fact is that Mr Bruce Gordon was seeking the appointment of Mr Clarke to the board of Ten in January 2016? A. Yes. The firm, on the other hand, had nominated two others, including Tony Hartnell, which was rejected. I can speculate for you for Mr Gordon, as to Mr Gordon's motives but you haven't asked me those questions so I won't. There did not appear to be any other evidence which suggests that Clarke's nomination was not in earnest. This was an instance of Atanaskovic seeking, for his own perceived ends, to diminish Clarke's status.
Clarke was appointed as one of the attorneys under the power of attorney. Atanaskovic's response on being asked, by counsel for the Gordon interests, why Clarke was appointed as an attorney was: Q. Then Brody Clarke. Are you able to tell the Court how it is that Brody Clarke was appointed as an attorney if, in your description, his three years had been nothing more at your firm than undistinguished experience as a lawyer? A. Because that's exactly what would happen - sorry, that's exactly the act that would be occurring in exercise of this power, namely the very mechanical act of applying a signature to a document. However, frankly there was no real prospect of Brody being called upon, and I expected to be the first signature, or be the signatory, but if I fell under a bus Jeremy Kriewaldt would be the next one. Q. Why have Mr Clarke there at all? A. You're a sole trader, you don't probably have as much need to record people, the regard that doesn't make them offended. Mr Clarke did have a number of talents, he may not have been the Einstein of theoretical lawyers, but he was good in practical circumstances. For example, talking to - I'm wondering if I can use this expression - battle-axe female administrators at regulatory authorities. He seemed to have a special talent to persuade them to do things that neither I or Jeremy or Lawson Jeeps [sic] seemed to be able to do. He was also reasonably good, certainly compared with most academically well-endowed lawyers, in organising mechanical things like execution of documents. Therefore, internally within AH I asked Mr Clarke to organise half a dozen documents for signature in multiple copies, and to get ready to exchange them later that evening by email pursuant to what I understand is called email exchange rather than the old-fashioned physical exchange. So as not to insult Mr Clarke I had him added at the end, not in the expectation that he would have any powers, but rather or effectively use any powers, but rather I would or Jeremy would, and he couldn't go off on a frolic of his own as a practical matter because of the need for the other parties who were surrounded by tens of lawyers and other clients, and of course Birketu and WIN were closely involved in the discussions relating to any documents and their change. Unfortunately when you deal with banking lawyers they can always find another I to dot or T to cross, and frankly these documents should have been capable of being executed at the beginning of the week, but they took the very last moment and I think they were finally exchanged about 6 or 7pm on Friday, 30 June. So you needed the power you referred to, i.e. small changes to take place and filling out of blanks. There did not appear to be any other evidence which suggests that Clarke's appointment as an attorney was facile. This was another instance of Atanaskovic seeking, for his own perceived ends, to diminish Clarke's status.
Clarke was involved in responding to the ACMA inquiry. Atanaskovic's response to a suggestion that he was keeping Clarke "in the loop" was: Yes, one, for the education purpose, I mentioned, but, two, you may recall some unkindly comments I made about mid‑level female battle‑axe regulators. One of those battle‑axes was formerly at ACMA. I won't name her but after conversations between myself and the chairman of ACMA eventually she was found employment elsewhere and was replaced by Jenny Briggs. One of the few people that AH could - Ms Briggs was sensible and polite. On the other hand the departed, I'll just for brevity call her, battle‑axe was not one with whom I could sensibly discuss things, not one with whom Jeremy Kriewaldt could sensibly discussed things, not one with whom Lawson Jepps could sensibly discuss things. Mr Skene could because of his super police [sic] nature, but he was in London. I thought that Mr Clarke may have a role given his previous successes with the battle‑axe but since the battle‑axe had departed that possibility didn't need to be explored. There did not appear to be any objective support for the assertion that Clarke was being "educated" or was provided with the material because of "his previous successes with the battle-axe". This was another instance of Atanaskovic seeking, for his own perceived ends, to diminish Clarke's status.
Atanaskovic gave evidence that Gordon did not like Clarke. There was no objective evidence to support this. Clarke played a role in the renovation of Bruce Gordon's home. Bruce Gordon invited Clarke to lunch to see the completed apartment. He directed various enquiries to Clarke directly and nominated him to be a director of Ten.
The Gordon interests regularly instructed AH. AH was, in effect, their in‑house counsel. Clarke built up a rapport with, and was trusted by, Bruce Gordon, Andrew Gordon, Lancaster and Collis. In various instances, including those induced by Clarke's fraud, significant amounts of money were paid on behalf of the Gordon interests on Clarke's say so, without any discernible intervention from any AH partner. Lancaster and Collis acted on Clarke's advice that the claimed set-off amount had to be paid into trust, even though they had doubts about it. This reveals the trust they had in Clarke.
The frauds were made possible because of Clarke's position as a trusted solicitor working for a law firm for a longstanding and valuable client.
Clarke had an involvement, to the knowledge of Atanaskovic and others at AH, in each matter which transpired to be the particular vehicle for each fraud.
It is somewhat difficult to see how it could be said that Clarke's employment did not give him the opportunity for and was not the occasion for the frauds.

[29]

The law

Ostensible or apparent or authority is conferred where a principal represents that another has authority. The principal will be bound as against a third party by the acts of that other person within the authority which that person appears to have, though the principal had not in fact given that person such authority or had limited the authority by instructions not made known to the third party: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 (Pacific Carriers) at 466; Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 at 132-133; Junker v Hepburn [2010] NSWSC 88 at [46]; Bowstead and Reynolds on Agency, 17th ed (2001) Sweet & Maxwell par 3‑005.
Ostensible authority is a manifestation of an estoppel, preventing the principal from disputing the authority: Lepore at 561 [130]-[131] (per Gaudron J).
The representation, by the principal, of authority, when acted upon by the contractor by entering into a contract with the agent, operates as an estoppel preventing the principal from asserting that he is not bound by the contract: Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 (Freeman) at 503 (cited with approval in Pacific Carriers at 466); Credit Lyonnaise Bank Nederland v Export Credit Guarantee Department [1996] 1 Lloyd's Reports 200 at 224.
The holding out is usually implied from conduct, such as where an agent has been equipped with a particular title, status and facilities or where the agent has been armed with a document which, when signed, bears the hallmark of authenticity. In the well-known statement in Freeman, at 503 Diplock LJ articulated it as permitting the agent to act in some way in the conduct of the principal's business with other persons. See, also: Clarey v Permanent Trustee Co Limited [2005] VSCA 128 at [107]; Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Company Pty Ltd (1975) 133 CLR 72 (Crabtree-Vickers) at 80; Pacific Carriers at 466 [36].
Whether the representation is general, or relates specifically to the particular transaction, it must come from the principal: Pacific Carriers at 466 [36]; Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 147 at 187.
In Magripilis v Baird [1926] St R Qd 89, Issacs J said at 91: Where a principal holds out his solicitors as his medium of communication in business negotiations as to the settlement of a lease, their letters on the subject of that business may either absolutely bind him in carrying ostensible authority, or may, in the absence of satisfactory evidence to the contrary, be regarded by a jury as authorised by him.
In Armagas Ltd v Mundogas S.A. [1986] AC 717, Stephenson LJ said at 761 (citation omitted): Usually a servant, as compared with an agent, has a wider authority because his employment is more permanent and he has a larger range of duties […] the agent in an ordinary case is engaged to perform a particular task on a particular occasion and has authority to do whatever is required for that purpose but has no general authority.

[30]

Conclusion on ostensible authority

Deutsche argued that Birketu held Clarke out as having its authority to 'give the payment directions' of 17 August 2017 and 31 August 2017 or 'represent their legitimacy' because he was held out to Deutsche as being 'a conduit of legitimate documents of Birketu'. It argued that Birketu did this by a number of acts and omissions.
First, it said that Clarke was 'held out' as Birketu's conduit with Deutsche in connection with the July extension of the NEC Swap.
Second, it said that Clarke was 'authorised by Birketu to negotiate with Deutsche […] concerning the Ten Swap, including its extension and fees payable in respect of it.'
Third, it relied on Bruce Gordon's statement to Seeto: "Brodie is one of John's guys. He did work for me on my house and he's done some good work for us".
Fourth, it said that Andrew Gordon (who did have authority to give payment directions), by failing to raise any alarm on receiving the 17 August 2017 email, represented to Deutsche that the actions being taken by Clarke, including the giving of the 17 August 2017 payment direction, were authorised by Birketu.
At the outset, it is apt to observe that the only asserted holding out relied on by Deutsche that was in or part of the transactions that comprised the Deutsche frauds is the last of them: Andrew Gordon's inactivity after receiving the 17 August 2017 email.
The substance of Deutsche's conduit submission was that because Birketu authorised Clarke to be the conduit of documents for the NEC Swap extension, it thereby held out that Clarke was an authorised conduit for some other documents in connection with another transaction and that those other documents would be genuine. I did not accept this submission.
Clarke was actually authorised to be Birketu's conduit for executed documentation in relation to the July extension of the NEC Swap. At Collis' request, Clarke conveyed Birketu's intention to extend the NEC Swap and he arranged for the necessary documentation to be signed by Andrew Gordon and Cowley and then transmitted to Deutsche. There was no relevant holding out. Had Clarke not been authorised to convey the executed documents, but had been armed with them by Birketu, Birketu would have conferred ostensible authority on him to convey them.
Clarke's authority in relation to the July extension had been exhausted.
It did not seem to me that by Birketu authorising Clarke to deliver validly executed documents for the purpose of extending the NEC Swap, it could be fairly taken to have been impliedly represented that Clarke had authority to exchange documents for another transaction, let alone one which did not merely extend the life of an existing transaction but altered its parameters in a significant way.
Even less did Birketu hold out that any documents that Clarke may provide in relation to a subsequent transaction would be genuine. Birketu held nothing out as to Clarke's integrity. It, as did Deutsche, simply assumed it. After all, he was a lawyer working at AH. He was not in the employ of Birketu. He had no general authority. The documents that Andrew Gordon actually signed on 17 August 2017 did not arm Clarke. Had he conveyed those, there could not have been a fraud. Clarke armed himself with his own forgeries.
As to Clarke's involvement in the negotiation of the extension of the Ten Swap and fees payable to Deutsche, the same considerations apply. It was a separate transaction. But, in addition, the evidence did not reflect any holding out in respect of the Ten Swap that Clarke had any authority to negotiate or agree anything on behalf of Birketu.
Deutsche unilaterally undertook not to charge fees under the NEC Swap referable to the time of Ten's voluntary administration. The most Deutsche could fairly have taken from Clarke's communications was that Clarke was authorised to ask.
Bruce Gordon's statement about Clarke being "one of John's guys" held nothing out with respect to Clarke's authority on any subject.
It is clear that neither the contents nor the implications of the 17 August email reached Andrew Gordon's mind. I did not think that his inaction is fairly to be characterised as a holding out with respect to Clarke's authority.
Even if there was, contrary to my view, some holding out as to Clarke's authority in relation to the payment directions, at no time did Birketu hold out anything that can be fairly characterised as a representation that Clarke had authority to alter the account payment details which Deutsche had on file and which had been provided by Birketu on 19 April 2016.
The reality is that it was not Birketu who held out to Deutsche that Clarke had authority in relation to the NEC Swap, but Clarke himself.
Finally, whatever implied holding out there may have been by Birketu, Deutsche did not rely on it. It insisted, by way of a call back, on a direct express communication of authority. The call back misfired.
It is apt to record that AH submitted that Clarke did not have Birketu's ostensible authority to deal with Deutsche. The effect of this contention succeeding was that Deutsche would be liable to Birketu and would need to establish that AH was vicariously liable to it for the Deutsche frauds. If, on the other hand, there was ostensible authority, Birketu, AH's client, would fail against Deustche on its simple lack of mandate case and would have to establish AH's vicarious liability. It can be readily appreciated that it was inevitable that AH's forensic decisions had potential effect on its client in the context of ostensible authority.

[31]

The oral undertaking

Whether Atanaskovic gave the oral undertaking is a narrow question.
Lancaster and Atanaskovic gave evidence and were cross-examined during the trial on a range of issues.
My assessment of who should be believed on the oral undertaking has been made having regard not only to their evidence on that topic, but having regard to their evidence as a whole.
Atanaskovic was an unsatisfactory witness whose evidence I do not accept where it conflicted in a material way with that of Lancaster (and, for that matter, Collis) and, in any event, where it is not is supported by objective contemporaneous material.
Counsel for AH put to Lancaster that what Atanaskovic said was that he would not charge for the freezing order application or the various steps that had been taken in order to prevent further distribution of the money and find out where it was. Lancaster denies this.
Atanaskovic says that he did not say anything at the lunch concerning the fees payable as regards the Deutsche claims against Birketu, this having been covered in previous extensive discussions he had with the Gordons and the AH engagement letter dated 16 November 2017. He says that the Deutsche matter had not come up at the lunch, so the position relating to it remained unchanged.
On 10 January 2018, at 10.58 am, Lancaster emailed Bruce Gordon, copied to Judith Gordon, noting what Atanaskovic had said: Hi Bruce. As discussed I am emailing to make a record of two things that John Atanaskovic said at lunch with you and I yesterday at Q Dining. JLA said in regards to our claim against him for the roughly $1.025m, that he was in talks with his insurer later this week with a view to having it resolved by next week. Importantly he said that if his insurance company did not pay the $1.025m (or even if they only pay part of the amount) then JLA would pay the $1.025m ( or I took it the part that the insurance company didn't pay). JLA made the point that Birketu/WIN would not be out of pocket. JLA later expressed to us that AH would not be charging Birketu for any of the work done by AH in defending Birketu against the Brody/Deutsche fraud situation and made it clear that this was because that matter was created by a member of his staff. I will make Craig Powell aware of the conversation. Regards Andrew
There is no room to ascribe what Lancaster recorded to error or confusion on his part. If, as Atanaskovic would have it, none of these things were said, Lancaster's email is a dishonest concoction. Appropriately, no such thing was put to Lancaster. There was no proper basis to do so. The cross‑examination of Lancaster, on the topic, went no higher than to suggest that Lancaster was confused.
Lancaster's version fits more comfortably with the inherent probabilities. The Gordon interests were an important and long-standing client of AH. The fees in dispute in this case alone are a significant amount of money. The following exchange occurred between counsel and Atanaskovic during cross‑examination: Q. Yes. That subject, Bruce Gordon Quay Grand, I want to suggest to you would have brought to your mind immediately the following. Firstly, a very important client of the firm, do you agree with that? A. You keep on saying a very important client of the firm. A significant client of the firm, on the fact there are very important clients and Mr Gordon possibly didn't figure.
A catastrophic fraud, of which the Gordon interests were the victim, at the hands of an AH employee, had been discovered. The commercial, moral and ethical imperatives of the situation support Lancaster and undermine Atanaskovic.
There is no logical or rational reason why a concession by Atanaskovic in these circumstances would be limited to work done on the freezing order and AH's internal investigation. The Deutsche frauds were as much a product of Clarke's frauds as were the other frauds.
The reference in the 10 January 2018 email to the $1.025 million which Atanaskovic said he would pay if his insurer did not is plainly a reference to the disbursement frauds. Far from paying the amount, the Gordon interests had to sue for it.
Where a party seeks to rely upon spoken words as a foundation for a cause of action the conversation must be proved to the reasonable satisfaction of the Court. This means that the Court must feel an actual persuasion of its occurrence or its existence. In the absence of some reliable contemporaneous record or other satisfactory corroboration, a party may face serious difficulties of proof. Such reasonable satisfaction is not a state of mind that is obtained or established independently of the nature and consequences of the fact or facts to be proved. The seriousness of an allegation made, inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question of whether the issue has been proved to the reasonable satisfaction of the Court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony, or indirect inferences: Briginshaw v Briginshaw (1938) 60 CLR 336 at 362; Helton v Allen (1940) 63 CLR 691 at 712; Rejfek v McElroy (1965) 112 CLR 517 at 521; Watson v Foxman (1995) 49 NSWLR 315 at 319.
The sensation of feeling an actual persuasion, after a contest, that an event has happened or that something exists is one which is well known and recognised by experienced trial judges for what it is.
I feel an actual persuasion that the conversation as recounted by Lancaster took place.

[32]

Should the investigation invoice fees be recoverable?

AH argued that the oral undertaking was too vague to be effective. I reject this submission.
An undertaking not to charge for work done in defending Birketu against Clarke and the Deutsche frauds situation is not vague. The plain meaning of the words used by Atanaskovic was that AH would not charge for working to protect its clients' position, which had resulted from the fraud of AH's own employee. Additionally, the undertaking was given in a particular context. The only scope for AH to charge for work within that category was under the investigation retainer. The undertaking relates to not charging for work done under that retainer.
AH also argued that any such undertaking was not underpinned by consideration. Birketu did not in its submissions seek to identify any. For reasons which are set out below, it seems to me that the fact that a solicitor's undertaking is not legally enforceable as a contract does not mean that it has, or should be given, no effect.
Wall identifies a series of charges covered by the investigation invoice which are for work done by AH in investigating its own position of conflict.
The investigation invoice includes the following items: • Drafting and revising letter on 24 and 25 October 2017 for Birketu to send letter to Deutsch [sic] Bank on 25 October 2017 regarding alleged conflict issues; • Drafting, finalising and sending letter to Herbert Smith Freehills on 27 October 2017 regarding alleged conflict issues and alleged authority; […] • Reviewing and considering letter received from Herbert Smith Freehills on 8 November 2017 regarding alleged authority and NSWSC proceedings; […] • Drafting, finalising and sending letter to Herbert Smith Freehills on 9 November 2017 regarding alleged ostensible authority and NSWSC proceedings; […] • Drafting, revising, finalising and sending letter to Herbert Smith Freehills regarding authority and s 129 claim made by Deutsche Bank; • Reviewing and considering letter received from Herbert Smith Freehills on 8 December 2017 regarding alleged ostensible authority, negligence by Deutsche Bank and alleged vicarious liability;
The total fees charged are derived from AH's internal time-recording system, Affinity. The following are examples of entries for matter 5983:

25 October 2017 - Sophocles (2.7 hours; $1,650.21 (excl. GST)): Discussion with Jeremy Kriewaldt; considering issues relating to conflict allegations raised by Deutsche Bank and its lawyers; reviewing relevant case law; drafting and circulating note on the subject.
31 October 2017 - Atanaskovic (5.50 hours; $4,482.03 (excl. GST)): Email from JAS and email reply; emails to others at AH re actual and ostensible authority of AH and BJC; discussions with BXO re searching for emails from and to BJC and people at DB and/or Birketu; emails from and to J Gordon: phone conference with B Gordon and J Gordon; preparing letter to Luke Hastings (3 pages) replying to letter from LH (2 pages), reviewing with AH people and despatching; reporting to B Gordon (with lunch with J Adgemis).
13 November 2017 - Skene (6.00 hours; $3,667.12 (excl. GST)): Email from JLA; review matter materials and draft memo on (i) possible grounds for negligence claim vs Deutsche Bank, and (ii) applicability of ss.129- 129 of Corporations Act to fraudulent amendments to Share Swap agreement and forged 'direction to pay'.
9 January 2018 - Enderby (3.90 hours; $1,182.99 (excl. GST)): Discussion with JLA regarding ostensible authority and the operation of s 129(4) of the Corporations Act. Subsequent to that discussion, research and preliminary memo writing on the operation of s 129(4) and judicial consideration of that provision. And research regarding the ability of a third party to assert that a solicitor/paralegal has the ostensible authority of a client.

There is also the following entry:

24 January 2018 - Enderby (1.00 hour; $303.33 (excl. GST)): Discussions with JLA and subsequent review of BJC's telephone and VM records regarding the purchase of the second unit in the Quay Grand. In evidence, Springthorpe conceded this to be an error. Although the amount of the charge is trivial, is it symptomatic of the difficulties attendant on the investigation retainer.

These entries are capable of being characterised as charges for work done for the benefit of AH, rather than Birketu, where AH's interests were adverse or potentially adverse to the interests of Birketu. If they are, a significant question as to whether they are unfair and unreasonable arises.
The important question to which my finding that the oral undertaking was given gives rise is whether the Court should, in the circumstances in which it was given and exercising its supervisory jurisdiction, give effect to that undertaking or refuse to lend the Court's powers to enforce the investigation retainer, in whole or in part. To do otherwise would be to permit a solicitor to act contrary to his undertaking to his client in what might be described as exceptional circumstances. How the Court should deal with this is a matter for the Court.
I do not consider that the fact that the undertaking is not enforceable as a contract is determinative, although it may be relevant.
I propose to give the parties the opportunity to be heard further on whether the Court can and should exercise its supervisory jurisdiction to withhold, directly or indirectly, enforcement of the investigation retainer.
In the meantime, AH will have judgment against Birketu and WIN for the amount claimed less the investigation invoice amount (excluding the disbursements and less $333.66), which on my calculation is $928,982.
If the Court concludes that the oral undertaking should not be given effect to, the question of referral to a referee does not arise and the value of the potentially objectionable line items need not be determined. Consideration of that question should accordingly be deferred.

At a glance

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Judgment (35 paragraphs)

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Legislation Cited (1)

Cases Cited (20)

Cited By (11)