Plaintiff v Defendants

... took place between February, 1986 and May, 1990. Thus there were repeated acts of dishonesty over an extended period. While a senior partner in an Accountancy firm, he defrauded a considerable number of people who were his clients, of some $3.3M approximately, with a net loss of $2.6M approximately.

The people defrauded comprised a variety of persons and companies. They trusted him with their financial affairs and some were basically ruined or substantially affected by his dishonesty. The money he obtained was mostly lost on the Future's market and on gambling at the races. Some of the money was used to pay other persons who had been defrauded, and it was to some extent robbing Peter to pay Paul, and also to reduce overdrafts and invest on the Share market.

He went to the United States on 20th May, 1990, ostensibly for a holiday but stayed on in America and evaded arrest for some two years. He remained in the US from May, 1990, until his arrest by the FBI on 1st May, 1992.

...

Further a huge amount of money was defrauded and lost. There was gross culpability and his conduct may well be more culpable and serious by reason of his defrauding a large number of individuals rather than a large corporation or even the Commonwealth, as the victims are more affected by their loss.

**2 The sentencing judge accepted that, prior to these offences being committed, Mr Mischel had been of good character, had no relevant prior convictions, and was genuinely remorseful. Notwithstanding these and other mitigating factors, the sentencing judge noted that Mr Mischel committed the offences while his accounting practice 'was very prosperous and he was not in any need.' He also emphasised that the offences 'involved gross and systematic breaches of trust'.

3 In a recent proceeding in this Court, a client alleged that Mr Mischel used money held on trust for the client in unauthorised trading and incurred losses of millions of dollars. In August 2011, Mr Mischel consented to judgment against him for $7 million plus interest of $1.194 million in that proceeding. Prior to judgment, freezing orders had been sought against Mr Mischel's assets. In that context, he swore affidavits designed to create a false impression as to the circumstances in which $2.4 million was lent to companies associated with him and secured over their assets.

4 As appears below, there are other matters which reflect poorly on Mr Mischel's general honesty and, consequently, his credibility as a witness of truth.

5 The result in this case depends on whether the Court should accept Mr Mischel's evidence as to the circumstances in which he says disputed documents were prepared and executed.

6 The fact a witness has been dishonest in the past, generally lacks credibility, has previously lied on oath, or tells lies in the course of a proceeding, does not mean that the witness's evidence must all be rejected. Each factual issue must be determined according to the requisite standard in the context of the whole of the evidence - including, of course, objectively ascertained facts, or evidence from other credible witnesses, which corroborates the evidence of the otherwise impugned witness.

7 Where serious allegations of fraud or other dishonesty are made in a civil case, the civil standard of proof requires the party making the allegation to persuade the Court of the fact contended for according to what is often described as 'the Briginshaw standard'. It is now accepted that the conceptual effect of this standard continues to apply under the Uniform Evidence Act, particularly under s 140(2)(c) which requires the Court, in determining factual issues on the balance of probabilities, to take into account 'the gravity of the matters alleged'.[1] So, when an allegation of fraud or other dishonesty is made in a civil proceeding:**

The fact finder must feel an actual persuasion of the occurrence or existence of the fact in issue before it can be found. Where ... the standard of proof is to be applied to circumstantial evidence, satisfaction as to a reasonable and definite inference is required.[2]

8 As the majority stated in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd & Ors:[3]

The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary 'where so serious a matter as fraud is to be found'. Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a Court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct.[4]

**9 The plaintiff is Ballantyne Suites Pty Ltd. It is owned by Mr Mischel's two children, Bradley and Kelly Mischel. The first defendant is Ballantyne Chambers (In liquidation). Its liquidator, Samuel Richwol, is the second defendant. For convenience, I will refer to them as 'the defendant' and 'the liquidator' respectively.

10 Mr Mischel was declared a bankrupt on 25 October 2011. Prior to that time, he was the defendant's only director.

11 The defendant was the original trustee of two unit trusts, which Mr Mischel established in 2005 to own real properties on his behalf. Mr Mischel was the only unit holder. The plaintiff claims that: (1) on 6 June 2006, Mr Mischel transferred the units in the trusts to the trustees of two discretionary trusts, which he had established for the benefit of his children on that day; (2) in October 2011, the trustees of the children's trusts appointed the plaintiff to replace the defendant as the trustee of the unit trusts; and (3) the defendant is therefore obliged to transfer the legal ownership in the two properties to it as the new trustee.

12 The defendant denies the plaintiff's claims. The defendant contends that the children's trusts did not exist in 2006, and that the plaintiff's claims are based on a series of documents which Mr Mischel fraudulently concocted and back-dated in July or August 2011 for the purpose of avoiding the operation of the five year relation-back period in s 120(1) of the Bankruptcy Act 1966 (Cth). If the disputed documents are genuine, and were executed in June 2006, the units in the two unit trusts are owned by the trustees of the children's discretionary trusts. If the documents are concoctions, Mr Mischel remains the unit holder in the trusts and the units form part of his bankrupt estate.

13 The Court must determine the authenticity of these documents in the absence of the originals being available for inspection or forensic examination. Mr Mischel says that he destroyed them as part of a document destruction program which began in about 2009, which he says was designed to shed his professional offices of large volumes of paper and streamline his office as a 'paperless office'. Further, the fact-finding task is made more difficult by the fact there is no witness to the execution by Mr Mischel of the transfers of the units from him to his children's trusts, or to the unit-holding certificates alleged to have resulted from those transfers.

14 In order to resolve the factual issue for determination, it is necessary to set out the objective facts in more detail and then, in that context, to consider the rival submissions as to whether the documents in issue are genuine.**

**15 After his release from prison in 1996, Mr Mischel commenced a consulting business which ultimately became known as Mischel & Co Pty Ltd. Mr Mischel ran that business until 25 October 2011, when he was made bankrupt. Prior to his bankruptcy, Mr Mischel built up substantial assets on his own account or through corporate entities controlled by him. The circumstances leading to Mr Mischel's bankruptcy are referred to below.

16 Mischel & Co conducted its business from premises at 27 Ballantyne Street, South Melbourne. The premises comprise two units and accessory units. They were acquired by the defendant in 2005 as trustee of the two unit trusts:

(1) as to unit 1 and accessory units, in its capacity as trustee of the Ballantyne Property Suite 1 Unit Trust ('Unit 1 trust');

(2) as to unit 2 and accessory units, in its capacity as trustee of the Ballantyne Property Suite 2 Unit Trust ('Unit 2 trust').

17 I will collectively refer to the Unit 1 trust and the Unit 2 trust as 'the unit trusts', and to the properties which they own as 'the properties'.

18 Mr Mischel was the initial unit-holder of all of the units in each of the unit trusts.

20 Mr Mischel gave evidence that he arranged for the preparation and execution of two discretionary trust deeds on 6 June 2006. By those deeds, Elaine Smith (Mr Mischel's bookkeeper at the time) established two trusts for Mr Mischel's children:

(1) The Kelly Mischel Discretionary Trust ('Kelly's trust'). A company owned and controlled by Mr Mischel, Commerce Consulting Group Pty Ltd, was appointed as the trustee of Kelly's trust.

(2) The Bradley Mischel Discretionary Trust ('Bradley's trust'). Another company owned and controlled by Mr Mischel, Mischel Investments Pty Ltd, was appointed as the trustee of Bradley's trust.

21 I will refer to Kelly's trust and Bradley's trust collectively as 'the children's trusts'.

22 As appears below, Mr Mischel said in an affidavit, and in his witness statement, that Commerce Consulting acted 'from time to time ... in various capacities for clients of Mischel & Co Pty Ltd such as bare trustee ...'[5] In oral evidence, he said also that Mischel Investments sometimes performed similar roles for clients.

23 Mr Mischel gave evidence that, on the same day that the children's trusts were established, he transferred his units in the unit trusts to the children's trusts by transferring the units in the Unit 1 trust to Kelly's trust and the units in the Unit 2 trust to Bradley's trust. Mr Mischel gave evidence that he effected these transfers pursuant to unit transfers dated 6 June 2006 (the 'unit transfers') and that he recorded the resulting unit holdings by unit-holding certificates bearing the same date (the 'unit certificates'). As I have said, Mr Mischel was the only signatory to these documents, and the originals have been destroyed.

24 Mr Mischel gave evidence in his witness statement that he personally lodged the trust deeds for the children's trusts with the State Revenue Office on 19 June 2007, more than a year after they were executed. He said that it was his normal practice to personally lodge documents with the State Revenue Office ('SRO') and that, on this occasion, he also lodged three trust deeds for clients of his practice, making a 'bundle' of five trust deeds lodged by him that day. He said the bundle comprised:

(1) Kelly Mischel Discretionary Trust dated 6 June 2006;

(2) Bradley Mischel Discretionary Trust dated 6 June 2006;

(3) The G & W Boocock Family Trust dated 6 June 2006;

(4) The Angelo Diplaris Family Trust dated 6 June 2006; and

The original trust deeds for the Angelo Diplaris Family Trust and the Stone-Cahn Unit Trust, with original SRO imprints dated 19 June 2007, are in evidence. An independently certified copy of the trust deed for the G & W Boocock Family Trust, with an SRO imprint dated 19 June 2007, is also in evidence. As I have said, only PDF copies of the trust deeds for the two children's trusts are in evidence.

25 If Mr Mischel's evidence about lodgement is true, two other deeds in the bundle were also dated 6 June 2006, and the fifth deed was dated 15 June 2007. Mr Mischel described the reason for late lodgement:**

My attendance at the SRO for lodgement of the G&W Boocock Family Trust, The Angelo Diplaris Family Trust and the Stone-Cahn Unit Trust was undertaken on behalf of clients of my accounting practice at the time. The Stone-Cahn Unit Trust was the document that spurred my attendance at the SRO, as the other four trust deeds were held at 27 Ballantyne Street, South Melbourne, awaiting my next visit to the SRO. Nobody required the Trust Deeds to be returned to them and therefore they were retained at 27 Ballantyne Street, South Melbourne, until I took them to the SRO to be stamped.

26 Mr Mischel said also that he could recall the precise circumstances of lodgement:

At the time of lodgement of the Trust Deeds on 19 June 2007, I recall that the deed on top of the bundle was the Stone-Cahn Unit Trust dated 15 June 2007. At the time of lodgement, I was given a receipt for the lodgement of the 5 Trust Deeds.

**That evidence was obviously directed at giving a reason why the SRO may have erroneously recorded the date of all five deeds as '18 June 2007 - a matter discussed below.

27 Mr Mischel gave evidence that the originals of the trust deeds for the children's trusts, the unit transfers and the certificates were all destroyed at his direction in the course of a program instituted by him in about 2009 to make his office a 'paperless office'. For convenience, I will refer to these documents as 'the disputed documents'. Prior to destruction, PDF copies were made.

28 In 2009, Mr Mischel and Mischel & Co were sued by two ex-clients, Mr Gloss Pty Ltd and Knowledge Services Pty Ltd - companies owned and controlled by Raymond Malone (the 'Mr Gloss proceeding'). They made serious allegations against Mr Mischel, to the general effect that between late 2007 and mid 2008 Mr Mischel invested millions of dollars of their money in unauthorised investments, resulting in a loss of millions of dollars.

29 Prior to the trial of the Mr Gloss proceeding, the plaintiffs in that proceeding obtained an ex parte freezing order against Mr Mischel on 13 December 2010. Mr Mischel was ordered not to remove from Australia or in any way dispose of, deal with or diminish the value of his Australian assets below an unencumbered value of $7.94 million. He was also ordered to swear and serve an affidavit informing the plaintiffs in that proceeding of:**

all your assets, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of your interest in the assets ...[6]

30 For the purposes of the freezing order, 'your assets' was defined to include:

(i) all your assets, whether or not they are in your name and whether they are solely or co-owned;

(ii) any asset which you have the power, directly or indirectly, to dispose of or deal with, as if it were your own (you are to be regarded as having such power if a third party holds or controls the asset in accordance with your direct or indirect instructions); and

(iii) the following assets in particular ...[7]

**31 The order also defined the concept of value of assets: 'the value of your assets is the value of the interest you have individually in your assets.'[8]

32 Pursuant to the freezing order, Mr Mischel swore, filed and served affidavits concerning his assets and in opposition to the continuation of the freezing order. The defendant contends that, in the course of the affidavits, Mr Mischel had the opportunity to disclose the existence of the children's trusts, and to contend that the value of his interest in the assets of those trusts was nil - because he had ceased being a unit-holder in the unit trusts in June 2006. The defendant contends that Mr Mischel took a different course, claiming the unencumbered value of the properties as his own on the one hand while, on the other hand, claiming that other assets owned by other trustee companies under his control were beneficially owned by third parties. Further, the defendant contends that Mr Mischel deliberately sought to convey a false impression in the affidavits as to the circumstances in which encumbrances were placed on his assets by Zigmo Australia Pty Ltd. Zigmo's role is described below. These matters are expanded upon below.

33 The trial of the Mr Gloss proceeding was heard by another judge of this Court in 2011. During the trial, Mr Mischel conceded liability for misrepresentation, breach of retainer and breach of fiduciary duties. On 9 August 2011, Mr Mischel consented to judgment against him in the sum of $7 million and interest of $1.194 million. The trial had not concluded at this time, and the Court was not required to make any finding of fact.

34 Before the consent judgment in the Mr Gloss proceeding, the plaintiffs in that proceeding had commenced another proceeding against Mr Mischel, companies related to him including the defendant, and Zigmo (the 'Zigmo proceeding'). The plaintiffs in the Zigmo proceeding sought to set-aside various loans, mortgages, fixed and floating charges, and guarantees relating to alleged loans made or arranged by Zigmo to Mr Mischel and related companies. They alleged that the loans and securities should be set aside pursuant to s 172 of the Property Law Act 1958 (Vic), as entered into with intent to defraud the plaintiffs in the Mr Gloss proceeding. On 20 October 2011, Mr Mischel and the other defendants in the Zigmo proceeding consented to judgment in the Zigmo proceeding, but with a denial of liability. By the consent judgment, the alleged loans by Zigmo to the Mischel interests, and all securities for those loans, were ordered to be void ab initio and unenforceable. Mr Mischel gave evidence that he did not consent to judgment in the Zigmo proceeding because he, his companies and Zigmo did not have a good defence, but only because they did not have the funds to defend the Zigmo proceeding - as evidenced by his bankruptcy a few days later.

35 Mr Mischel was made bankrupt by order of the Federal Magistrates' Court on 25 October 2011. Shortly before that, in September 2011, he telephoned the SRO and asked an officer what records the SRO kept in relation to the bundle of five trust deeds he lodged on 19 June 2007. He gave evidence that he was told that all five deeds were recorded by the SRO as having been executed on 18 June 2007. There is no evidence that the SRO in fact kept any record of the names or dates of execution of any of the five trust deeds lodged on 19 June 2007; the SRO has since stated that it has no record of any information about the deeds for the two children's trusts; and I infer that the SRO has no relevant information about the other three deeds in the bundle. It is unnecessary to decide whether Mr Mischel was in fact given incorrect information or whether he invented a story of having been so informed so as to justify or explain his letter sent to the SRO on 29 September 2011 referred to below.

36 Following this conversation, Mr Mischel wrote to the SRO on 29 September 2011. In his letter, he sought to have the SRO amend its records - to record that the trust deeds for the children's trusts were dated 6 June 2006. I infer that Mr Mischel's intention at the time was to prepare for his impending bankruptcy. Having regard to the documents and events referred to below, no other inference is reasonably open.

37 In anticipation of his bankruptcy, Mr Mischel arranged for him and his children to execute documents dealing with the unit trusts and the children's trusts:

(1) On 2 August 2011, during or in anticipation of the trial of the Mr Gloss proceeding, and after a family meeting, the following documents (the 'August documents') were executed -

(a) a deed removing Commerce Consulting as the trustee of Kelly's trust, and appointing Bradley as trustee in its place;

(b) a deed removing Mischel Investments as the trustee of Bradley's trust, and appointing Kelly as trustee in its place; and

(c) a deed providing that the defendant was to be removed as trustee of the unit trusts upon nomination of a new trustee no later than 31 October 2011.

(2) On 7 October 2011, after the consent judgment in the Mr Gloss proceeding and another family meeting, Mr Mischel arranged for the following further documents (the 'October documents') to be executed:

(a) a deed removing Bradley as trustee of Kelly's trust, and appointing Babinda Pty Ltd as trustee in his place. Babinda is a company owned and controlled by Kelly;

(b) a deed removing Kelly as trustee of Bradley's Trust, and appointing Glenapp Pty Ltd as trustee in her place. Glenapp is a company owned and controlled by Bradley; and

(c) a deed removing the defendant as trustee of the unit trusts and appointing the plaintiff as new trustee in its place, effective on 31 October 2011.

38 On 24 October 2011, Mr Mischel resigned as a director of the defendant, Mischel Investments and Commerce Consulting Group, the previous trustees of the unit trusts and the children's trusts.[9]

39 Following Mr Mischel's bankruptcy on 25 October 2011, the defendant was placed in liquidation in February 2012. The plaintiff requested the liquidator to transfer the Ballantyne Street properties to it as new trustee of the unit trusts. The liquidator refused, on the principal ground that he was not satisfied that the unit transfers from Mr Mischel to the trustees of the children's trusts are genuine.

40 Against this factual background, I proceed to consider the issue for determination.**

**41 It was submitted on behalf of the plaintiff that, even if the Court concludes that Mr Mischel lacks general credibility, the Court should nevertheless accept Mr Mischel's evidence that the trust deeds for the children's trusts, the unit transfers and the unit certificates were executed by him on 6 June 2006 and are genuine. It was contended that the Briginshaw standard of proof had not been satisfied by the defendant because the Court should not be actually persuaded that Mr Mischel concocted and back-dated the documents. Particular reliance was placed on the following matters in support of Mr Mischel's oath on this issue.

42 First, the evidence of Ms Smith, the bookkeeper who established the children's trusts, that she signed many trust deeds as settlor in the course of her employment, that she had a general practice of checking the date on trust deeds she signed to confirm that the date 'matched the actual calendar date', and that she has no reason to believe that she did not undertake 'this process' when executing the trust deeds for the children's trusts. On this basis, it was contended that the Court should find that the trust deeds for the children's trusts were in fact established on 6 June 2006 - the date on the copy trust deeds.

43 However, if a fraud such as that postulated has been perpetuated, Ms Smith's evidence of her general practice when signing trust deeds would be no answer to the allegation.

44 Second, reliance was placed on the copy SRO imprints appearing on the PDF copies of the deeds for the children's trusts, and on the other three trust deeds in the bundle which were stamped by the SRO on 19 June 2007. Counsel for the plaintiff emphasised that the SRO 'Doc ID' numbers on the five deeds in the bundle were all within the same numerical sequence and range - from 2216044 to 2216049 (with only 2216048 missing from the sequence). As appears below, the defendant answers this contention by submitting that it was a simple process to lift the image of an original SRO imprint from one document, to place it on another document, and then copy the second document 'so that you can't tell that it's been done'. This was conceded by the plaintiff.

45 Third, on the assumption that the first submission was accepted and the Court finds that the children's trusts were established on 6 June 2006, the plaintiff contends that this fact provides strong corroboration for Mr Mischel's evidence that the unit transfers and certificates were also signed on 6 June 2006. It was contended that it is unlikely that Mr Mischel would have established the children's trusts on 6 June 2006 without some transaction in mind, such as those trusts acquiring assets to comprise the trust fund. After all, so the argument ran, there is no point in establishing a trust to hold a meagre settled sum of $100. I accept that, in the usual course, trusts (unlike 'shelf companies') are not established for no commercial reason. However, this is far from the usual case. Moreover, as appears below, there is no contemporaneous record that the children's trusts were in fact established on 6 June 2006; or, indeed, any time before 2 August 2012. This contention is no answer if the Court finds that the children's trusts were not created on 6 June 2006.

46 Fourth, in answer to the defendant's alternative contention that the deeds for the children's trusts were executed on 18 June 2007, the plaintiff relies upon the lack of any suggested motive for Mr Mischel to back-date the trust deeds for the children's trusts at that time, in particular as at 19 June 2007 when Mr Mischel says he lodged the trust deeds with the SRO. Of course, this submission depends upon acceptance that the children's trusts were in fact established by no later than 19 June 2007 and that the SRO imprints are genuine. If that is not the case, and the copy trust deeds have been fraudulently concocted some time afterwards, Mr Mischel's motives are obvious. For example, once Mr Mischel had conceded liability in the Mr Gloss proceeding, he had an obvious motive for back-dating the trust deeds for the children's trusts, the unit transfers and the unit-holding certificates; so as to prevent the value of the units in the unit trusts forming part of his bankrupt estate. The timing of Mr Mischel's letter to the State Revenue Office on 27 September 2011, in which he endeavoured to have the SRO alter its records of the dates of the trust deeds for the children's trusts, is consistent with that motive; as are the August documents and the October documents - which were admittedly executed with Mr Mischel's impending bankruptcy in mind.

47 In determining whether the disputed documents are genuine, I have considered the following matters. Some of the matters bear on Mr Mischel's general credibility, some concern the probabilities of the facts at issue, and some are relevant to both general credibility and the probabilities.

48 First, Mr Mischel has a history of dishonesty. He has been convicted of serious criminal offences involving dishonesty of a serious kind. Further, those offences were callous, showing total disregard for the interests of clients who placed trust in him. I infer that Mr Mischel is a person who would take whatever steps necessary to suit his financial interests, including steps to reduce the assets of his bankrupt estate so as to defeat claims by creditors and benefit himself or his family in their stead.

49 Second, I reject as entirely implausible Mr Mischel's explanation for destroying original trust deeds and other formal documents such as unit certificates. The defendants' liquidator, Mr Richwol, gave credible evidence, consistent with general commercial experience, that:**

I am not aware of any practice amongst accountants whereby original documents such as trust deeds and unit transfers are destroyed to create a 'paperless office'. I have been an accountant and liquidator for 40 years and have never in all my professional life heard of an accountant who deliberately destroys important records, such as trust deeds, deeds for the removal and replacement of a company as trustee, and transfers of units in unit trusts.

**50 Third, Mr Mischel has previously given false evidence on oath. Mr Mischel made an obviously false declaration in support of an application for a new passport. This was after Mr Malone had taken his passport when he discovered that Mr Mischel had lost millions of dollars of his money in unauthorised investments. Although Mr Mischel knew precisely when Mr Malone took his passport, and why he had taken it, he signed a passport application declaring that he had lost his passport (and not had it stolen) and did not know when he had lost it. He explained why he had made these false statements in an affidavit sworn 21 December 2010 in the Mr Gloss proceeding. He said that he telephoned the Department of Foreign Affairs and spoke with an officer, that he explained the broad circumstances in which his passport had been handed over to Mr Malone, and that the officer informed him that he should apply for a new passport. In oral evidence, he said that he completed the passport application 'exactly' how he had been told to 'go about it' by the Department officer. I reject his evidence as implausible. It may be that the officer told him to apply for a new passport on the basis that Mr Malone had stolen his current one, but it is most unlikely that an officer who had been given the true facts would have advised him to apply on the basis that his passport had been lost - and in no case is it plausible that Mr Mischel would have been told to state that he did not know when his passport had been taken.

51 Fourth, Mr Mischel has previously given sworn evidence which was deliberately misleading:

(1) On 7 February 2011, Mr Mischel swore an affidavit in the Mr Gloss proceeding in compliance with, and in opposition to the extension of, freezing orders made against him and related companies. For the reasons appearing below, I find that this affidavit was deliberately misleading, because it does not disclose the source of $2.4 million purportedly lent by Zigmo to Mr Mischel and companies associated with him, including the defendant as trustee of the unit trusts, and secured by their assets.

(2) In an earlier affidavit sworn 21 December 2010, Mr Mischel had disclosed the $2.4 million loan and securities as part of his evidence that he and all of the companies controlled by him had a net deficiency of liabilities over assets. The genuineness of the Zigmo loans and securities was challenged at a hearing on 22 December 2010. In the context of this contention, Mr Mischel gave detailed evidence in his February 2011 affidavit about the Zigmo loans. In that affidavit, he gave the clear impression that Zigmo was an arms-length financier which, through its chief executive Bryan Lukav, arranged funding for Mr Mischel and his interests 'through [Zigmo's] own clients.' In that context, Mr Mischel gave the following evidence:**

Following the hearing in this matter on 22 December 2010, I contacted Mr Lukav of Zigmo and asked him to provide me with documents evidencing the payments to me from Zigmo. Mr Lukav has since provided to me a number of redacted copy bank statements as described below. I have been informed by Mr Lukav and believe that he arranged to redact identifying information on the statements because of the fact that these monies came from their investor clients and they are protecting their clients' confidentiality. They have left exposed the dates and the amounts debited and the commencement of the short name of the relevant client accounts. I confirm that these are not my accounts but the accounts of third party clients of Zigmo, whose funds were on-lent by Zigmo to me.[10]

(3) This evidence related to earlier loans which Mr Mischel claimed were made by Zigmo, before the $2.4 million advances. Mr Mischel produced heavily redacted bank statements which he said proved the advance of the initial loan funds. The names of the account holder and of Zigmo's alleged third party clients were all redacted. As to the $2.4 million loans, Mr Mischel said that he contacted Mr Lukav from Switzerland while he was on holiday in early January 2008 and arranged further loans of $1.6 million in two payments of $800,000 each. Again, Mr Mischel produced heavily redacted bank statements to prove the making of the advances in January 2008 and, in that regard, stated in the February 2011 affidavit:

I confirm that, once again, this is not my account and that I am informed by Mr Lukav and believe that the funds provided to me were provided by a third party and this statement shows the debits of the funds concerned against the account of Zigmo's third party client.[11]

**(4) Mr Mischel also gave evidence to the same effect concerning two further advances of $400,000 each made by Zigmo in July 2008. The clear intention of this evidence was to convey that the so-called 'third party clients' were unconnected with Mr Mischel.

(5) In fact, the so-called third-party who provided the $2.4 million was a company called Active Factors Pty Ltd. At all relevant times, Mr Mischel was a director of Active Factors. There was a dispute in the evidence as to whether Active Factors advanced money to Mr Mischel and related entities, including the defendant, through Zigmo; or whether Zigmo had no involvement whatsoever and its role was invented by Mr Mischel in the context of the freezing order application to disguise the fact that the purported Zigmo loans were from a related party. But even if it be assumed that Zigmo's involvement was genuine, that does not excuse Mr Mischel giving a deliberately false impression to the Court and the Mr Gloss plaintiffs in his February 2011 affidavit. The intention of the Court's orders for disclosure of all of Mr Mischel's assets was clear - to identify the extent and value of those assets. It was in Mr Mischel's interests to downplay the value of his assets by disclosing all relevant debts. If there was a good reason for him to conceal the involvement of Active Factors, he could have sought orders that those aspects of his affidavit remain confidential. So, on his own evidence, I infer that Mr Mischel knowingly put forward a misleading affidavit before the Court in an endeavour to further his own financial interests.

52 Before leaving the issues concerning Zigmo and Active Factors, I must mention another issue which occupied some time in evidence. The defendant, by leave under s 106(1) of the Evidence Act 2010 (Vic), called Adrian Stone. Mr Stone is the owner and Chief Executive of Active Factors. As I have said, the sum of $2.4 million was advanced from Active Factors's bank account to an entity associated with Mr Mischel in 2008. Mr Mischel gave evidence in the Mr Gloss proceeding, in the context of the freezing orders, to the effect that this amount was advanced by Active Factors through Zigmo as an intermediary, on the basis that Zigmo was the lender who had raised the money from Active Factors as one of its clients. Mr Mischel confirmed this evidence at the trial of this proceeding. He produced to deeds to support his evidence: (1) Deed of Ratification and Loan Agreement dated 2010, purporting to ratify and record loans totalling $2.4 million from Active Factors to Zigmo in January and July 2008; (2) Deed of Mortgage Debenture dated March 2010 by which Zigmo purportedly charged its assets to Active Factors as security for those loans. Mr Mischel said that he recognised Mr Stone's signatures on each of these deeds, on behalf of Active Factors. The witness to Mr Stone's signatures was Mr Lukav, the owner of Zigmo. Mr Lukav did not give evidence.

53 Mr Stone acknowledged that the signatures on the deeds, which purported to be his signatures on behalf of Active Factors, looked like his signatures. But he denied that he signed the deeds for the following reasons:

(1) Until recently, he had never heard of Mr Lukav or Zigmo.

(2) Any agreement by Active Factors to lend money to Zigmo required his authority. He did not give that authority in January or July 2008, when the moneys comprising the $2.4 million were advanced, and did not later agree to ratify such loans or sign deeds ratifying or evidencing them. When asked whether Active Factors agreed to lend money to Zigmo in January 2008, he replied: 'Absolutely not to my knowledge and certainly not to my authority. It would have required my authority and there was no such authority to do that.'

(4) He was not aware of the Zigmo proceeding until recently, and was never asked by Mr Mischel to fund the defence of that proceeding so as to maintain Zigmo's alleged securities over the assets of Mr Mischel and related companies, including the defendant.

(5) He did not learn that $2.4 million of Active Factor's money had been advanced to Mr Mischel and companies associated with him until his bank was subpoenaed in the course of the Mr Gloss proceeding and, in that connection, contacted him about the payments totalling $2.4 million. At that time, he looked at his bank statements and realised, for the first time, that $2.4 million had been taken from the Active Factors bank account without his authority. In that context, after checking the bank statements and discovering that the money had been paid to Mr Mischel's benefit, he had a conversation with Mr Mischel to this effect:**

he [Mr Mischel] pulled me aside and told me that he took the money, that he took it to support a gambling, basically stock market gambling habit.

**54 Counsel for the defendant submitted that I should accept Mr Stone's evidence over Mr Mischel's on this issue. In other words, that I should find as a fact that Mr Mischel has concocted the documents between Active Factors and Zigmo, including either forging Mr Stone's signatures on the deeds or tricking him into signing them in the course of acting for him as his accountant.

55 I am not prepared to make any finding on this collateral and very serious issue. The dispute between Mr Mischel and Mr Stone was not the subject of full discovery of relevant documents, and there are aspects of Mr Stone's evidence which I found implausible. In particular, his evidence that he did not appreciate that $2.4 million had been taken from the Active Factors bank account without his authority until 'a good two years after that', in about 2010, when his bank telephoned him. I have not taken this dispute into account in reaching my conclusion on the central issue for determination.

56 Fifth, in his affidavits in connection with the freezing orders, Mr Mischel had three opportunities to claim that he had no interest in the assets of the unit trusts because, although he controlled the defendant and the defendant was the trustee of those trusts, all of the units were owned by the children's trusts. In his affidavit sworn 21 December 2010, Mr Mischel produced as exhibit 'HM-3' a document headed 'Mischel Group Statement of Position as at December 2010'. That statement included the current value of the real estate owned by the defendant as trustee of the unit trusts as an asset, and all of the debts of Mr Mischel and the companies referred to in the statement as liabilities. The statement concluded with the statement that there was a 'Current Personal Deficiency of Debt over Assets'.[12] In his affidavit, Mr Mischel had described this statement as 'a table setting out my assets and liabilities.'[13] In his witness statement and in cross-examination, Mr Mischel placed reliance upon the heading of the statement, contending that he understood that he was obliged by the freezing orders to disclose the value of all assets under his control, referring to paragraph 2 of the definition of 'your assets' in the freezing order which is set out above. But that position ignores the further definition of 'value of your assets' in the freezing order, the fact that Mr Mischel was at that time represented by competent counsel and the further evidence given by Mr Mischel in subsequent affidavits in the context of the freezing orders.

57 In his affidavit sworn 27 June 2011, Mr Mischel made it clear that he understood the difference between his ability to control the trustee of an asset and his own individual or personal interest in the trust asset. In the context of an allegation that he owned and controlled Commerce Consulting, he deposed that Commerce Consulting did not own any assets and he did not derive any income from it, even though Commerce Consulting acted 'from time to time ... in various capacities for clients of Mischel & Co Pty Ltd such as bare trustee ...'.[14] On this basis, Mr Mischel justified not including Commerce Consulting in his statement of financial position:**

as I was required to disclose my assets and liabilities, which I did, the liability or the assets acquired [by Commerce Consulting under the relevant agreement being addressed in the affidavit] were not mine because I did not hold any beneficial interest in the shares acquired ... as they were held on a bare trust by Commerce Consulting ...'[15]

**58 Mr Mischel's failure to mention the interests of the children's trusts in the unit trusts in the course of his affidavits is inconsistent with the plaintiff's case that the unit transfers are genuine. This inconsistency can be taken into account in determining whether the disputed documents are genuine.

59 Sixth, in a similar vein, it was not until after the consent judgment in the Zigmo proceeding, on 2 October 2011, that Mr Mischel claimed, for the first time, that the units in the unit trusts were owned by the children's trusts.

60 Seventh, Bradley and Kelly Mischel gave evidence. Their evidence was limited to the circumstances in which the August documents and the October documents were executed. Neither of them gave evidence that they knew or understood at any time prior to August 2011, a few days before their father consented to judgment in the Mr Gloss proceeding, that the children's trusts existed or that they had any beneficial interest in the unit trusts. Their failure to give such evidence gives rise to an inference that their evidence on this issue would not have assisted the plaintiff's case.[16]

61 Eighth, there was evidence before the Court as to Mr Mischel's preparedness to create false and back-dated documents in order to solve a particular problem. After it became apparent to Mr Malone that his money had been lost while under Mr Mischel's control, Mr Malone asked Mr Mischel to prepare tax returns for the plaintiffs in the Mr Gloss proceeding. Mr Mischel said that Mr Malone's request was not just that he prepare tax returns for the two plaintiffs, but that he was asked to provide 'advice on alternatives for the restructuring of his tax affairs'. Whatever the precise form of the request, Mr Mischel agrees that he prepared and submitted to Mr Malone documents relevant to two alternative structures to be adopted by Mr Malone for the purposes of his tax affairs. One of those structures, which Mr Mischel labelled 'Option 2 (Non-Preferred)', involved the use of a joint venture structure pursuant to a sham agreement drafted by Mr Mischel which was back-dated to 15 November 2007, at the start of the trading which led to the loss of Mr Malone's money. In cross-examination, Mr Mischel repetitively stated that Mr Malone was a forceful character who demanded, under threats of violence, that he prepare alternative structures to assist him financially following the loss of his money. But even accepting that evidence, and the fact that Option 2 involving the fabricated joint venture was not Mr Mischel's preferred structure, the fact remains that Mr Mischel was prepared to put forward for his client's consideration a sham joint venture structure to be documented by a back-dated joint venture agreement. This fact is also relevant in determining whether the disputed documents are genuine.

62 Ninth, Mr Mischel told his children and their spouses at the family meetings when the August documents and the October documents were signed that those documents were required in the context of his impending bankruptcy. Bradley had the best recollection of what was said. He recalled Mr Mischel saying 'that he required Kelly's and my involvement to secure the trusts that were created for our benefit' (August documents), and because 'due to the possibility of my dad's bankruptcy any documentation which included his name would be subject to review' (October documents). That evidence shows that Mr Mischel anticipated his impending bankruptcy and took steps to protect the position of his two children in that event, by ensuring that the trustees of the unit trusts and the children's trusts were no longer under his control. Why this necessitated the two stage process of the August documents and then the October documents was not explained.

63 Tenth, there is a material difference between the other two discretionary trust deeds lodged with the SRO on 19 June 2007 and the trust deeds for the children's trusts. In the other two deeds, Recital D on the first page does not name the trust, but recites only that: 'The trusts created by this Deed will be known by the name specified in item 2 of the Schedule.' In the case of the children's trusts, Recital D names the trusts:**

(1) 'The trusts created by this Deed will be known by the name The Bradley Mischel Discretionary Trust and is specified in item 2 of the Schedule.'

(2) 'The trusts created by this Deed will be known by the name The Kelly Mischel Discretionary Trust and is specified in item 2 of the Schedule.'

**64 The plaintiff relies on the existence of the names of the children's trusts on the same page of the trust deeds which contains the copy SRO imprint. The difference between the two forms of Recital D was drawn to Mr Mischel's attention in evidence. He said that there were varying practices in his firm as to how to complete Recital D, and endeavoured to support this evidence by referring to 'two templates'. I do not accept Mr Mischel's explanation for the variance. When he was first asked about this issue, he gave his evidence haltingly, interspersed with the expression 'um', and in a generally unconvincing manner. His first answer contained the statement: 'there shouldn't be a difference in the practice'. I accept there will often be different practices adopted by different professionals adapting pro-forma or template documents; but the variance here is both convenient and consistent with deliberate deception. Although the weight to be given to this matter is not as strong as others I have mentioned, it is a factor to be taken into account in the overall mix of relevant factors in determining whether the disputed documents are genuine.

65 Eleventh, by August 2011, the consent judgment in the Mr Gloss proceeding and Mr Mischel's consequent bankruptcy were in prospect. In these circumstances, Mr Mischel had a motive to concoct and backdate the trust deeds for the children's trust, the unit transfers and the unit certificates - so as to avoid the assets of the unit trusts forming part of his bankrupt estate. If that was his intention, he needed to backdate the documents more than five years before his anticipated bankruptcy - so as to avoid the operation of the five year relation-back period under s 120 of the Bankruptcy Act 1966 (Cth).[17] In cross-examination, Mr Mischel said he first learned about the five year relation-back provisions of the Bankruptcy Act in the context of this proceeding. He claimed that his accountancy practice never engaged in any insolvency work, that whenever an insolvency issue arose for one of his clients he would routinely refer the client to specialist insolvency practitioners, that he had no specialised knowledge of insolvency laws, and that his own earlier bankruptcy did not involve any issues concerning relation-back periods. It may be that Mr Mischel has no specialised knowledge of insolvency laws, and that he referred clients needing specialist insolvency advice to other accountancy firms. It may also be that there were no issues concerning void or voidable transactions during relation-back periods in his previous bankruptcy. I reject, however, as implausible that an experienced accountant and businessman such as Mr Mischel had no knowledge about the existence of a five year relation-back period during 2011. In this regard, I note that the documents at issue are dated 6 June 2006, about five years and four months before Mr Mischel's bankruptcy on 24 October 2011. If Mr Mischel's evidence is to be believed, this was pure coincidence. This matter can also be taken in account in assessing whether the disputed documents are genuine.

66 Twelfth, there is no evidence that the SRO has any record which assists the plaintiff. It has expressly stated that it kept no contemporaneous record of the names or dates of execution of any of the two trust deeds which are put forward by the plaintiff as constituting the deeds for the children's trusts.

67 Thirteenth, building on the above matters, there is no contemporaneous record of the existence of the disputed documents until PDF copies of the disputed documents were sent by Mr Mischel to his solicitors, by email and attachments, on 15 November 2011.

68 Fourteenth, to the extent that the plaintiff may still contend that all possibilities were not expressly put to Mr Mischel, that does not prevent the Court taking all of the possibilities into account in determining the issue on the whole of the evidence. The trial concerned the defendant's allegations that Mr Mischel lacks all credibility and has fraudulently concocted false documents. That allegation was put to him directly, and indirectly, throughout an extended cross-examination. Taking his evidence as a whole, whatever possibility had been put to him as to the means by which he concocted, backdated or manipulated the disputed documents, I have no doubt that he would have denied that possibility.

69 Fifteenth, Mr Mischel was a most unimpressive witness. He was evasive, argumentative, hid in generalities, and sometimes became a pedant when he perceived that course suited his purpose of evasion or dissembling. In my opinion, he falls into that category of witness whose evidence should not be accepted on any issue unless it is inherently probable or is corroborated by other credible evidence.

70 In the context of all of the matters canvassed above, the Court must assess whether the defendant has satisfied its onus of establishing, to the requisite standard, that the disputed documents are not genuine. This requires the Court to consider, in as precise a form as possible, the process by which the defendant contends Mr Mischel concocted and backdated the disputed documents. As finally put to Mr Mischel, expressly or by implication, the defendant contends that Mr Mischel concocted and backdated the disputed documents in about August 2011 by the following process:

(1) bringing to his mind that the standard form of discretionary trust deed prepared by his office did not contain the date of the deed on the execution page. The standard form deed gave the date on the first page and in the Schedule;

(2) finding two trust deeds between Ms Smith as settlor and companies controlled by him as trustee, Commerce Consulting Group and Mischel Investments respectively, where he had signed on behalf of the trustee and witnessed Ms Smith's signature;

(3) searching for two trust deeds bearing SRO imprints dated after the unit trusts were established and, if possible, more than five years before the likely date of his bankruptcy. When he could not find trust deeds of that kind, finding two trust deeds dated 6 June 2006 which were not stamped until 19 June 2007 (the G & W Boocock and Angelo Diplaris Family Trusts) and other trust deeds stamped together with those trust deeds.[18] He could have found these deeds by chance or by recalling that he lodged a bundle of trust deeds on 19 June 2007 - some of which had been executed well before that time;

(4) preparing the first page of the trust deed for each of the children's trusts by:

(b) naming the trust in recital D, contrary to the practice of only naming the trust on the face sheet and in the Schedule, as in the other two discretionary trusts in the bundle lodged with the SRO on 19 June 2007;

(c) adding a copy of an SRO imprint made 19 June 2007 from an original trust deed. As I have said, the plaintiff conceded that this process was possible, as it is not difficult to copy the image of an SRO imprint onto a document, then copy the document so that the copy appears to bear an original imprint by the SRO.[19]

(5) preparing a coversheet, table of contents and a Schedule;

(7) preparing and executing the unit transfers and unit certificates;

(8) preparing PDF copies of the disputed documents; and

(9) destroying the originals of the disputed documents.

71 Taking all of the above matters into account, I am persuaded to the requisite standard that Mr Mischel concocted and backdated the disputed documents in or about July or August 2011 as the consent judgment in the Mr Gloss proceeding and his consequent bankruptcy approached. In reaching this severe conclusion, I have considered the fact that the proven existence of the three other trust deeds lodged with the SRO on 19 June 2007 provides some corroboration for Mr Mischel's evidence that he also lodged the deeds for the children's trusts on that day; particularly as two of the other trust deeds are also dated 6 June 2006. But, although this evidence is consistent with Mr Mischel's account of events, it is not inconsistent with him having concocted the deeds for the children's trusts as alleged. In the end, the combination of: Mr Mischel's bad character; his previous false and misleading sworn evidence; his obvious motive to concoct and backdate the disputed documents; the implausibility of his evidence of a document destruction program designed to create a paperless office, especially in respect of important primary documents affecting his own interests and those of his children; his failure to refer to the children's trusts when he had the opportunity to do so in the Mr Gloss proceeding; the lack of any evidence that his children knew of the children's trusts, or that they had a beneficial interest in the properties, until Mr Mischel's bankruptcy approached in 2011; evidence of Mr Mischel's preparedness to put forward false and backdated documents; the convenience of the different form of Recital D in the deeds for the children's trusts; the implausibility of Mr Mischel's denials of knowledge about the five year relation-back period under the Bankruptcy Act, and the convenience of the dates of the deeds for the children's trusts being a few months before the commencement of that period; the lack of any verifiable contemporaneous record to support Mr Mischel's account of events, until 15 November 2011; the concession that it was possible for an image of an SRO imprint on one document to be placed on another document, for the second document to be copied, and for the copy document to show the SRO imprint: 'so that you can't tell it's been done'; and Mr Mischel's unimpressive conduct as a witness, outweigh the inconclusive corroboration set out above which provides some support for his version of events.

72 Finally, in reaching this conclusion I have considered the fact that, although the concoction of the trust deeds for the children's trusts was a relatively simple process, albeit one involving many steps, some ingenuity on Mr Mischel's part was required - especially when he could not find conveniently dated trust deeds with contemporaneous SRO imprints. I am well satisfied that Mr Mischel had the intellectual capacity, and devious character, to exploit the convenient circumstance provided by the facts constituting the limited corroboration to which I have referred, and to use the SRO imprints from two other trust deeds which were lodged in the bundle of five deeds on 19 June 2007 - whatever date they may have been executed - to concoct the PDF deeds for the children's trusts on which the plaintiff relies.

73 My conclusion has the result that the Court will not, as a matter of public policy, aid the plaintiff by granting it the relief it seeks in the proceeding. As Lord Mansfield said in Holman v Johnson: [20]**

The principle of public policy is this; ex dolo malo non oritur actio. No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act. If, from the plaintiff's own stating or otherwise, the cause of action appears to arise ex turpi causa, or the transgression of a positive law of this country, there the court says he has no right to be assisted. It is upon that ground the court goes; not for the sake of the defendant, but because they will not lend their aid to such a plaintiff.

74 For the reasons given, the plaintiff's case depends upon proof of Mr Mischel's immoral and illegal acts. This result does no injustice to the children's trusts or their beneficiaries - as no consideration was given for the alleged unit transfers - and I can see no argument for any exception to the Holman v Johnson principle in this case;[21] which was pleaded and argued on the basis that a decision on the genuineness of the disputed documents would be determinative.

Does the defendant have a lien over the property of the unit trusts?

**75 The effect of the above findings is that the office of trustee of each of the unit trusts is vacant. The defendant was automatically removed on its liquidation by force of the trust deeds, and the plaintiff's claim to be the new trustee cannot be maintained. I will hear the parties as to whether the Court should appoint a new trustee, and will ensure that the trustee of Mr Mischel's bankrupt estate is given an opportunity to be heard before any order is made in that regard. It is likely that the bankruptcy trustee will call for the whole of the trust estate once a new trustee is appointed.[22]

76 Although removed as trustee of the unit trusts, the defendant may nevertheless have a right to indemnification from the trust assets for debts, costs and expenses legitimately incurred in the course of acting as trustee - and for that purpose to retain legal ownership of the trust assets, by way of lien, until that indemnity is satisfied. This raises issues concerning the extent of the mortgage debt and as to the extent and reasonableness of the liquidator's costs and expenses - including his costs of this proceeding. The parties agreed that these issues should be considered and determined after the Court determined whether the disputed documents were genuine. Given the Court's findings on that issue, it may be that the plaintiff lacks any standing to be heard, as the proper contradictors are any new trustee and the trustee of Mr Mischel's bankrupt estate. But I will hear the parties on that, any remaining issues, and as to costs.**

[1] Nom v DPP & Ors [2012] VSCA 198, [113]-[124].

[3] [1992] HCA 66; (1992) 110 ALR 449.

[9] Plaintiff's chronology dated 16 May 2013.

[14] Emphasis added. Mr Mischel gave similar evidence in his principal witness statement.

[16] Jones v Dunkel & Anor [1959] HCA 8; (1959) 101 CLR 298; Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389, 418-419; Kuhl v Zurich Financial Services Australia [2011] HCA 11, [63]; Nominal Defendant v Rooskov [2012] NSWCA 43, [98]; Maric v Nominal Defendant [2013] NSWCA 190, [32].

[17] There was no consideration for the unit transfers.

[18] The single gap in the SRO Doc ID sequence leaves open the possibility that Mr Mischel lodged a bundle of six trust deeds on 19 June 2007.

[19] Transcript, 21 June 2013, 98 (lines 15-24).

[20] [1775] EngR 58; (1775) 1 Cowp 341, 343; [1775] EngR 58; 98 ER 1120, 1121.

[21] For example, Nelson v Nelson (1995) 184 CLR 538, 554-5, 576, 595, 604-5.

[22] Saunders v Vautier [1841] EngR 629; (1841) 4 Beav 115; 49 ER 282.