Plaintiff v First Defendant Second Defendant Third Defendant Fourth Defendant [2017] VSC 241 | Case summary

Supreme Court of Victoria|2017-05-11|Before: ROBSON J

CORPORATIONS - Shareholders in a family-owned company proposed gifting their shares in the company to another company controlled by the donors' children - Whether donors executed valid share transfers - Whether the donors of the shares did all that was necessary for them to do to effect a gift of the shares - Where register of members not produced - Where no evidence that share transfers prepared and signed - Held donee of the gift had not established that the donors had done all that was necessary for them to transfer the shares to the donee - Held donors entitled to be registered as members of the company - Sections 176, 231, 1091D and 1322(4) of the Corporations Act 2001 (Cth) (Corporations Act).

EQUITY - Circumstances where equity will enforce a gift.

EVIDENCE - Presumption of regularity - Whether presumption applies to infer shares were validly transferred from the existence of an intention by the donors to transfer the shares and subsequent conduct consistent with the shares having been transferred.

EVIDENCE - Whether inferences that shares were transferred outweighed by direct evidence that no transfers were signed by the donees.

Mr W Keogh solicitor for the litigation guardian for the First and Second Defendants

1 This case concerns a dispute over the control and ownership of the assets that Kevin Francis Gerraty (Frank) and his wife Rosemarie Gerraty (Marie), built up during their working lives. Four of their children (John, Paul, Philip and Kevin) claim that they now control the assets. Frank and Marie resist that claim.

2 Frank and Marie have seven children, five boys and two girls. Frank and Marie are now retired and in their 80s. They live on the pension and handouts from their children, in a house controlled by four of their sons (John, Paul, Philip and Kevin).

3 Frank's father had started a nursery business in Melbourne. Over the years, Frank built up and expanded nursery businesses in Victoria and Queensland. The four sons, John, Paul, Philip and Kevin, worked in the business. The two girls, Francine and Katherine, also worked in the business at times but now work outside the business. David the fifth son, moved to the USA and established a nursery business in California. For convenience I will refer to John, Paul, Philip and Kevin as the four sons.

4 In July 2001, Frank was put under financial pressure from creditors. Frank proposed a restructuring of the business to protect it from creditors and to enable the four sons to learn how to manage the business. Frank's business and home were all owned by Chambeyron Pty Ltd. Frank and Marie owned all the shares in Chambeyron.

5 Frank also controlled a company called Colbart Pty Ltd which was the trustee of a unit trust. The unit trust held no assets at this time. Frank proposed, in substance, that he and Marie would give their shares in Chambeyron to Colbart and that all his children and himself would own the units in Colbart.

6 The four sons contend that this proposal was validly carried out and that the gift by Frank and Marie of their shares in Chambeyron to Colbart was completed. The four sons assumed control of Chambeyron. In 2001, the accountant for Chambeyron and Colbart, and at one time also the company secretary, Mr Ivan Clyne of Davis Clyne, on the instructions of Frank, informed ASIC that Colbart was the holder of the shares in Chambeyron.

7 Recently, Francine, on behalf of her parents, convinced ASIC that the rightful shareholders of Chambeyron remain Frank and Marie. The records of ASIC have been altered accordingly.

8 Frank and Marie are in straightened circumstances. Frank and Marie now live in a house purchased in the name of Chambeyron. They have no access to the funds or assets purportedly held by Colbart as trustee of the Colbart unit trust. Frank and Marie assert that the gift of their shares was not validly completed and seek to retake control of Chambeyron.

9 The alleged gift, if effective, would have deprived Frank and Marie of all of their assets, including their family home, and would take away any secured income they would have for their retirement.

10 Colbart seeks, inter alia, a declaration that Colbart, as trustee for the Colbart unit trust, is the sole shareholder of Chambeyron; and an order, pursuant to s 1322(4) of the Corporations Act 2001 (Cth) (Corporations Act), that the register kept by ASIC be rectified to reflect that Colbart is the sole shareholder of Chambeyron. Colbart seeks to do so by establishing as a fact, that valid share transfers of the shares in Chambeyron were executed by Frank and Marie, and that Colbart was validly recorded in the register of members of Chambeyron as the sole shareholder of Chambeyron.

11 Colbart is not relying on any equitable principles, such as an estoppel, to make out its claim.

12 After July 2001, the family largely acted as if the restructuring had taken place and the four sons took over the management of the family business (to the extent they had not already done so), the finances of the businesses and of Frank and Marie's home. Consequently, Frank and Marie were left without access to funds and financial security in their retirement. In 2014, they claimed ownership in the shares in Chambeyron that were claimed, by Colbart, to have been gifted to Colbart. In 2005, Frank and Marie unsuccessfully applied for the age pension; they applied again in October 2007 at which time their received the pension.[1]

13 Marie is now 83 years of age, is suffering from the early stages of Alzheimer's disease, has chronic obstructive pulmonary disorder, is said to be easily stressed, and was said by her daughters to be emotionally and physically fragile.

14 At the commencement of the trial, based on a report from her neuro psychiatrist Mr Peter Drysdale, I concluded that Marie was under a disability and was handicapped person within the meaning of Order 15 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic). I appointed her daughter Katherine Parsons (Kate) as her litigation guardian under Order 15 rule 15.03 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic).

15 Mr William Keogh had earlier in the proceeding filed a notice of appearance for the defendants but, due to their lack of funds, at the commencement of the trial he filed an application for leave to cease acting for the defendants. Mr Keogh agreed to act as solicitor for Kate as the litigation guardian for Marie. On that basis I granted Mr Keogh leave to discontinue acting as the solicitor for the defendants.

16 Frank will turn 85 this year. He has hypertension pulmonary fibrosis and bronchiectasis and suffered from a left parietal stroke in 2007, whilst on holiday in the USA visiting David. Frank lost the ability to write as the result of his stroke.

17 Frank struggled to adequately represent himself during the hearing and was severely hampered in not having legal representation. His consultant geriatrician, Dr Ron Scholes FRACP, reported on 6 December 2016, that Frank fulfilled the criteria for testamentary capacity. This report expired during the trial.[2]

18 During the course of the trial it was plainly evident to me that Frank's health was being adversely affected by participating in and attending the trial. On day nine of the trial, after observing Frank fall asleep on several occasions during the hearing, and noting his occasional absences from Court whilst the trial was proceeding, I requested the parties make submissions on whether I should appoint a litigation guardian for Frank. After hearing from the parties, I appointed Kate as Frank's litigation guardian and Mr Keogh as her solicitor. The appointment took place before Frank was called on to present his case. Mr Keogh did not call Frank to give evidence during Frank's case.

19 Francine was unrepresented throughout the trial. Francine took on the lion's share of conducting the defence of the defendants. Mr Keogh played a limited role acting in accordance with his duty for Marie, and later, also for Frank.

20 The defendants were at a considerable disadvantage during the trial in not being represented by counsel. The four sons did not make any funds available to their parents to retain counsel to represent them in seeking to avoid losing control of their material assets. It was contended on behalf of the four sons that Francine had assets that she could have made available to fund the litigation and she chose to use these assets for other purposes, and that certain proposals were put forward by the plaintiff that would have allowed for the release of funds, however these proposals were all rejected by the defendants for reason of the conditions attached thereto.

21 At the time of the alleged restructuring in 2001, Frank and Marie lived in the family home at 72-74 Winfield Road North Balwyn, where all the children were raised. The home was in the name of Chambeyron. Chambeyron was Marie's maiden name. In 2007, the family home was sold as Frank and Marie wanted to downsize. Frank and Marie moved to Wattle Valley Road. This property was purchased in the name of Chambeyron.

22 Philip said that he used to give his parents money on an ad hoc basis but ceased to do so in 2007. Over the years since the restructuring, Paul and Francine have each given their parents around $500 per week.[3] Paul claimed to be owed over $400,000 by the trust, Paul suggested that this amount was made up of funds he contributed to his parents living costs over the years. John, Kevin and Philip have also, at various times, claimed to be owed money from Frank and the trust assets.

23 The four sons each gave evidence that they did not know the extent of their parents health problems and the associated costs. They did not know exactly how much money their parents were living off.

24 The defences filed on behalf of Frank and Marie were clearly drafted without any legal assistance. Nevertheless, Frank and Marie expressly plead that no transfers of shares in Chambeyron were executed by them.

25 During the hearing, after Colbart had concluded its evidence, Mr Keogh on behalf of Frank and Marie sought to amend their defences to raise equitable relief, to set aside the transfer of the shares if the transfers were otherwise effective. Mr Keogh sought to rely on such matters as the fact that Marie was not given any legal advice to the knowledge of the four sons about the transfer. The amendments were not allowed.

26 In order for the court to recognise and enforce the gift of Frank and Marie's shares in Chambeyron to Colbart, Colbart must establish that Frank and Marie did everything they needed to do, according to the nature of the property, to pass property in the shares to Colbart. Accordingly, Colbart must establish that Frank and Marie signed and delivered up share transfers of their shares in Chambeyron to Colbart.

27 Colbart also submits that it must establish that the register of members for Chambeyron was updated to reflect the change in shareholding.

28 Colbart relies on Frank's proposed restructuring as evidence of Frank's intention to make a gift of the shares. Such an intention, if established, would not perfect an imperfect gift, and as has been said: '[a] man who forms an intention to make a gift is under no conscientious or other obligation to complete the gift.'[4]

29 The relevant principles relating to the enforceability of a gift are well established. In the English case of Milroy v Lord, Turner LJ stated the principles as follows:[5]

I take the law of this Court to be well settled, that, in order to render a voluntary settlement valid and effectual, the settler [sic] must have done everything, which according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him. He may of course do this by actually transferring the property to the person for whom he intends to provide, and the provision will then be effectual, and it will be equally effectual if he transfers the property to a trustee for the purposes of the settlement, or declares that he himself holds it in trust for those purposes; ... but, in order to render the settlement binding, one or other of these modes must, as I understand the law of this Court, be resorted to, for there is no equity in this Court to perfect an imperfect gift. The cases I think go further to this extent, that if the settlement is intended to be effectuated by one of the modes to which I have referred, the Court will not give effect to it by applying another of those modes. If it is not intended to take effect by transfer, the Court will not hold the intended transfer to operate as a declaration of trust, for then every imperfect instrument would be made effectual by being converted into a perfect trust.

30 Turner LJ's comments in Milroy v Lord were discussed by Griffith CJ in Anning v Anning.[6] The Chief Justice said_:[7]_

I think that the words 'necessary to be done', as used by Turner LJ in Milroy v Lord, mean necessary to be done by the donor... If, however, anything remains to be done by the donor, in the absence of which the donee cannot establish his title to the property as against a third person, the gift is imperfect, and in the absence of consideration the Court will not aid the donee as against the donor. But, if all that remains to be done can be done by the donee himself, so that he does not need the assistance of the Court, the gift is, I think complete.

31 In the High Court case of Corin v Patton Mason CJ and McHugh J, discussing the applicable principles for completing a gift, said of the above referenced judgment of Turner LJ that:[8]

Two propositions emerged from the observations of Turner LJ. First, the donor must have done everything necessary to be done, according to the nature of the property, in order to transfer the property and render the gift binding. Secondly, if the gift was intended to have been effectuated by one means, the Court will not give effect to it by another means.'

The point is, as Page Wood V-C noted in Donaldson v Donaldson, that where there is an imperfect gift "which requires some other act to complete it on the part of the assignor or donor, the court will not interfere to require anything else to be done by him" (our emphasis).

33 However, absent Frank and Marie having done everything required to complete a gift, equity will not normally interfere to perfect an imperfect gift[10] and will not require Frank and Marie to complete the gift.[11] Under the rule in Strong v Bird,[12] a volunteer will sometimes take under a transfer which is initially imperfect, for lack of compliance with legal formalities, or where principles of estoppel may apply.

34 This rule may have application in the case where it can be said that the share certificates were signed, but that the members register was not updated - such a formality may not defeat the gift. Mason CJ and McHugh J in Corin v Patton note that this is a reflection of the maxim that 'equity looks to the intent rather than form.'[13]

35 If the Court is satisfied that Frank and Marie did do all that it is necessary for them to do to transfer property in their shares in Chambeyron to Colbart, then Frank and Marie cannot recall the shares simply because it was a gift.[14]

36 As Latham CJ said in Brunker v Perpetual Trustee Co Ltd:[15]

The simple position is that he cannot get back property which he has transferred in an effectual manner so as to vest the title to the property to another person. If, on the other hand, the gift is incomplete, so that the transaction, so far as it has gone, does not vest any property in another person, then the position is that the alleged donee has nothing, and because he is a volunteer, a court will not help him get anything from the donor.

...the rule that a court of equity will not assist a donee by completing an imperfect gift means that, in the absence of consideration, the court will not compel the donor to do anything to complete a gift. Where a donor has placed a donee in a position to obtain a legal title by the donee's own action without further action by the donor, no question arises as to the application of the rule.

38 The secretary of Chambeyron, Mr Clyne, informed ASIC that Colbart was now the sole member of Chambeyron. This record is not material in determining whether Frank and Marie did everything in their power necessary to effect the transfer, that is, delivering signed share transfers to Colbart or Colbart's agent. The ASIC records may be relevant, however, to support the inferences relied on by Colbart, as discussed below. Under the relevant provisions of the Corporations Act in force at the time, (s 176), the ASIC record is good evidence of the facts stated therein, in the absence of evidence to the contrary. Here, the evidence to the contrary would be the absence of signed share transfers from Frank and Marie to Colbart.

39 In July 2001, before the alleged restructuring was mooted, Chambeyron owned a property in Boundary Road Heatherton on which a major nursery business was conducted. The nursery extended over several acres. The business included wholesale and retail nursey sales and a nursery plant hire business. Chambeyron also owned Marindi Park Pty Ltd, which owned a nursery at Mount Nathan, Queensland.

40 Frank's father owned a nursery in Melbourne. Frank continued the nursery which was called Frenchams Park. Frank also previously owned a nursery at the Basin in the Dandenong's and had had subdivided land north of Surfers' Paradise.

41 At the time of the alleged restructuring, Kevin managed the Boundary Road nursery and Paul managed the Mount Nathan nursery. John was a truck driver and transported plants between nurseries. Philip had a plant hire business operating out of Maudsland, Queensland. Philip sourced plants for short term hire from nurseries that Kevin owned in Victoria and nurseries that Paul owned in Queensland.

42 Chambeyron was incorporated on 26 September 1969. From 1977, Marie had two shares and Frank had three shares in Chambeyron and that was the position until immediately prior to the disputed transaction in 2001, and is the position now reflected on the ASIC register.

43 Colbart was incorporated in Queensland on 12 May 1982.[17] The Colbart unit trust was settled on 1 July 1982 with Colbart as the trustee. The trust deed provided for the corpus to be divided into 2000 units valued at $10 each. The subscribers for the units were Francine and Frank with 1000 units each. Provision was made to issue further units to obtain further funds. At the time of the alleged restructuring, Colbart was not trading and held no assets.

44 As is discussed further below, in 1992, the ANZ Bank appointed receivers and managers of Colbart. By 1994, ANZ Bank was paid out and the receivers and managers withdrew.

45 Although the plaintiff is Colbart, the protagonists are the four sons Kevin, John, Philip and Paul (who effectively control Colbart) and on the other side are Frank and Marie, their daughters Francine and Kathrine and their son David.

46 The four boys contend that their father Frank was an adventurous entrepreneur who took unreasonable risks. The four boys contend that the restructuring in 2001 came about as Frank was exposed to financial claims and the business assets were at risk. The restructuring was set up to protect the family's assets and to restrain Frank's ability to put those assets at risk.

47 On 30 November 2000, a company secretary of Chambeyron, Mr Clyne, lodged an annual return for Chambeyron with ASIC that reported that the directors were Frank, Marie, John, and Philip. The company secretaries were reported as Marie and Mr Clyne. The shareholders were reported as Marie owning two shares and Frank owning three shares.

48 Also on 30 November 2000, Mr Clyne lodged an annual return for Colbart reporting that the directors were Frank and Paul.

49 In about July 2001, Frank prepared a document described as a proposal, that set out the steps that were to be undertaken in the restructuring he proposed of his business entities. The proposal is in Frank's handwriting.[18] Philip gave evidence that his father showed him the written proposal and, at the request of Frank,[19] Philip typed it up.[20]

Dear

To all our children and spouses. We request that everyone reads this letter and understands our motivations and decisions.

Prior to these discussions taking place the tenant at 9a Motherwell St (owned by Chambeyron Pty Ltd) left the house. The house was offered to John and Anita to rent while they looked for a house to purchase, they declined. Kevin and Natalie wanted to do some additions to their house and expressed a proposal that instead of moving out of their house and renting would fix up Motherwell Street to a suitable condition for sale when they move back into their own home.

Why sell 9a Motherwell Street 1 It is getting old

2 It has a connection to Patsy

3 We don't want the hassle of tenants

John's transport company and Paul's and Kevin's nurseries and to a lesser extent Phil's hire business are interdependent and everyone seems to be of the opinion that the properties on which they exist and depend should be kept within the family unit. All members of the family should share equally in any capital appreciation on the properties.

Current Ownership

Chambeyron Pty Ltd - Owned by Marie and Frank

Properties - Boundary Road

Winfield Road

Motherwell Street (being prepared for future sale)

Marindi Park Pty Ltd - Owned by Chambeyron Pty Ltd

Properties - Mount Nathan

Other corporate structures are

- Colbart Pty Ltd which manages the Colbart Unit Trust. It was formed when Schneiders paddock was bought in Pineridge Road (1 unit owned by Frank, 1 unit owned by Francine)

- K F & R C Gerraty Family Trust administered by Marmas Pty Ltd. It has loans to and from Chambeyron Pty Ltd and Marindi Park Pty Ltd.

- Gerraty Group Super Fund administered by Frenchams Park Pty Ltd has some shares in Telstra etc.

- Nankoor Pty Ltd owned by Marindi Park Pty Ltd and Frank.

- Alquila Indoor Plants Pty Ltd a shelf company all children equal shareholders. Formed to take over a Frenchams Franchise which is now sold.

The proposal is

All children and Frank to have an equal number of units in the Colbart Unit Trust. The Colbart Unit Trust to own all the shares in Chambeyron Pty Ltd which owns all shares in Marindi Park Pty Ltd. This means the important real estate is owned by all members of the family equally. It removes and risk that Frank's involvement with other business may have on the security of tenure of the nursery businesses, on the real estate they occupy. Ivan Clyne the accountant is happy and is of the view that it is a good solution and achieve the aim.

Nankoor Pty Ltd to be used by Frank for his business dealings and to operate outside the Colbart Trust, Marindi Park Pty Ltd and Chambeyron Pty Ltd. The Family Trust and Super Fund continue to invest as funds are available.

All children to be directors of Colbart Pty Ltd and to each own $250 units transferred from Frank and Francine. Chambeyron Pty Ltd and Marindi park Pty Ltd should be self-sufficient from rental income received and Motherwell Street sold so there are no risks to directors or shareholders.

What about Marie?

Marie approves of this after much discussion, but Marie is seeking security and an income particularly if Frank dies first. There is no provision in this current arrangement for this and it doesn't mention loans made to and from children's companies or individuals. It does ensure Marie the security of a house, assuring Marie an income is still to be sorted out - I haven't died yet - I think?

Frank Gerraty

51 Thus under the terms of the proposal, Frank and Marie were to transfer their shares in Chambeyron to Colbart, and Frank and Francine were to transfer units in the Colbart unit trust so that each of the seven children held 250 units and Frank held 250 units.

52 Mr Clyne said that he received instructions from Frank that the shares in Chambeyron were to be owned by Colbart and that the reason for the restructure was because Frank was planning to have the whole family involved in the business structure.[21]

53 On 18 July 2001, Marie resigned as secretary and director of Chambeyron.[22] A minute of a meeting of the directors of Chambeyron held on 18 July 2001 at 99 Canterbury Road, Blackburn (the address of Davis Clyne) records that Frank, John and Philip were present and resolved to accept the resignation of Marie as a director and secretary of Chambeyron and to lodge notification of the change with ASIC.[23]

54 Mr Clyne as the company secretary of Chambeyron, informed ASIC that Colbart was now the sole shareholder of Chambeyron. I will deal shortly with Mr Clyne's evidence of what he did or did not do.

55 On 20 July 2001, Mr Clyne wrote to Philip concerning Colbart and the Colbart unit trust, enclosing documents for signing. The letter stated:[24]

Colbart Unit Trust

The 1000 units in Francine's name is to be spread between the other members of the family. The 1000 units in Frank's name is also to be spread between the other members of the family.

Colbart Pty Ltd

All members of the family, except Marie, to be directors of the main company, Colbart Pty Ltd. All members of the family except Marie to be shareholders of the main company, Colbart Pty Ltd.

The signatures required for the Melbourne members I will get in due course down here.

I will attend to all the Australian Securities & Investment Commission documentation.

56 Mr Clyne prepared a Colbart unit trust register of unit holders.[25] In the register he recorded that each of Frank, Francine, David, John, Kate, Kevin, Paul and Philip held 250 units. Each of Kevin, John, Philip and Paul said that the units purportedly transferred to them were a gift.[26]

57 In September 2002, Frank wrote a letter addressed to 'everyone' (presumably the family) stating that he was pursued by creditors who had the impression he had assets. He wrote 'as you know, he hasn't as they were given to a trust.'[27]

58 In September 2002, Frank, through Adamsons solicitors and attorneys, proposed resolving his indebtedness to Lygon Nominees (discussed below) through Chambeyron borrowing money.[28] The correspondence mentions that Frank was to resign as a director of Colbart and assign his shares to Colbart to his eight children and his units in the unit trust to his eight children. Frank wrote in a response dated 19 September 2002, stating that he had seven children and that he wanted his unit transferred to Marie.[29]

59 On 14 February 2005, Mr Clyne wrote a letter addressed to 'whom it may concern' asserting that Colbart owned all the shares in Chambeyron.[30] Frank wrote on the letter 'this letter was in today's mail - I think it should read Colbart owns 100% shareholding in Chambeyron and Marindi Park,' and signed it.

60 Colbart pleads that on 20 July 2001, Paul, Philip, Kevin, John, David and Kate each acquired 250 units in the Colbart unit trust and Frank and Francine each retained 250 units.

61 Frank, Marie and Francine, in substance, deny this allegation. Colbart seeks no relief in relation to the ownership of the units trust. Colbart did seek to rely on the transfers to establish Frank's proposal was carried out and thus share transfers were signed.

62 The proposal prepared by Frank considered the transfer of the units. Francine held 1000 of the 2000 units on issue in the Colbart unit trust. Francine explained that the unit trust was created when her father, through Colbart, purchased the swamp land abutting the Mount Nathan property in Queensland (the Pine Ridge Road block).[31] Francine said that the unit trust was created as a vehicle to raise further moneys, if required, to purchase the land. As it was, no further funds were required and no further units were issued. The land owned by Colbart was sold to Villaworld and Devine Homes, as part of the joint venture discussed below, to allow for the ANZ Bank-appointed receivers and managers to retire. Francine said that she thought that the trust had lapsed as it had no further use.

63 Francine denies that she transferred 250 units to Paul. A form of transfer of units to Paul was prepared by Mr Clyne and produced in evidence. It was not signed by either Francine or Paul. Francine said that she refused to sign because 'peppercorn' rentals were being paid for the property Paul was renting from Mirindie Park.[32]

64 Philip was not renting a property from Chambeyron. Francine said that Philip had no preferential tenancy on any of the properties owned by the family businesses and she therefore did not object to transferring 250 units to Philip.[33] A transfer of units signed by both Philip and Francine and dated 20 July 2001 was tendered by Colbart.[34]

65 Francine signed a transfer of 250 units to Kevin but the transfer produced in evidence was not signed by Kevin and Kevin did not give evidence that he signed a transfer. Despite signing the transfer, Francine said she told Mr Clyne not to register the transfer of units to Kevin because as with Paul, she was concerned about the 'peppercorn' rentals that were being paid by Kevin as tenant of the property on Boundary Road, Heatherton.

66 Francine said that she did not wish to transfer units in the unit trust to Paul or Kevin and told Mr Clyne as much. Francine asked Mr Clyne if he recalled being informed by Francine that she was unwilling to sign some of the unit transfers and instructing Mr Clyne not to register the unit transfers because of concerns she had about not having sufficient financial information and 'peppercorn' rentals being paid for properties tenanted by Kevin and Paul. Mr Clyne admitted that he vaguely recalled such a conversation.[35]

67 During Francine's cross examination of Mr Clyne, I sought to clarify Mr Clyne's evidence and asked Mr Clyne 'in the case where Francine had not signed, refused to sign, did you on the instructions of Frank nevertheless carry out the transfer, record the transfer?'[36]

Mr Clyne: ---Yes, although I just moved forward. Like this were the instructions - - -[37]

Robson J: Irrespective of whether she signed or not, you went forward with Frank's instructions?[38]

Mr Clyne: ---Yes.[39]

68 In view of the answers given by Mr Clyne, I am not satisfied that there were ever fully signed transfers of units from Francine to Paul and Kevin.

69 Francine was not present at the family meeting that purportedly approved the restructuring of the family businesses. Francine was not asked to sign the transfers until sometime after 20 July 2001. I accept she went with her father to Mr Clyne's office where she was presented with the transfers. I find that she signed the transfer to Kevin and Philip, but that she refused to sign the transfer to Paul. I find that she expressly told Mr Clyne not to register or effect the transfers, as she wanted further financial information to be given to her parents. I am not satisfied that at any time thereafter she authorised Mr Clyne to register or effect the transfers she had signed.

70 In the statement of agreed facts, Frank admitted that he had signed transfers to Kate, David and John, but in his defence, Frank denies that the transfers were properly approved in accordance with the deed.[40] He says Francine instructed the accountant that no transfers should be registered.

71 Subsequently, when Francine was investigating the purported restructuring, she obtained advice that stamp duty was payable on the transfers in order for the transfers to be effective. It is unclear from the evidence what stamp duty, if any, would have been payable. If at the time of the transfer there were no assets held by the unit trust, it is likely that stamp duty was not payable. If the shares in Chambeyron had already been transferred to Colbart, stamp duty may have been payable. All alleged recipients of the units said that they did not pay any stamp duty. The plaintiff accepts that if successful, there may be some outstanding stamp duty that would need to be paid.

72 Francine also contends that the provisions in the trust deed governing the transfer of units, in particular the need for a meeting of unit holders to approve the transfers, was not held.

73 It is not contended that a meeting of the two unit holders (Frank and Francine) was held to approve the transfer of the units.

74 The deed of trust for the Colbart unit trust provides that an effective transfer of units requires the payment of the fair market value of the units. The trust deed also provides that the transfer provisions can be varied, with the unanimous consent of all the unit holders (in this case, being Frank and Francine) to meet the circumstances of any particular case.[41] The trust deed requires the trustee to deliver a unit certificate to any new unit holder following a transfer.

75 The trust deed also requires a special resolution of the unit holders for some transfer procedures[42] and that no business shall be transacted at any meeting of unit holders unless there are present a quorum of not less than two unit holders who between them hold not less than thirty per centum of the issued units, or one unit holder who holds not less than sixty per centum of the issued units.[43]

76 Contrary to the contention of Colbart, the transfers were not properly carried out. I find there was no transfer by Francine of 250 units to Paul. By reason of Francine's instruction to Mr Clyne, I am not satisfied Francine transferred 250 units to Kevin. Colbart has not satisfied me that the necessary meetings were held to transfer any of the units by Frank and Francine. In conclusion, the evidence in relation to Colbart and the unit trust, does not support any inference that transfers of the shares in Chambeyron were signed by Frank and Marie.

77 Frank's previous business dealings where he had got into financial trouble previously, set the scene for the alleged restructuring. In the 1980s, Frank, through Colbart, purchased the Pine Ridge Road property. Frank was indebted to the ANZ Bank. In 1991, the ANZ bank appointed receivers and managers of Colbart. The receivers and managers retired in 1994 when Frank was able to pay out the ANZ Bank by, inter alia, entering into a joint venture with Villa Wood and Devine Homes to develop the land owned by Colbart. After which time, Colbart had no assets.

78 Sometime prior to July 2001, a group of investors including Frank, leased a warehouse in Thomastown from Lygon Nominees Pty Ltd. Frank had guaranteed the lease. The investors were described as inventors and were developing projects that might be eligible for generous research and development tax concessions. Mr Williams, a friend of Frank's, gave evidence of attending the warehouse and said that the projects included timber drying, water purification back packs, combustion systems for cleaning coal, and the development of ceramic pots.

79 On 1 August 2001, Lygon Nominees, Lou Nominees Pty Ltd and Di Michelle Investments Pty Ltd (the applicants) obtained judgement against Frank, Peter Vernon Lansell and George Kirov (the defendants) for $167,184.44 in the County Court plus interest thereon of $27,199.52.

80 On 29 July 2001, the applicants served a bankruptcy notice on the defendants. On 23 December 2002, the applicants served on the defendants a bankruptcy petition seeking an order of sequestration against each of the defendants.

81 Although no evidence was led on this issue before me, the County Court proceeding would have had to have been served on the defendants prior to 20 July 2001 to obtain judgment by default on 1 August 2001. I can only infer that written demands on the defendants including Frank, were made well before the alleged restructuring.

82 Accordingly, the restructuring would in all likelihood not have protected Frank's assets from being attacked to meet the judgment.

83 Philip gave evidence that Frank also had some issues with Westpac around this time. In January 2002, Philip assisted Chambeyron in refinancing debts owed by Chambeyron to the Bank of Melbourne (which is owned by Westpac). The Bank of Melbourne said that it was owed about $1.5 million by Chambeyron and was asking for repayment of all outstanding loans.

84 The refinancing involved selling 9a Motherwell Street Toorak, for approximately $460,000, re-mortgaging Boundary Road Heatherton for approximately $650,000, and re-mortgaging 72-74 Winfield Road North Balwyn for approximately $350,000.[44] Philip said that with these sums, there was still a shortfall of funds owing to the Bank of Melbourne which would be met by family members contributing funds.

85 On this issue of Frank's involvement with the inventors, Mr Clyne said that he was aware of the large warehouse in Thomastown that Frank was involved in.[45] Mr Clyne said that several people were involved with Frank trying to invent things that were going to make a lot of money.[46] Mr Clyne said that he pleaded with Frank not to get involved. Mr Clyne told Frank he had enough wealth and that he should not have anything to do with those people.[47]

86 The four boys contend that the debt to the Bank of Melbourne and the leasing guarantee of the lease to Lygon Nominees were the financial problems that led to the proposed restructuring. David also said that these financial problems led to a restructuring, but that the restructuring was not in the form alleged by the four boys.

87 Francine rejected this proposition and gave evidence that there were sufficient assets available to meet all debts.

88 In 1984, Mr Clyne and Mr John Davies formed Davies Clyne. Frank became a client of Mr Clyne's through Mr Davies, with whom Mr Clyne worked, and who had previously carried out accounting work for Frank.

89 Mr Clyne 'assumed responsibility for the financial statements and tax returns' for various companies Frank ran, including Frenchams Park, Mansito Herlina (one of Frank's trust companies), Chambeyron and Colbart.

90 Mr Clyne was appointed the company secretary of Chambeyron in about 1984-1985.[48] Mr Clyne took the place of Mr John Davies as secretary.[49]

91 Mr Clyne said that since becoming company secretary of Chambeyron he kept a folder of the secretarial documents and another file for working papers for tax returns. Mr Clyne said that the secretarial folder would have contained signed consents to be directors, signed consents for the secretaries, transfer documents of shares and registers.[50] Mr Clyne said that the registers would record who were the directors, secretaries, public officers, share transfers and include a register of members.[51] Mr Clyne accepted that he was responsible for maintaining the register of members for Chambeyron.

92 Mr Mereine asked Mr Clyne how he could be sure that the share register and share transfers and other things were in the secretarial file for Chambeyron. Mr Clyne said that it was his normal practice since starting work.[52]

93 Mr Clyne said that he was the company secretary of Colbart as well and also kept a similar corporate folder which contained the normal secretarial documents, consisting of consents to act as directors, transfers of shares and the register itself. He said that he was sure of that as that was the normal secretarial practice.[53]

94 Mr Clyne identified the secretarial file that he kept for each of Chambeyron and Colbart. Neither file contained a signed or unsigned transfer of the shares in Chambeyron from Frank and Marie to Colbart.[54] The secretarial file for Chambeyron did not contain a register of members. Mr Clyne said that he did prepare a register of members for Chambeyron and updated the register with the new shareholder Colbart. Mr Clyne thought the register of members should have been in the Chambeyron file. I deal with custody of the file as a separate issue below. Mr Clyne also said that he gave notice of the change of shareholding in Chambeyron to ASIC.

95 Mr Mereine informed the Court that two files shown to Mr Clyne and admitted into evidence[55] were produced by Francine consequent upon a notice to produce. Mr Clyne said that one file was a file for Colbart and one was a file for Chambeyron. Mr Clyne was asked whether they were the complete files that he maintained. Mr Clyne said that he was not sure and that he could not recall as it was some time ago.[56] Mr Clyne said that as far as he could see there was no company register on the Chambeyron file. Mr Clyne said that he could say it was the folder he maintained for Chambeyron but could not say if it was fully intact.[57] Mr Clyne said that he did not know where the share register was for Chambeyron.[58]

96 The Chambeyron corporate file was described as a normal manila folder.[59] The back sleave of the folder was slightly higher than the front sleave of the folder. On the portion of the back sleave that protruded above the front sleave of the folder was written in hand 'Chambeyron Pty Ltd Corporate file.'

97 Mr Clyne said that the red folder[60] containing documents for Colbart was not a folder he used and was not the folder he handed to Francine. He said it had some Colbart documents in it but only trust deeds.[61]

98 To my observation, the Chambeyron corporate file was not in the form of a typical company file, for example one constituted by a ringed folder containing identified dividers for minutes, register of members, ASIC notices and the like. Rather the documents in the folder were all filed over a metal pin in the top left hand corner. To my observation the file was poorly kept. Documents were not filed in date order nor accordingly to any category of document. It appears that documents in the file had been removed and replaced at some stage. The file contained some correspondence and information about bank loans.

99 The Chambeyron corporate file contained one share transfer of shares held in a company called Irabo Pty Ltd signed in 2001. There was no transfer for the shares held by Frank and Marie in Chambeyron to Colbart, whether a draft, unexecuted, partially executed, or at all. There was no correspondence relating to any transfer of shares by Frank and Marie in Chambeyron. There was no register of members of Chambeyron in the corporate file.

100 Behind a page entitled 2001 in the Chambeyron corporate file are minutes of a meeting of directors of Chambeyron held on 18 July 2001 resolving to accept the resignation of Marie as a director and secretary of Chambeyron. This is followed by two separate signed resignations of Marie as director and secretary. The next document filed is a letter from NAB dated 2002. Below the resignations on the pin is a notice from ASIC dated 2 April 2004 relating to a registered agent for Chambeyron.

101 Mr Clyne, when shown the Chambeyron corporate file, was not asked whether the Chambeyron corporate file was in the form he kept it.

102 Mr Clyne said that Marie had been registered with ASIC as a director and secretary of Chambeyron, but that before 31 December 2001, she resigned from both positions. Mr Clyne had no recollection of the event but gave his evidence based on the annual returns for Chambeyron lodged with ASIC. Mr Clyne was asked what he did in relation to the resignation of Marie as a director and secretary of Chambeyron. Despite Mr Clyne having no recollection of the event, when asked what documents he would have prepared in relation to the resignations of Marie, he said that 'the company register would have to be updated of course and the filing of the resignation.'[62]

103 Mr Clyne was shown documents signed by Marie as a director and as a secretary of Chambeyron.[63] Mr Clyne was shown minutes of a meeting of directors of Chambeyron held at Mr Clyne's office on 18 July 2001 attended by Frank, Kevin and Philip that accepted the resignation of Marie as a director and secretary of Chambeyron.[64] Mr Clyne said that the resignations and the minutes were in the Chambeyron corporate file. Mr Clyne said that the register of members, that he said he would have amended, was not on the file.[65]

104 Mr Clyne was taken to the annual returns for Chambeyron for 2000[66] and 2001.[67] Mr Clyne agreed that the 2000 annual return showed that the shareholders of Chambeyron were Frank and Marie and that the return for 2001 showed that the shareholder of Chambeyron was Colbart. Mr Clyne agreed that he caused each return to be filed with ASIC. Mr Clyne was asked what caused that change in the shareholders of Chambeyron between the filing of the 2000 and 2001 annual return. Mr Clyne said the cause for the change in the shareholders of Chambeyron as shown on the annual returns 'was because I had instructions from Kevin Francis Gerraty [Frank]'[68] for '[t]he shareholdings of Chambeyron to be owned by Colbart.'[69]

105 Mr Clyne was asked whether he recalled what Frank said to him about the reason for the change. Mr Clyne said that '[h]e was suggesting that there would be a family - he was planning to have the total family involved in, in the structure, in the business structure.'[70] Mr Clyne was asked whether Frank explained to him how that was to take place. Mr Clyne answered '[y]es. It was suggested this would be the way to go'[71] (referring to the transfer of shares).

106 Mr Clyne was asked what, if anything Frank said to Mr Clyne about Marie's involvement. Mr Clyne said that it was quite clear that Marie did not wish to be part of the rearrangement and that Frank had told him this.[72]

107 Mr Clyne was asked why he was taking instructions from Frank. Mr Clyne said that he had 'known Frank since 1984 and Frank was not only a client but he was a friend.' He said that he respected Frank, so when Frank asked him to do something, he did it.[73]

108 Mr Clyne was asked whether he recalled where the conversation took place about the change or restructuring. Mr Clyne said that it 'would have been in [his] office.'[74] Mr Clyne was asked what, if any, documents he prepared in relation to the transfer of Chambeyron shares from Frank and Marie to Colbart. Mr Clyne said that 'I just can't recall, it's not in the folder, I just can't recall offhand.'[75]

109 This answer was given in the context of Mr Clyne being taken through the resignation of Marie as a director and secretary of Chambeyron, the annual returns for Chambeyron showing the change of shareholders from Frank and Marie to Colbart, and questions about why the change was made, and Mr Clyne recalling receiving instructions from Frank. Then, after his memory had been refreshed of all these prior events, Mr Clyne was not able to recall what documents he prepared.

110 Mr Clyne was asked what he did to the register when the transfer had occurred. Mr Clyne said that 'when the transfer is complete I update the register.'[76]

111 Mr Clyne said that the files that he kept for Chambeyron and Colbart were handed to Francine about three years ago.[77]

112 Mr Clyne was then again questioned on what he did to effect the transfer of shares in Chambeyron from Frank and Marie to Colbart.[78]

Mr Clyne: The share transfers. The share transfers to the other shareholders.[79]

Mr Mereine: The share transfers from Frank and Marie in Chambeyron who was shareholder going to be?

Mr Clyne: The shareholder in Chambeyron the shares were going to be owned by Colbart Pty Ltd.

Mr Mereine: Are you telling his Honour that you prepared a share transfer to effect that?

Mr Clyne: yes.

113 Mr Mereine, without asking any question as to whether Mr Clyne had the transfer signed by either or both of Frank and Marie or whether he had sighted a signed transfer by either Frank or Marie, then asked:[80]

And after the share transfer was effected what if anything did you do to the register, you were referring to earlier?

114 At that point, I said to Mr Mereine 'I won't allow that question. You asked him did he prepare a share transfer. You can't ask the next one, you haven't established the basis for it;' referring to Mr Mereine's question that assumed that the transfer was effected. Mr Mereine said that he would establish the basis for the question and asked '[a]nd what if anything else other than the share transfer did you do in relation to the transfer shares?' Mr Clyne said: 'update the register.'[81]

115 Thus, despite my prompting, Mr Mereine did not elicit from the witness any evidence that Mr Clyne saw either or both of Frank and Marie sign the transfers or that Mr Clyne sighted transfers signed by Frank and/or Marie.

116 Mr Clyne gave evidence about an occasion that he vividly recalled when Marie had been present in his office with Frank, but could not say why Marie was there. This meeting is discussed further below. Mr Clyne said that Marie could have been just accompanying Frank. It is unlikely, therefore, that Marie came to sign a transfer when Mr Clyne says he vividly recalls the occasion but said that he did not know why she was there.[82]

117 When Mr Clyne was asked about preparing documents for Chambeyron, he was not asked whether he sent share transfer forms to Frank or Marie nor, as mentioned above, was he asked whether or not he sighted a signed transfer form for either Frank or Marie. Further, when I prompted Mr Mereine that he ought establish the share transfers were effected (as he had suggested), he failed to ask any questions to establish that fact, but moved on to ask Mr Clyne questions about updating the share register.

118 In view of Mr Clyne's evidence that he does not recall preparing any documents relating to the transfer of shares in Chambeyron from Frank and Marie to Colbart, and the evidence that was led of the meeting with Marie at his office, I am not satisfied that Mr Clyne did in fact prepare a transfer of shares in Chambeyron from Frank and Marie to Colbart.

119 Even if, contrary to my finding that plaintiff has not established that a form for the transfer of shares in Chambeyron from Frank and Marie to Colbart was prepared, there is no evidence, from Mr Clyne (or by anybody else for that matter), that such forms were sighted either signed or unsigned. Further, the evidence that Mr Clyne advised ASIC of the transfers by the filing of the annual return for Chambeyron for year ended 31 December 2001, does not in any way encourage me to infer that he may have only acted accordingly because he had sighted signed transfers, but now has forgotten.

120 If the plaintiff's case was that Mr Clyne could not recall sighting the signed transfers but his practice was such that he would not have lodged the annual return of Chambeyron recording the changed shareholding in Chambeyron unless he had in fact sighted the transfers, that case was not put or sought to be established.

121 In any event, I am not satisfied that Mr Clyne would have so acted. Mr Clyne transferred units in the Colbart unit trust from Francine to Paul despite Francine not signing the transfer form for the transfer of those units. Mr Clyne admitted that he did so as Frank instructed him to. Mr Clyne also said that the reason he notified ASIC that Colbart was now the sole shareholder of Chambeyron was because Frank told him to do so. I do not think the inference can be drawn, from Mr Clyne notifying ASIC that Colbart was the sole shareholder of Chambeyron, that Mr Clyne so notified ASIC because he sighted transfers from Frank and Marie.

122 Mr Clyne explained that ASIC's practice was to send a form of annual return to Mr Clyne. If Mr Clyne was happy with it, then he would send it back. He said that ASIC would only know if a form should be altered from that previously lodged, if Mr Clyne had previously notified ASIC of the change.[83] Mr Clyne said, referring to the annual returns for Chambeyron for 2000 and 2001, that the change reflected in the 2001 return would come from another form that Mr Clyne had lodged with ASIC.

123 Mr Clyne signed a letter prepared under Davies Clyne letter head dated 13 October 2015, addressed to Mr David Weinberger of Kliger Partners, Melbourne, which stated as follows:[84]

Re Chambeyron Pty Ltd

I have been asked by Mr Kevin F GERRATY and Francine GERRATY as to my knowledge of any transfer of shares in the company CHAMBEYRON PTY LTD.

It is my belief that there were no transfers of shares in this company.

If shares were transferred to other members of the Gerraty Family this would have given rise to substantial Capital Gains Tax implications. This company had three properties as part of its assets and to transfer of shares at market value - which has to be the case when disposals and acquisitions are made between related parties - would have triggered the Capital Gains Tax provisions of the Tax Act.

With this knowledge, I would not have advised on, or even contemplated, this action.

There has been no change in the records of the Australian Security and Investment Commission since original documents were lodged with the Commission at the inception of the company.

Furthermore, there is no evidence in the company statutory file which is now in the control of Ms Francine GERRATY, in the form of minutes, notes and share transfers to indicate that there were changes.

Finally, I am not aware, to the best of my knowledge, of any share transfers from the formation shareholders of Chambeyron Pty Ltd to any other person.

Ivan Clyne

124 Mr Clyne said that the letter was typed by him, at his office. He said that Frank and Francine were present. He said that they had several documents and correspondence with ASIC suggesting that what had been recorded with ASIC for the last ten of fifteen years was not right and should be negated.[85]

125 Mr Clyne was asked why he wrote the letter. He said because he was asked to. He said the information came from information provided to him by Francine. He said that he had no records because he no longer had files in the office, so he had to just base it on what was 'thrown' at him.[86]

126 Mr Clyne was asked whether the contents of the letter were correct. Mr Clyne said that '[i]ts not correct because it doesn't conform with the facts because that's since 2001.'[87]

127 Mr Clyne said that he wrote the letter because he felt compelled to because Frank had always been a trusted person with him and he felt that he should write the letter based on the information given, but that he could not substantiate the information that was given to him.[88]

128 Mr Clyne was asked what facts could not be substantiated, he said:[89]

Well, the facts are that there was several meetings based on the fact they are all shareholders and directors and there was enough documentation around to say that was the case. So I wrote the letter out within ten minutes without giving it due consideration and it was not correct. It's not right.

129 Mr Clyne does not say that the letter was incorrect in saying there were no share transfers in Chambeyron; Mr Clyne says its incorrect because the parties have held meetings which have been documented, on the basis that the shares in Chambeyron are owned by Colbart. Mr Clyne was given the opportunity to say that there were in fact share transfers of the shares in Chambeyron to Colbart, contrary to what he said in the letter, and he did not do so.

130 Under cross examination by Mr Keogh, Mr Clyne agreed that he did not take any instructions from Marie as to the transfer of her shares in Chambeyron to Colbart. Mr Clyne said 'no, I take Frank's words.' It was put to him that he acted on Frank's instructions alone and he agreed, and said: 'yes, because I'd known Frank for 17 years by this time.'[90]

131 Mr Clyne was asked what if any changes were involved with Colbart. Again Mr Clyne could not recall.[91] Mr Clyne said that updating the register would have involved taking one name out and inserting a new name of the shareholder. When asked if there were any changes made to Colbart that he was involved in that he could recall, Mr Clyne said:[92]

Mr Clyne: Yes. The Colbart unit, it was a unit - there was Colbart.

Mr Mereine: Yes?

Mr Clyne: And there was Colbart unit trust.

Mr Mereine: Just focusing on the company Colbart Pty Ltd for the moment what if any changes were you involved in with the company?

Mr Clyne: I can't recall. Is there something I can look at?

132 This evidence, again, does not support the finding that Mr Clyne prepared, and Frank and Marie signed, transfers of their shares in Chambeyron to Colbart.

133 Mr Clyne was shown an ASIC form dated 18 July 2001 recording that six shares in Colbart Pty Ltd had been issued.[93] Mr Clyne said that Frank had told him that the entity was to have eight people involved, seven children and Frank. Mr Clyne said that accordingly, as there were two existing shares in Colbart, six further shares needed to be issued. Mr Clyne was asked where the documents were (presumably for the share issue). Mr Clyne said that he would have to assume they were in the folder. Mr Clyne said they were not in the Colbart folder that he had in front of him.[94] Mr Clyne said that he was aware directors were also appointed to Colbart, and that he would have prepared appropriate documents such as consents to act as directors and the appropriate forms to send to ASIC.[95]

134 Mr Clyne was taken to the annual return of Colbart dated 14 December 2001, that showed that the shareholders and directors were, Frank, Kevin, John, Philip, Paul, David, Francine and Kate. When Mr Clyne was asked why he confirmed that information with ASIC he said '[b]ecause that was the facts at the time.'[96]

135 Mr Clyne said that the changes made to the Colbart unit trust were that units were transferred equally between eight people.[97] He said he did that because he was instructed to do so by Frank.[98] Mr Clyne identified unit transfers he prepared[99] and trust unit script with his signature as secretary of Colbart.[100]

136 Mr Clyne said that by the end of July 2001, there were eight shareholders in Colbart, eight directors of Colbart and eight unit holders in the Colbart unit trust.[101] Mr Clyne said that Marie was not made a director or a shareholder of Colbart as his instructions from Frank were that Marie did not wish to be part of the restructure.[102] Mr Clyne was then asked whether he had ever in his professional capacity met Marie. Mr Clyne said possibly two or three times.[103]

137 As mentioned above, Mr Clyne recalled a time when he met Marie in his office with Frank and there being a little bit of tension in the air. He recalled that when Frank was not in the room, Mr Clyne said that he asked Marie 'are you still in love with your husband?' And she said 'of course, of course.' Mr Clyne said that he realised he had blurted out something that he should not have, and he remembered this occasion vividly.[104]

138 Mr Clyne could not recall what Marie was doing in his office. Mr Clyne said that she may have just been accompanying Frank.[105]

139 Mr Clyne was pressed by Mr Mereine on the reason for Marie being in his office. Mr Clyne said that he could not answer because he did not know.[106]

140 Kevin recalled the meeting in July 2001 where the proposed restructuring was discussed. He said everyone was there save David.[107] Kevin said that the demands made by creditors in relation to the Lygon Nominees matter was the cause of the restructuring and that the proposal and figures for the restructuring were put forward by Frank.

141 Kevin said that Marie was insistent that they had to stop Frank from spending money. He said a trust was mentioned, the Colbart family trust, and everyone was going to have a one-eighth share. Kevin said that he recalled Marie getting angry and saying that she wanted to actually get some security and she wanted Frank not to have to be the only person who was in control of the money.[108] Kevin said Marie wanted 'protection of assets related to her retirement';[109] Marie 'wanted the assets to be protected from Frank.'[110]

142 Kevin said that he could not recall discussing with Marie what the corporate structure should be, and whether it was her intention that Colbart should take over the ownership of Chambeyron. Kevin said that it was Marie's 'intention that the children have the greater say in the allocation of funds.'[111] Kevin said that Marie wanted the assets protected by setting up a trust.[112]

143 Kevin did not know why Marie was not included as a beneficiary of the trust.[113]

144 Kevin said that he understood that after 2001, Colbart held 100 percent of the shares in Chambeyron and it was the Colbart unit trust that ultimately owned the family assets. Kevin said that this was his belief because Mr Clyne told him that was the case and that was the intention of the family. Kevin said that he never saw a register of members for Chambeyron, and said that that was handled by Mr Clyne. Kevin did not give evidence that he saw any transfer of shares in Chambeyron signed by his parents.

145 Kevin said that after the 2001 meetings when the restructuring was discussed, the family carried on business as if the restructuring had occurred.

146 Kevin gave evidence that in 2014 Francine asked Kevin to lend money against the Colbart trust assets to purchase three St Kilda apartments. Kevin did not lend the money. Kevin said that he later heard from Paul that Francine, with Frank, had paid a deposit for the units. Kevin said that the family had lost confidence in Francine's ability to manage the accounts for Chambeyron because she had tried to purchase apartments. Kevin said that this led to the April 2014 extraordinary meeting being called to remove Francine as a director of Chambeyron.

147 Frank asked Kevin why he didn't take notice of Frank and Marie's instruction concerning the sale of the family home at Winfield Road. I clarified what Frank was asking Kevin and asked whether it was made clear that Frank and Marie would like the new home, being Wattle Valley Road, to be purchased in their name. Kevin said that Marie did make it clear that she wanted a house unencumbered and her name on the title.[114] Kevin said that you would have to ask Philip why Wattle Valley Road was encumbered by a mortgage, Kevin did not know why it was done. Philip organised the loans.

148 Philip said that as a result of the Lygon Nominees issues and the debts owed to the Bank of Melbourne, in 2001, he organised the refinancing of Chambeyron's debts with the NAB.

149 As is mentioned above, Philip said that the refinancing involved the sale of the Motherwell Street property for $500,000, with the other $1 million or so that was owing being made up with money secured against the Winfield Road and Boundary Road properties. Any shortfall was to be met by the 'Gerraty group' which Philip explained was all the family members contributing to repay the debt. Philip said that very little was needed to meet the shortfall and that he could not recall whether he or his business provided any funds.[115]

150 Philip said that in 2001, Frank had once again gotten into financial trouble and that the family did not want the assets owned by Marindi Park, with which the sons operated their businesses, put in jeopardy again. Philip said they were previously in jeopardy in 1990, when administrators called in to Marindi Park, and referred to earlier problems with the ANZ bank.[116]

151 Philip said that there was a family meeting whereby there was a decision made that the family would divide up Colbart into eight units or shares. Philip said that it was discussed that there was to be a division of eight of the company and division of eight of the unit trust.[117]

152 Philip said that in respect of the proposal in relation to the Colbart unit trust, he attended Mr Clyne's office to sign paperwork. He identified his signature on the transfer of units that was also signed by Francine.[118] Philip was asked in the second half of 2001 what if anything else he signed in relation to Colbart. Philip said that just before Christmas he went into Mr Clyne's office to again sign some documents. He could not recall the document, but he remembered Mr Clyne telling him, while he was there, that Marie was in a week or so before. Philip said Marie 'never comes into Ivan Clyne's office to sign' 'and I remember that, and that's how I remember that my mother's signature was on that document that I also signed.' Philip said that the document he signed was left at Mr Clyne's office. Philip was able to identify and recall the time that he visited Mr Clyne's office from tickets he had purchased for his family to fly to Melbourne.[119]

153 Philip said that at the beginning of 2002, he understood that Colbart owned the shares in Chambeyron. Philip said that he could not recall seeing a register of members for Chambeyron. Philip did not give any evidence that he saw any transfer of shares in Chambeyron signed by his parents.

154 Philip said that Marie was not involved in the division of Colbart and the Colbart unit trust because 'she didn't want anything to do with it, or the family business, she hated it, she was scared of the way Frank got into financial trouble.'[120] Of the proposal, Philip said that Marie said 'she didn't want Frank to have full control over the financial assets anymore.'[121] Philip said that the role of the Colbart unit trust is to provide for Frank and Marie's future.

155 Philip was asked why the family business was split eight ways in the trust. Philip said that Marie 'didn't want anything to do with the family business. She hated it.'[122]

156 Philip said that after 2001, the family conducted the business of the companies as if the restructuring had occurred and that he attended meetings for Colbart to conduct the business of Colbart, and to manage the assets of Chambeyron.

157 Philip said that he was not involved in the purchase of the Wattle Valley Road property (the current residence of Frank and Marie) and that he was only involved in securing bridging finance.[123] Philip recalled Marie asking for her house to be paid off, however Philip said that he was advised that the family would save money if they retired all commercial debts and kept a debt on the residential property because the interest rate was cheaper.[124] I asked Philip whether Marie conveyed the believe that the house she lives in is her house, Philip said that it is 100 per cent held for her benefit.[125] Mr Mereine sought to clarify what Philip meant by this, Philip said that Wattle Valley Road is to be used for Marie's benefit 'for the rest of the life, or whenever she needs to go to a home' and after Marie's death, Wattle Valley Road is held for the unit holders.[126]

158 Paul said that in 2001, Frank had a high level of indebtedness, and bank statements from Westpac showed this; that interest payments were not being covered and repayments of capital were not being made. Paul said that discussions took place at the family home in Winfield Road to restructure the businesses to protect the family assets.[127] Paul did not remember the meeting in detail. Paul said that the restructure was to entail all the children and Frank having a share in the Colbart unit trust. Paul said that he didn't recall paying anything for his share, and that 'there was no value in the family companies and we had pressing issues at this time, that was the least of our problems, the units were given to me.'[128]

159 Paul said that subsequent to the meeting he had clear instructions from Marie to attend Mr Clyne's office to 'fix things, to protect the assets of Marindi Park by a company restructure.'[129] Paul said that he recalled going with Philip to Mr Clyne's office in 2001 on his mother's instructions. Paul did not give any evidence of seeing any transfer of shares in Chambeyron to Colbart signed by his parents.

160 Paul said that due to the issue with Lygon Nominees, Frank entered into a scheme of repayments that prevented him from being bankrupt.[130] Paul said that this scheme was funded by family money from various children and it involved a sale of Frank's unit in the unit trust, in exchange for the money for the settlement. Paul said that there was a signed contract for the sale of the unit; that the document was in his attic, but that it was not there now. Paul did have a bill from Adamsons' solicitors, the solicitors who Paul says drew up the contract for the sale of the unit, and various correspondence from Adamsons' solicitors. A letter shown to the Court from Adamsons' solicitors refers to shares.[131]

161 Paul said he did not think anything was paid for the shares in Chambeyron and that he did not recall signing anything 'but that doesn't mean [he] didn't sign anything' as Paul said that he signs forms when he goes to Mr Clyne's office.

162 Paul said that after this time, meetings were held as if the restructure had been carried out and that at the meetings, discussions focused on the direction of family trust, employment of all children, and the welfare of their parents.[132] Paul said that he believed he owned a share in the unit trust and that 'it has never been mentioned by [Francine] that [Francine] didn't transfer [the units] until now.'[133]

163 When asked if he recalled Marie expressing a desire that the family home be in her name, Paul said that he recalled that she only expressed that desire post-2013 or 2014.[134]

164 Paul said that he did not recall whether he attended the April 2014 extraordinary meeting, but that John would have held his proxy if he did not attend. Paul said that, at that meeting, it was resolved that Francine should be removed as director of Chambeyron because of 'her reckless behaviour in dealing with family funds,' referring to her decision to purchase three units in St Kilda, and that Frank was removed as secretary of Chambeyron 'because of recklessness in conducting family business.'[135]

165 John said that he recalled that Lygon Nominees owned a premises at Thomastown and that Frank was running a business out of that premises for research and development. John said that rent was owing on the premises by Frank and there was a court proceeding, and that Paul was asked to 'solve the problem.'[136]

166 John said that he received units from Frank in the Colbart unit trust. John said that they were gifted to him because he is the eldest son.[137]

167 John said that he attended meetings as a unit holder, where the business of Colbart and Chambeyron was discussed. John said the purpose of these meetings was to discuss the health, wellbeing and financial stability of the Colbart unit trust, Frank's voting rights, current directors of the companies and assets of the trust.[138] John said that Marie also participated in these meetings and that she was present as a unit holder.

168 When asked if John was aware of Marie's desire to have her home in her own name, John said that he 'didn't recognise that as a priority; she might have wished it on one or two occasions.' John also said that he 'finds that hard to understand'[139] as Frank has 'never owned a single thing in his entire life.'[140]

169 John said that he thought some funds were used to purchase their new home and that it surprises him that there is any concern that the monies were not used to purchase property for Frank and Marie.[141]

170 In a family meeting in 2014, John said that he recalled discussing removing Francine as a director of Chambeyron because of the family having 'no confidence in Francine with running of the business.'[142] Frank was removed as company secretary for Chambeyron for reasons of 'no confidence again.'[143]

171 John was not involved in running a nursery as Paul and Kevin were. John is a truck driver. With due respect to John, he did not present as somebody who was financially astute and although the eldest of the children, appears to have relied on his brothers in the running of the family business.

172 John gave no evidence of a transfer of shares in Chambeyron to Colbart signed by Frank and Marie.

173 Kate gave evidence that her mother gave her attentions to domestic duties and left the business side of the family up to Frank. Kate said that her mother was keen to own her own home and to secure her retirement. Kate said 'mum wanted a property in her own name.'[144] She said that her mother said the 'boys were to have the businesses and the girls the property. That is why she was so keen to have a property in her own name.'[145] Kate said 'we all knew that she wanted to be safe and secure in her future.'[146]

174 Kate was involved in the sale of the Winfield Road property and the purchase of the Wattle Valley Road property for her parents to live in. Kate said she believed sufficient funds were available from the sale of the Winfield Road property to allow Frank and Marie to buy a property in their own names.[147] Kate said that Philip decided to pay off loans on business properties, which, she said 'doesn't make very good financial sense because you're better off having a loan on a business property and having tax deductions associated with that than having a loan on a property that Marie and Frank were going to live in.'[148]

175 Kate said that the boys thought the Wattle Valley Road property was too expensive and that Frank and Marie were spending too much money.[149] The Winfield Road property sold for approximately $1.5 million. The Wattle Valley Road property was purchased for $702,000. Kate said that the 'boys were not happy about it and thus [Kate thinks] only $200,000 was put down on Marie and Frank's property and the rest was mortgage.'[150] Kate said that Philip handled the division of the proceeds of sale of Winfield Road.

176 Kate said that she absolutely believed Marie and Frank own their own home.[151] Kate said that she 'presumed the new property would have been in their name.'[152]

177 Kate lives nearest her parents and sees them regularly. Kate said that her parents often come over to her house for dinner so that she can ensure they are eating properly.[153] Kate believed that Philip has not seen his parents for 5-6 years; Paul sees them briefly a few times a year; John drops money off for his parents, but does not see them; Kevin hasn't seen parents for 7-8 years except at family meetings; David lives in America; Francine sees her parents a lot. Kate said that Marie and Frank are on ventilators and the maintenance for caring for them comes from Francine and Kate.[154]

178 Kate said that she recalled the discussions concerning Lygon Nominees and that there was a 'call to arms for us to all step up and help.'[155] Kate recalled Marie indicating that she was concerned with Frank's business decisions, said saying they have to do something so that we are safe and secure, but that Marie did not come up with any plans for moving forward or ever formulate anything.[156] Kate said that Marie never told Kate that Marie agreed with the proposal put forward by Frank (copied above).[157]

179 On several occasions Kate had asked to borrow money from the family, and for repayments of money she had lent Frank and Marie for medical expenses. In her written requests, Kate often phrased the request as being to borrow money from the family trust and for the loan to be secured against her unit share in the family assets.

180 When it was put to her that Kate believed that as a result of the restructuring, Kate had a unit in the Colbart unit trust of some value, Kate said: 'if I used the incorrect terms I apologise. As you can appreciate it was a highly emotional time. I didn't want to beg my family but it had gone to the point where I actually had to beg for some money and I begged on a continual basis and was denied.'[158] Kate said that 'at that time I was not sure what owned what. It was the group of family, the family group that had the assets. I couldn't tell you whether Chambeyron owned this or Marindi owned that. There was a Queensland property, there was a Melbourne property, there was Mum and Dad's house, they also had Motherwell at some stage. It was just a group, the family group had assets.'[159]

181 Kate said it was well known within the family that for the transfer of units to have occurred, everyone had to pay the stamp duty.

182 Kate said that she never had faith in Mr Clyne as the accountant for the family.[160]

183 David gave evidence that he was not aware that his parents had transferred all the assets from Chambeyron to Colbart. When asked who owns Heatherton Road, David said his parents 'bought it and its theirs.'[161]

184 David said that he has discussed the health of his parents with his brothers and that he has 'told [his] brothers that they are slowly killing them.' [162] David said that when Frank and Marie come to visit him in America, they come over 'quite broke'[163] and that he has asked his brothers on occasions 'to ease up on money'[164] as he believes his parents are 'very underly looked after.'[165]

Plaintiff v First Defendant Second Defendant Third Defendant Fourth Defendant

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Judgment (525 paragraphs)

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Cases Cited (8)