Plaintiffs v Defendants

2 The first to fourth, sixth to eighth and tenth to eighteenth defendants ('defendants') have applied for summary judgment pursuant to s 62 of the Civil Procedure Act 2010 (Vic) or, in the alternative, that the statement of claim be struck out. The defendants' application is based on the following submissions:

(a) the payment was made from the assets of Vapold;

(b) Vapold is not a trustee and is the legal and beneficial owner of its assets;

(c) the relevant trust assets are the shares in Vapold which are held on trust by the second, third and fourth defendants; and

(d) accordingly, the payment was not made from trust assets and cannot constitute a breach of trust.

The fundamental issue to be determined on the summary judgment application is whether the plaintiffs' claim that the Vapold assets were held on trust has no real prospect of success.

3 The plaintiffs have applied to restrain the defendants' solicitor, Mary Nemeth, from continuing to act on their behalf on the grounds that she is likely to be required to give evidence at trial about advice given in relation to and documentation of the payment, and may be required to defend those actions or that advice; and that there is an apparent conflict between the interests of the defendants represented by Nemeth. The plaintiffs submit that, in the circumstances, it is in the interests of justice that Nemeth not continue to act for the defendants.

4 The Liberal Party of Australia (Victorian Division) ('Division') is an unincorporated association.

5 The plaintiffs and the seventh to eighteenth defendants are members of the Administrative Committee of the Division.

6 Vapold is a corporation that is related to the Division. The nature of that relationship is a fact in issue in the proceeding.

7 The second, third and fourth defendants, Alan Stockdale, Karyn Sobels and Christopher Pearce respectively ('Trustees') are:

(a) the directors of Vapold; and

(b) members of the State Finance Committee appointed by the Administrative Committee under the constitution of the Division ('Constitution') as trustees.

The Trustees hold shares in Vapold on trust for the Division.

8 Deeming is a member of the Division and a member of the Legislative Council of Victoria for the Western Metropolitan area.

9 The defendants relied on the following affidavits:

(a) Stockdale, sworn 4 September 2025;

(b) Sobels, affirmed 20 October and 27 October 2025;

(c) the sixth defendant, Philip Davis, sworn 8 September 2025; and

(d) Nemeth, sworn 10 November 2025.

10 The plaintiffs relied on the following affidavits:

(a) the first plaintiff, Colleen Harkin, sworn 26 June and 15 October 2025;

(b) the sixth plaintiff, Gregory Mirabella, sworn 20 October 2025; and

(c) solicitor for the plaintiffs, Grant Walker, affirmed 26 June and 23 September 2025.

11 The proceeding is listed for trial on 23 March 2026.

12 Discovery is not complete. There is a significant dispute before a judicial registrar about the scope of discovery.

13 Witness outlines are due to be served in January and February 2026.

14 The parties agree the Division is governed by the Constitution as most recently amended on 27 July 2024.

15 The Constitution establishes the Administrative Committee and provides that it 'shall conduct the business and affairs of the [Division] other than policy formulation'.

16 The financial affairs of the Division are governed by cl 18 of the Constitution. The State Finance Committee is established to deal with the income and expenditure of the Division '[s]ubject to the direction of the State Council and the Administrative Committee.'

17 The appointment of trustees is governed by cl 18.4 which reads:

The Administrative Committee shall appoint three members of the State Finance Committee to be Trustees who shall hold the income and property of the Party on trust for its Members.

18 The period of office of trustees is governed by cl 18.5 which reads:

The Trustees shall hold office until resignation or removal by resolution of the Administrative Committee which shall have the power to fill any vacancy.

19 The income and property of the Division is governed by cl 18.8 which reads:

All income and property of the [Division] shall be applied towards the objects of the [Division] and no portion shall be paid in any manner by way of dividends, bonus or otherwise by way of profit or benefits to the Members of the [Division].

20 A trust deed was executed on 15 September 1972 by Sir Edward Cohen, James Johnston and Wilfred Brookes as trustees, and Philip Russell and Leo Hawkins as President and General Secretary of the Division, respectively, for and on behalf of the State Executive and members of the Division ('trust deed').

21 The trust deed recognises the existence of an informal trust in relation to the assets of the Division that predates the trust deed in respect of which Cohen, Johnston and Brookes were the current trustees. The trust deed recites:

WHEREAS the Liberal Party of Australia (Victorian Division) is a voluntary unincorporated body formed and operating under a written Constitution since the year 1945 together with subsequent amendments thereto which said Constitution as amended was confirmed by the State Council of the Victorian Division on the 23rd day of February 1972 AND WHEREAS the said Constitution provided that the State Executive shall appoint three trustees by whom the income and property of the Party shall be held AND WHEREAS the Trustees and their predecessors have acted as trustees under the said Constitution since the formation of the said Division and have collected held and disbursed the funds of the said Division pursuant to the said Constitution but not pursuant to any written deed or document of trust AND WHEREAS the State Executive has now resolved to confirm and ratify the said trust fund and the exercise of the several powers and duties of the trustees from time to time under the terms of this deed and pursuant to the terms of this deed to ratify and confirm the appointment of the Trustees heretofore and the Trustees now the parties to this deed pursuant to Section 56 of the said Constitution.

22 The trust deed contains the following declaration of trust:

The trustees shall hold all land, moneys, funds, securities and other property and income of the Victorian Division upon trust for the Victorian Division and the members.

Evidence on the summary judgment application does not identify what assets were held on trust for the Division when the trust deed was executed.

23 The trust obligations set out in the trust deed include the following:

The trustees shall deal with the said property and income in such manner as may be required from time to time by resolution of the State Finance Committee.

...

The trustees shall pay all moneys received by them into an account or accounts in the name of or under the control of the trustees at a Bank to be determined by the trustees, and shall disburse such moneys in such manner as may be required from time to time by resolution of the State Finance Committee.

24 The trust deed requires the trustees in each financial year to:

a) Have the accounts of the Trust funds audited by an auditor appointed by the State Finance Committee for this purpose[.]

b) Provide the State Finance Committee with a copy of the audited accounts and any report of the auditor thereon.

No audited accounts of the Division trust funds are in evidence.

25 The trust deed provides that '[t]he trustees shall hold office until death or resignation or until removed by resolution of the State Executive'.

27 At the time of incorporation, Vapold adopted a memorandum and articles of association under the Companies Act 1961 (Cth).

28 The general objects of Vapold set out in the memorandum and articles include:

(e) to act as trustee and/or in any fiduciary capacity whatsoever whether with or without remuneration and on any terms or conditions.

More specific objects added to the memorandum and articles include the following:

(pp) to promote the objects policies causes and activities of the [Division];

(qq) to provide an office headquarters and other facilities for the use of the members and staff of [Division] and to furnish outfit and maintain the same and to permit the use of such facilities by the members officers and staff of the said Party.

29 The original subscribers of Vapold were Cohen and Johnston with one share each.

30 The memorandum and articles contain the following definitions:

"Constitution of the Liberal Party of Australia (Victorian Division)" or "Constitution" means the constitution of the [Division] as presently established or as amended from time to time hereafter and any constitution substituted therefor from time to time.

...

"State Executive" means the State Executive of the [Division] as appointed pursuant to the Constitution[.]

"State Finance Committee" means the State Finance Committee appointed pursuant to the Constitution of the [Division.]

"Trustee appointed pursuant to the Constitution" or "Trustees appointed pursuant to the Constitution" shall mean the Trustee or Trustees as the case may be appointed pursuant to the Constitution of the [Division].

31 Provisions in the memorandum and articles relevant to the capital and shares of Vapold include:

1. Subject to these Articles the shares shall be under the control of the Directors and so that -

(a) The members of the Company shall be restricted to those persons who are from time to time Trustees pursuant to the Constitution[.]

(b) The Directors shall approve the transfer of any existing share to any new Trustee appointed pursuant to the Constitution and may issue further shares in respect to any additional Trustee appointed pursuant to the said Constitution.

32 Provisions in the memorandum and articles relevant to transfer and transmission of shares include:

1. No share or shares in the Company shall be held by or transferred to any person or persons other than a Trustee or Trustees appointed pursuant to the Constitution.
2. (a) Subject to the provisions of Paragraph (b) hereof the Directors may refuse to register any transfer of shares without assigning any reason therefor, and their decision shall be absolute.

(b) The Directors shall forthwith register all transfers of shares made to a Trustee or Trustees appointed pursuant to the Constitution, and the Directors shall not register any transfer of shares except when such transfer is made to a Trustee or Trustees appointed pursuant to the Constitution.

The memorandum and articles provide that where a trustee ceases to be appointed under the Constitution, their shares shall be transferred to a person who is a trustee.

33 The memorandum and articles provide that a director of Vapold was either to be a trustee appointed under the Constitution by the Division or the treasurer of the Division.

34 Provisions in the memorandum and articles in relation to winding up include the following:

129(1) If the Company is wound up, whether voluntarily or otherwise, the liquidator may with the sanction of a special resolution divide among the members in specie or kind all or any part of the assets of the Company and may with the like sanction vest any part of the assets of the Company in trustees upon such trusts for the benefit of the members or any of them as the liquidator with the like sanction shall think fit.

35 Stockdale produced the Constitution of Vapold ('Vapold Constitution') that is current now and at the time of the events that are the subject matter of this proceeding. There is no difference between the memorandum and articles and the current Vapold Constitution that is material to the outcome of the summary judgment application.

36 There is no express statement in the memorandum and articles or the Vapold Constitution to the effect that Vapold is a trustee or that the assets of Vapold are held on trust for the Division.

37 Stockdale produced an auditor's report dated 12 December 1973 of the balance sheet of Vapold at 30 June 1973 and the related profit and loss statement from incorporation on 13 October 1972 to 30 June 1973. The audited financial statements disclose a capital donation of $48,850 received during the reporting period, assets including land and buildings at cost of $101,783 and a mortgage liability of $54,000. There is nothing in the Vapold financial statements to indicate that the company's assets were held on trust for the Division.

38 Stockdale gave the following evidence about the purpose of Vapold's incorporation and the assets owned by it in 1973:

I have been unable to ascertain from the records of Vapold which are held by Vapold precisely what the purpose of its incorporation was, however at all times during my directorship of Vapold it has been my understanding that its corporate purpose is to serve the interests of the [Division]. Further, I have read a book written by Alan Gregory called 'Cormack Foundation: A history to 2020' which states that Vapold was incorporated specifically for the purpose of purchasing an office and facilities for the [Division] to utilise. I believe that office was 232 Albert Road, South Melbourne (the 'South Melbourne Property').

39 A title search of the South Melbourne Property shows that Vapold was registered as proprietor on 14 November 1972. I infer that the South Melbourne Property is the property recorded in the Vapold balance sheet at 30 June 1973.

40 Stockdale said that having reviewed the books and records of Vapold relating to its history, he had found no evidence that the company is a trustee of a trust in favour of the Division, nor that it had ever acted in a trustee capacity. He said the records he reviewed indicated that Vapold existed as a company in its own right, and that it was at all times his understanding that Vapold is the legal and beneficial owner of its assets. Stockdale said:

During my time as director, I have always understood that the objective of Vapold is to invest its assets to receive a return on investment and to use its investments (and especially the return on them) for the benefit of [the Division].

Stockdale referred to and produced the following historical records:

(a) the memorandum and articles;

(b) the Vapold Certificate of Incorporation;

(c) title searches of the South Melbourne Property and a property at 104 Exhibition Street, Melbourne subsequently purchased by Vapold;

(d) a letter from a chartered accountancy firm consenting to appointment as auditors; and

(e) the auditors' report for the year ending 30 June 1973.

It is not clear whether there are any other historical books and records held by Vapold that were reviewed by Stockdale for the purposes of making his affidavit.

41 Stockdale was appointed as a director of Vapold on or about 23 October 2017. Stockdale said that on the same day he was allotted 1,350 shares in Vapold and that he signed a declaration of trust confirming that the shares were the property of the Division under the trust deed.

42 Stockdale said his becoming a shareholder and director of Vapold was contemporaneous with his appointment as a trustee under cl 18.4 of the Constitution. Minutes of an Administrative Committee meeting held on 22 October 2017 record resolutions appointing Stockdale as a trustee of the Division and as a director of Vapold. The meeting minutes record:

On Friday the Finance Committee meeting and Vapold Directors meeting was scheduled for 10.30 and 11 am. At the Finance Committee meeting at 10.30 on Friday the State President who chairs this meeting indicated that the Party is short of funds and we would like Vapold to sell the $2.2M worth of shares it holds on behalf of the Party.

43 The Administrative Committee appointed Sobels as a trustee on 15 August 2024. Sobels made a declaration of trust on 22 August 2024, that is in the same form as the declaration made by Stockdale and relevantly reads:

I, Karyn Sobels of [redacted]. ACKNOWLEDGE DO HEREBY AND DECLARE that the 1,350 shares of which I am the registered as the holder in the Register of Members of Vapold Pty Ltd ('the Company[']) are the property of the and are held by me solely as nominee of the Trustees therefor under the Trust Deed made the Fifteenth day of September, One Thousand Nine Hundred and Seventy Two ('the said Trust Deed[']). And is so held upon the terms and conditions set out in the said Trust Deed.

I AUTHORISE the Trustees for the time being under the said Trust Deed to at any time complete the Transfer of the said shares that I have this day signed in blank as to the consideration particulars of the transferee and date of sale and lodge the same with the Company for registration.

44 The Administrative Committee appointed Pearce as a trustee on 28 November 2024. Pearce executed a deed of trust on 7 March 2025. The deed of trust records that Pearce was requested by the Division to become a shareholder and director of Vapold. The deed records the acknowledgements, declarations and undertakings by Pearce to the Division, including the following:

1. I declare that the 1350 shares that I am registered as the holder of [i]n the Register of Members of the Vapold are the property of [the Division] and I hold said shares on trust for [the Division].
2. I will if required by [the Division] transfer the said shares to a person or corporation nominated by [the Division] at a consideration designation by [the Division]. To this end:

(a) I authorise the Trustees of [the Division] for the time being to at any time complete the transfer of the said 1350 shares that I have previously signed in blank and to lodge the same with Vapold for registration.

(b) I will use by best endeavours to have Vapold register such a transfer.

(c) In the event that Vapold refuses or fails to register the transfer I will if requested by [the Division] bring proceedings to have registration effected, provided that [the Division] gives me an appropriate indemnity.

1. In accordance with clause 18.4 of the Constitution of [the Division], I will use my best endeavours as a shareholder, and if applicable as a director, to ensure that all [i]ncome and property of Vapold is applied for the benefit of [the Division].
2. I will use my best endeavours as a shareholder of Vapold to have any person or persons nominated by [the Division] to be appointed as director of Vapold.
3. I will vote as directed by [the Division] at any general meeting of the shareholders of Vapold.
4. I will use my best endeavours to ensure that a condition precedent to the appointment of any person as a director of Vapold or to any transfer or allotment of shares of Vapold to any person will be that that person will first sign a Deed of Trust and Undertaking on the same terms as or to the effect of this Deed of Trust and Undertaking.

45 Stockdale said that in each year since he has been appointed as a director, there has been consultation between the directors of Vapold and senior representatives of the Division as to dividends and other payments from Vapold to the Division. He said it has been common for the Division to indicate that it desires Vapold to use some portion of its financial resources in a particular way, and that on occasion the indication of a desire had been expressed as a request, proposal, instruction or direction. Stockdale said regardless of the terms of expression, those indications had been given considerable weight by the Vapold directors, although not treated as binding. He said:

[The directors] have not treated compliance with the [Division's] indications of desire as mandatory, because we have always approached our decision-making on the basis that we must bring our own judgement to bear, as directors, as to how Vapold's assets should be deployed.

46 Mirabella served as vice-president of the Division between 2017 and 2019, and as president between 2022 and 2023. Since that time, he has been a member of the Administrative Committee and the Finance Committee.

1. It is my understanding that Vapold was set up by the [Division] in order to acquire property for itself.
2. Vapold is an entity that holds assets for the [Division]. As an unincorporated association, the [Division] cannot hold its own assets. It is my understanding that the [Division] holds assets through Vapold, the first [d]efendant. The Vapold incorporation documents is [sic] consistent with my understanding.
3. Vapold's assets are the assets of the [Division].

48 Mirabella said that, as a matter of practice, at each State Finance Committee meeting there is a discussion of Vapold finances. He said the financials of Vapold are treated as one and the same as the financials of the Division. Mirabella said:

The inclusion of Vapold's financials within the [Division] balance sheet makes it clear to me that the true purpose of the Vapold entity, is that Vapold is merely a vehicle for the [Division] to hold assets and investments.

49 Finance committee documents tendered through Mirabella show that Vapold is an agenda item at committee meetings. The Vapold agenda item for the Finance Committee meeting held on 24 July 2025 reads:

7. Vapold Pty Ltd

8.1 Executive summary

8.2 Significant matters and risks

Appendix:

P. Vapold Investment Report - June 2025 and summary

50 Mirabella produced some financial reports that were appendices to Finance Committee agendas for consideration at meetings. The reports are presented as Division documents. One of the reports, titled Executive Summary and Update, records consolidated financial results for the Division. Line items under the heading 'Income' show Vapold dividends for the relevant period. An Investment Fund Summary and Investment Report shows the mix of investments held by Vapold. Vapold assets and liabilities are recorded on a consolidated Division balance sheet. Separate balance sheets and profit and loss statements were presented for Vapold. A Division compliance calendar has entries for Vapold board meetings.

51 Davis said that on 21 May 2025, he received an email from Pesutto relating to the judgment that had been obtained by Deeming against him in a Federal Court defamation proceeding. Davis said Pesutto requested urgent assistance to deal with payment of a costs order made against him in the Federal Court defamation proceeding.

52 Davis said that all members of the Administrative Committee received an email from a party member on 28 May 2025, proposing that a loan facility of $1.55 million be extended to Pesutto, funded in part by Vapold. The submission expressed the contribution to the loan as being from the division.

53 Davis said that in late May and early June 2025, he corresponded and telephoned Pesutto about the request for a loan. Davis requested that advice be obtained about the ability of the Administrative Committee to pass a resolution directing the trustees of the Division to make a request to the board of Vapold to consider making a loan to Pesutto to assist him to pay the costs order. A memorandum of advice dated 12 June 2025 was subsequently provided by barrister Edward Gisonda SC ('Gisonda advice').

54 On 16 June 2025, Sobels signed a retainer instructing Nemeth to act in respect of the Pesutto loan. The scope of work Nemeth was instructed to undertake included:

• Providing you with advice in relation to the trustees liability if they grant a loan to [Pesutto] in their capacity as trustees of the [Division] and their capacity as directors of Vapold.

• Provide you with advice concerning threats made to the board concerning the granting of the loan.

55 A meeting of the Administrative Committee took place on 19 June 2025. Davis said the following resolutions were carried at the meeting:

The Administrative Committee agrees to proceed to consider the request by [Pesutto] for a loan to settle the Costs Order concerning the Deeming v Pesutto Defamation Matter.

...

[T]he Administrative Committee agrees to the request for a loan from John Pesutto by Vapold on the following basis:

SUM - $1.55M

INTEREST RATE: Commonwealth Bank Australia Standard Variable Home Loan.

TERM: 30 YEARS (or earlier by agreement)

SECURITY: Loan Agreement: Registered General Security Agreement over all John Pesutto's assets and undertakings ($650,000) and by guarantees ($900,000).

To be remitted directly to Mrs Deeming's lawyers trust account on condition that John Pesutto pays the balance of the liability due under the Costs Order.

And directs the Party Trustees and Vapold P/L Directors to give effect to the resolution of the Administrative Committee.

...

[The]Administrative Committee confirms that it is within its authority to instruct Vapold to make a loan.

The following resolution put to the meeting by Mirabella was not carried:

That this Administrative Committee resolves not [to] make any loans to any MPs with reference to [cl] 18.8 of the Constitution.

56 The Gisonda advice was provided to Administrative Committee members at the start of the meeting and discussed in debate about the resolutions. Gisonda was asked to address whether the proposed loan arrangement to Pesutto was permissible under the Constitution. A premise of the request for the Gisonda advice and of the Administrative Committee debate about the resolutions was that a loan by Vapold to Pesutto would be made from the income and property of the Division, and in those circumstances it would be necessary that the loan comply with the Constitution, in particular cl 18.8. In the advice, Gisonda discussed four possible constructions of cl 18.8, three of which would permit the loan transaction.

57 In advance of the meeting, the seventh defendant obtained an opinion from barristers Stuart Wood AM KC and Paul Jeffreys on whether a loan from the Division to Pesutto 'authorised and advanced by its appropriate bodies' would comply with cl 18.8 of the Constitution. Counsel were instructed to assume that the Pesutto loan would be 'authorised and advanced by the appropriate bodies in the [Division]'. The advice assumes the loan was to be made from party assets, but makes no mention of Vapold.

58 Davis said the meeting was adjourned for a short break after the motions were passed. During the break, Davis instructed that a letter be sent to Division members to inform them about the resolutions. That letter reads, in part:

The [Division]'s Administrative Committee met this evening and resolved that Moira Deeming should be paid what is owed to her, and therefore the Party will contribute $1.55 million directly to Mrs Deeming.

Mr Pesutto will be required to re-pay this amount to the Party on a commercial loan basis, with a market-based interest rate, ensuring that the Party earns additional income from this investment.

59 A meeting of the Vapold board was held on 21 June 2025 to discuss the resolution to lend $1.55 million to Pesutto to assist him with payment of the costs order. Stockdale said:

During the course of the meeting the loan terms were discussed and the board considered whether the terms of the loan would deliver a satisfactory return to Vapold on its money lent. After considering those terms and legal advice provided to the directors, the board of Vapold concluded that the loan would deliver a satisfactory return to the company and passed a resolution that Vapold proceed with the loan to Mr Pesutto on terms agreed as quickly as possible in order to avoid Mr Pesutto's [sic] committing an act of insolvency which would occur on 27 June 2025 if payment was not made by that date.

Stockdale said the board of Vapold approved the loan to Pesutto and delegated authority to Sobels to finalise the documentation of the loan. The resolution of the Vapold board reads as follows:

That the Board resolves to give effect to the direction from the Administrative Committee in relation to the arrangement to lend $1,550,000 to John Pesutto on commercial terms, including at an interest rate equivalent to the Commonwealth Bank of Australia ('CBA') standard variable home loan rate, as varied from time-to-time by the CBA. Having considered the matter and received relevant legal advice, the Board is satisfied that the release of this sum by Vapold in accordance with the direction of the Administrative Committee is for the benefit of the Victorian Division of the Liberal Party of Australia. The Board resolves that, in accordance with the Administrative Committee's direction, that sum be paid to the Trust Account of Mrs. Deeming's lawyers at a time determined by the Chair of Vapold.

60 On 22 June 2025, Sobels wrote to Harvey Allatt, in his role as a member of the Finance Committee, raising the need for them to discuss the Pesutto loan. In Allatt's response he said:

The governing body of the [Division] is the Administrative Committee and is responsible party for this matter in the first instance and matters associated with the loan approval.

Allatt noted that the loan was to be advanced by Vapold to Pesutto. He said:

I have assumed the trustees are holding the assets under an effective bare trust for the [Division] as such and for the purpose of my email comments.

61 On the evening of 25 June 2025, Vapold received a letter from the plaintiffs' solicitors demanding that it not make any payment towards the loan ('25 June letter'). Stockdale said the board instructed Nemeth to respond rejecting the plaintiffs' demand. The letter from Nemeth to the plaintiffs' solicitors dated 26 June 2025 ('26 June letter') includes the following:

Your letter misapprehends the relationship between Vapold and the [Division].

Vapold holds assets on behalf of the [Division], and generally deals with those assets as directed by the [Division]. Item 1 on page 2 of your letter demands in substance that Vapold refrain from acting in accordance with a direction from the [Division].

...

To reiterate, Vapold has been directed by the [Division] to make the loan to Mr Pesutto which is referred to in your letter. Vapold considers itself duty bound to comply with that direction.

62 Stockdale said the loan was drawn down on the morning of 26 June 2025 'by way of an electronic funds transfer of $1.55M' to Deeming's solicitors' trust account as directed by Pesutto. Stockdale said:

At all times, I believed, and believe now, that the making of the loan to Mr Pesutto was consistent with the objectives of Vapold, in the interests of Vapold and for the benefit of the [Division] and its members.

63 The plaintiffs allege Vapold is the holding company of the trust assets of the Division. The defendants deny this allegation and allege Vapold holds its assets in its own right and is not the trustee of any trust. The defendants allege that the trustees hold the shares in Vapold on trust for the Division.

By clause 18.4 of the Constitution, the income and property of the [Division], being the Trust Assets of the [Division], is held by, and vested in, three Members of the State Finance Committee appointed by the Administrative Committee to be Trustees, on express trust for its Members ('the Party Assets Trust').

The plaintiffs then plead the trust deed and the appointment of the trustees but do not expressly link these matters to the creation of the Party Assets Trust.

65 The plaintiffs make complaints about the conduct of the Administrative Committee meeting held on 19 June 2025. They allege that the resolutions passed at the meeting 'were invalid and ultra vires, in that they purported to authorise the application of $1,550,000 of Trust Assets in contravention of cl 18.8 of the Constitution'. The plaintiffs seek a declaration that the Administrative Committee resolutions 'were ultra vires, invalid and/or void'.

66 The plaintiffs allege the loan to Pesutto was effected by payment on 26 June 2025 from Vapold to the trust account of Deeming's solicitors ('payment').

67 The plaintiffs allege the payment was made from trust funds in breach of cl 18.8 of the Constitution. They seek declarations against the first to fourth defendants that the payment was made ultra vires and in breach of trust.

68 The plaintiffs seek an order against Deeming for payment of the sum of $1,550,000 received on 26 June 2025 to Vapold.

69 It is an essential element of the plaintiffs' case that the payment was made from assets held on trust for the Division. The plaintiffs do not address in the statement of claim or the reply the defendants' case that the trust assets are the shares in Vapold, that Vapold holds its assets in its own right, and that the payment from Vapold was not made from trust assets. The plaintiffs plead reliance on the Constitution and the trust deed. They do not plead any other material facts of the allegation that the Vapold assets are held on trust by the Trustees or, alternatively, by Vapold for the Division.

(a) that cl 18.4 of the Constitution creates a Party Assets Trust; and

(b) that Vapold is a trustee such that it is only the legal owner of its property, which falls within the Party Assets Trust.

71 The Constitution does not establish a trust. Rather, cl 18.4 is the means by which the Division has been responsible for appointing new trustees from time to time to carry on the work under the deed.

72 Vapold is a proprietary company limited by shares. It is not, and could never be, a trustee under the Constitution, which does not provide for corporate members. Vapold's assets at its founding were its own, not pre-existing property that the original trustees held on trust for the Division. Those assets had, accordingly, always been at arm's length from the Division.

73 The directors of Vapold have authority in that capacity over its property and affairs. That authority is conferred by the Vapold Constitution and by the corporations law. Neither Vapold, nor its directors (in that capacity, or as trustees), can be compelled by the Division to make a decision in relation to Vapold.

74 The decision to enter into the Pesutto loan was made by Stockdale, Sobels and Pearce as the directors of Vapold. The Pesutto loan is now an asset on Vapold's books. It took the place of other assets that were deployed to make the loan. As Stockdale attests, the Vapold board considered that the Pesutto loan would deliver a satisfactory return to the company.

75 All the trustees can do in relation to Vapold is hold or dispose of its shares. It is trite that ownership of the shares in a company (legal or beneficial) does not make the property of the company the property of the shareholders. The company's assets are held by it in its own right.

76 The Administrative Committee did not make a decision to lend funds to Pesutto from the Division's own property or income, and no such loan was made. Rather, the Administrative Committee made a request (wrongly expressed to be a direction, given the absence of a power to direct) to Vapold to make such a loan from its assets (which it subsequently did). It follows that the case against the Administrative Committee members does not raise a justiciable controversy.

77 The Pesutto loan was made from Vapold assets. There has been no decision relating to the Division's property made by any of the defendants. The 'proprietary right or interest' exception to non‑justiciability is simply not engaged.

78 The defendants' contention as to Vapold's independence is contrary to historical, financial and circumstantial evidence showing that Vapold's assets are held on trust for the Division. This proceeding directly invokes the proprietary exception in that the plaintiffs are seeking to protect their rights as beneficiaries of trust property, being Vapold assets. The nature and function of the Party Assets Trust, the relationship between the Division and Vapold in respect of this trust and the characterisation of and beneficial ownership over the assets of Vapold will be issues for determination after a trial, having regard to the Constitution, evidence as to the history, operations and function of Vapold, and the relationship between Vapold, its directors, the trustees and the Division.

79 Clause 18.4 of the Constitution places an obligation on the Administrative Committee to appoint three members of the State Finance Committee to be trustees of the Party Assets Trust to hold the income and property of the party on trust for the party's members. The trustees must be individuals. The effect of cls 18.4, 18.8 of the Constitution and the deed is that Divisional members had a proprietary interest in the income and property of the Division as beneficiaries of the Party Assets Trust as administered by the appointed trustees.

80 For the purposes of the defendants' summons, the plaintiffs rely on the following evidence that Vapold is the entity through which the assets of the Party Assets Trust are held on trust for the Division members.

81 First, the temporal connection between formal ratification of the Party Assets Trust and the incorporation of Vapold supports the inference that steps were taken at that time to ensure the Division's assets were held on trust for the Division and its members through the corporate entity of Vapold. A corporate structure was used because of practical difficulties associated with trustees holding assets in their individual names perpetually, and to allow a means by which the Division was able to control the affairs of Vapold. The mere assertion by Stockdale that he has found no evidence Vapold is the trustee of a trust in favour of the Division, nor that it has ever acted in a trustee capacity, will need to be carefully tested at trial. Whether there is evidence supporting an objective intention that Vapold's assets be held in trust for the Division will necessarily involve consideration of the language used in the constituting documents and of events since at least 1972.

82 Second, the memorandum and articles of association support the plaintiffs' position that Vapold does not hold assets or income for itself. To the extent Vapold may 'provide an office headquarters', it does so only for the members and staff of the Division and not for itself or its own board and staff. The obligations within the memorandum and articles of association continue to be reflected in the Vapold Constitution.

83 Third, even on Stockdale's evidence, Vapold was likely incorporated for the specific purpose of purchasing an office and facilities for the Division to use. An available inference from Stockdale's evidence is that the Cormack Foundation gifted or donated money to the Division in order for Vapold to purchase the South Melbourne Property. Evidence as to the intention of the donor will be important. The evidence suggests that when Vapold held and dealt with the South Melbourne Property it was dealing with the Division's office and the Division's assets, not its own.

84 Fourth, Vapold is closely managed by the State Finance Committee. Vapold matters and investments are regularly discussed at meetings of both the State Finance Committee and the Administrative Committee. Critically, the financials of Vapold are treated as part of the Division's financials. The assets of the Division and its members are overwhelmingly held in and by Vapold through its various investments.

85 The application for summary judgment should be considered in the context of the decision in Alston v Cormack Foundation Pty Ltd,[1] which involved a determination following a long contested trial of whether the Cormack Foundation held its assets on trust for the Division. Unlike the Cormack Foundation, the Vapold financials are reported on and dealt with as part of the Division's financials and its origins are tied closely to the deed and the Division. The fact that the trustees expressly hold their shares in Vapold on trust for the Division in the circumstances only supports the conclusion that the Vapold assets are trust assets of the party.

86 Vapold has no separate operations or identity. It purchases or sells properties, makes investments and holds assets solely for the benefit of the Division and never for its own benefit. In the circumstances of this case, Vapold made a loan to Pesutto after Pesutto asked for one from the Division (and not from Vapold), and after the Administrative Committee purported to approve the loan. Any notion that the loan was not drawn down from the Division's assets as held on trust by Vapold and the trustees is contrived and not consistent with the reality of Vapold's function and operations.

87 The trust deed executed by Pearce reflects the position pleaded by the plaintiffs that the income and property of Vapold are held on trust for the benefit of the Division, and the trustees are obliged to exercise control over Vapold as shareholders to ensure compliance with their obligations under cl 18.4 of the Constitution.

88 Fifth, the entire premise of a loan to Pesutto, the need to obtain legal advice as to the constitutionality of the loan and for the Administrative Committee to pass resolutions concerning the loan was that it was, in fact, the Division, and not an independent third party entity, that would lend the moneys. That is confirmed by the language used by Nemeth in her 26 June letter. The language used by Nemeth is the language of a trust. Any suggestion to the contrary is a contested matter for trial.

89 Sixth, members and leaders of the Division, the Trustees and Vapold have each treated Vapold funds as Divisional funds in lending the money to Pesutto. The direction given by the Administrative Committee to Vapold is consistent with how Vapold and the Division have treated, and continue to treat, Vapold's assets. There is a strong arguable evidentiary basis to contend that the assets of Vapold are held on trust for the Division and its members. That question can only be resolved following a contested trial.

90 Summary judgment may be ordered by a court if a claim has no real, as distinct from fanciful, prospect of success.[2] The Court has a discretion to order that a matter proceed to trial despite there being no real prospect of success if it is in the interest of justice to do so, or because the nature of the dispute demands a full hearing on the merits.[3] The power to order summary judgment should be exercised with caution and only if it is clear there is no real question to be tried.[4]

91 The need to exercise caution in ordering summary dismissal arises particularly where the proceeding raises complex issues, involves significant factual contest and where the outcome may affect a large number of persons.[5] Even if the Court has doubts as to the claim made by a party the complexity of issues and extent of factual disputes may mean the proper course is to exercise the discretion to require a formal trial of the claim.[6] For that reason it may not be appropriate to summarily dismiss a proceeding that concerns the construction of contractual or trust documents where evidence of surrounding circumstances may be relevant to resolution of ambiguities and uncertainties.[7]

92 The necessary objective intention to create an express trust may be inferred from the language and conduct of relevant parties and evidence of the surrounding circumstances.[8] Subject matter and context are important to ascertaining intention.[9] The search for intention must necessarily focus on events that occurred at the time the trust was allegedly created.

93 A dispute in relation to the internal machinations of an unincorporated association such as the Division may be justiciable if it concerns the alleged interference with a proprietary right or interest, for example a transfer of assets in breach of a trust.[10]

94 A court may strike out a pleading that does not disclose a cause of action or defence; is scandalous, frivolous or vexatious; may prejudice, embarrass or delay the fair trial of the proceeding; or is otherwise an abuse of process.[11] I adopt without repeating the principles to be applied on a strikeout application summarised by J Dixon J in Wheelahan v City of Casey (No 12).[12]

95 The trust deed is expressed to be the ratification of a pre-existing trust that was not itself reduced to writing. There is no evidence about the informal trust other than what is contained in the trust deed. The trust deed refers to the trustees of the informal trust having 'collected, held and disbursed the funds of the said Division'. Further, the trust deed records a declaration of trust over 'all land, monies, funds, securities and other property and income of the Victorian Division'. However, there is no evidence about what property was the subject of the informal trust or of the formal trust when it commenced in 1972.

96 The trust deed provides for an audit of trust funds for the period ending on the last day of February in each year. There are no audited accounts of the trust funds in evidence.

97 As stated above, the audited Vapold accounts for the year ending 30 June 1973 record capital donations of $48,850. There is no detail in the accounts of the donors or of the terms on which, or purposes for which, the donations were made. The auditors report records:

It is not practicable for [Vapold] to establish controls over donations prior to their initial entry in the accounting records, nor is it practicable for us to carry out audit tests to verify that such amounts have been received and recorded. Our examination relating to donations was therefore limited to the amounts recorded in the accounts.

In our opinion, except for the effect of any adjustments that might have resulted had the donations been susceptible to satisfactory audit tests:

(a) The accompanying accounts give a true and fair view of the state of affairs of Vapold Pty. Ltd. at 30th June 1973, and of its loss for the period from date of incorporation on 13th October 1972 to 30th June 1973.

(b) The accompanying accounts are properly drawn up in accordance with the provisions of the Companies Act 1961 of Victoria and so as to give a true and fair view of the matters required by section 162 of that Act to be dealt with in the accounts.

98 It may be that a transfer of trust assets would not usually be recorded as a donation. However, the limited evidence currently available leaves open the possibility that the Division held the beneficial interest in the capital donation at the time because that was a term on which the capital sum was transferred to Vapold by a third party, or because the capital sum was property of the Division held on trust by the trustees when it was transferred to Vapold. There was no evidence on the application about these matters.

99 The net assets of Vapold as at 30 June 1973 approximated to the capital donation. It seems likely that donation was used to fund the purchase of the South Melbourne Property, which was made available for use by the Division, with the balance of the purchase price being by way of mortgage loan.

100 There are no accounts of Vapold in evidence for the period from July 1973 until 2024. There is only very limited evidence about the source of assets currently recorded in Vapold's balance sheet. As a result, it is not possible to determine, on the current evidence, what if any further assets have been transferred to Vapold by donation or otherwise in the intervening decades.

101 The memorandum and articles record that Vapold's objects include promotion of the policies, causes and activities of the Division, and the provision to the Division of office headquarters and other facilities. There is nothing further in the memorandum and articles to clarify how that second object was to be achieved.

102 The trustees are appointed by the Division in accordance with the provisions of the Constitution, now cl 18.4. The memorandum and articles provide for the trustees to be the shareholders of Vapold. The trustees' exclusive share ownership of Vapold allows them to appoint the directors of the company from time to time. These arrangements give the Division indirect control over Vapold.

103 I accept the defendants' submission that because the structure of the Constitution, trust deed and memorandum of articles result in the shares in Vapold being held on trust for the Division and the Division having indirect control over Vapold, there appears to be no need for a further arrangement pursuant to which the Vapold assets are held on trust for the Division. However, the fact that the structure exists does not exclude the possibility that all, or some, of Vapold's assets are held on trust for the Division.

104 The material facts pleaded by the plaintiff and the evidence on this application that is contemporaneous with the trust deed and incorporation of Vapold are not sufficient, if accepted, to establish a trust over Vapold assets in favour of the Division. The best that can be said for the plaintiffs' case is that while the Constitution, trust deed and memorandum of articles may make it unlikely the Vapold assets are held on trust for the Division, that evidence does not preclude the possibility and that there are gaps in the evidence as to the assets held on trust in the period up to the incorporation of Vapold; the source of the initial capital donation to Vapold and the terms on which that money was transferred to Vapold; and the absence of audited accounts of the Division trust funds.

105 The plaintiffs rely on the following evidence to support the existence of a trust over the Vapold assets. First, the belief held by members of the Division that the Vapold assets are held on trust for the Division. That is certainly Mirabella's opinion, although he provides little evidence supporting his assertion to that effect. Davis, who is both president of the Division and a member of the Administrative Committee, may have instructed Gisonda on the basis of that understanding. It appears the Wood and Jeffreys advice was obtained on the same understanding. There is evidence to suggest that view is held by other members of the Division.

106 Second, the resolutions carried by the Administrative Committee at the meeting on 19 June 2025 and the communication to Division members by Davis in the course of that meeting are consistent with the Administrative Committee treating a loan from Vapold to Pesutto as being made from Division assets. The plaintiffs submitted it should be inferred that the fourth resolution passed by the Administrative Committee was thought necessary because the direction to make the Pesutto loan was not given to Vapold as a company holding assets in its own name, but was a direction given to those who controlled trust assets belonging to the Division who were required to be indemnified because this was a trust decision.

107 Third, on one view, the Pearce trust deed may lend some support to the plaintiffs' argument that the assets of Vapold are held on trust for the Division. Pearce declared that he will use his best endeavours as a Vapold shareholder 'to ensure that all income and property of Vapold is applied for the benefit of [the Division]', and that he will vote at any Vapold general meeting as directed by the Division.

108 Fourth, the 26 June letter is consistent with the Vapold assets being held on trust for the Division. The plaintiffs submitted the letter was on instructions from the Trustees, who are also directors of Vapold and was a frank admission against self-interest by those parties.

109 Fifth, the treatment and consideration of the Vapold financials by the Finance Committee. There is little in this point. For obvious reasons it is relevant for the Finance Committee to consider the Vapold income and assets. The payment of dividends by Vapold to the Division is consistent with the shares in Vapold being held on trust for the Division.

110 Sixth, the scope of work in the Nemeth retainer, which, the plaintiffs submitted shows the Trustees as directors of Vapold understood that Vapold held assets of the Division and saw themselves as acting in both their capacity as trustees and as directors of Vapold in granting a loan to Pesutto, being specifically alive to the issue of their potential liability as trustees.

111 Seventh, Allatt's email, as a member of the Finance Committee, in which he said that the legal funding entity of the payment was Vapold and assumed the trustees were holding the assets under an effective bare trust for the Party.

112 In the summary judgment application, the defendants relied on Stockdale's evidence in order to establish that Vapold is the legal and beneficial owner of the assets it holds. The matters set out in paragraphs [105]-[111] provide a basis for challenging Stockdale's evidence in two ways. First, the instructions to Nemeth in the retainer and evidenced by the 26 June letter are consistent with the Vapold assets being held on trust. Second, the matters set out in the previous paragraph are evidence of an institutional belief that is contrary to Stockdale's evidence.

113 Stockdale's evidence is based on his review of historical records held by Vapold. It is not clear whether all of the records reviewed by Stockdale are in evidence, or whether there may be further relevant historical records held in other repositories. The plaintiffs submitted there will inevitably be other documents that have not yet been reviewed, including Vapold financials, that are discoverable and will be relevant to them establishing at trial a proprietary claim of misapplication of Division trust funds.

114 I have concluded, exercising appropriate caution, and taking account of the factual complexity of the proceeding that the defendants' application for summary judgment should be refused. There are gaps in the historical evidence to which I have referred above. The Constitution, trust deed and memorandum and articles do not wholly preclude the possibility that the Vapold assets are held on trust for the Division. There may be an institutional belief that the assets are held beneficially for the Division. On one view, the Administrative Committee proceedings and the instructions to Nemeth, particularly as evidenced by the retainer and the 26 June letter are consistent with that view. Whether the Vapold assets are held on trust is likely to be determined by the circumstances that are established around the time of formation of the trust deed, the incorporation of Vapold and the transfer of assets to it. More current evidence may be relevant to establishing those circumstances. Further discovery is not complete, and the possibility that illuminating documents will be produced cannot be discounted.

115 The plaintiffs' current pleading is not adequate. I understand that the plaintiffs are alleging an express trust in favour of the Division that has included the Vapold assets since the time of its incorporation. In submissions on this application, the plaintiffs raised the possibilities of a resulting or constructive trust, and that there had been a transfer of trust assets to Vapold at some time between incorporation and the date of the payment. None of these possibilities are pleaded adequately or, in respect of some matters, at all. The current pleading amounts to little more than an assertion that the Vapold assets are held on trust.

116 The plaintiffs will be given an opportunity to apply to amend the statement of claim to adequately plead the trust allegations. Having regard to the nature of this claim and the parties involved, that opportunity to replead should follow discovery. At the time of any application to amend there can be further consideration as to which, if any, of the plaintiffs' claims should be allowed to proceed to trial. Orders will be made providing a timetable for the plaintiff to serve a proposed amended statement of claim, for the defendants to give notice of any objection to that pleading, and for a determination of any resulting disputes.

117 Consistent with these reasons I will strike out the trust allegations pleaded in the statement of claim. I understand that to be paragraphs [4], [11] and [12]. It may be that other paragraphs of the statement of claim should be re-pleaded including the breach allegations in paragraphs [55]-[64].

118 Sobels said that Nemeth's involvement in the Pesutto loan transactions has been known to each defendant from the outset of this proceeding, and that:

(a) there was no doubt about what Nemeth did as solicitor for Vapold and the Trustees, or the advice she gave;

(b) there was no controversy between the defendants and Nemeth in relation to her work on the Pesutto loan or any advice given by her; and

(c) the defendants do not consider there is any conflict between them, or that Nemeth has a personal conflict due to any matter preceding the litigation.

Sobels said that she and other defendants are in a position to give any necessary evidence about those matters.

119 Sobels said that at the Vapold board meeting on 21 June 2025, Nemeth told the board that she was not instructed to consider if the resolutions of the Administrative Committee were valid, but that she had been instructed the Division had advice on that issue from Gisonda. Sobels said Nemeth did not give advice to her, Stockdale or Pearce in their capacity as trustees, or any advice about the meaning and effect of the Constitution. Sobels said in relation to the demand in the 25 June letter that the loan payment not be made, the Vapold board were then and remain of the view that Vapold was not required to stop the loan drawdown because of the demand. Sobels said '[the defendants] do not apprehend any circumstances in which we would contest or complain about any advice given by Ms Nemeth in that telephone meeting'.

120 Sobels said that each of the defendants wished for Nemeth to continue to act for them in the proceeding because of her familiarity with the issues raised by the proceeding, the operations of Vapold and of the Division; and because of the significant disruption and additional costs the defendants would face in preparation for the trial and upcoming interlocutory hearings if Nemeth could no longer act for them.

121 The unexplained failure of Nemeth to give evidence as to how she has fulfilled her obligations to the Court and her clients, allows the Court to more readily and confidently infer that her evidence would not have assisted the defendants' case.[13]

122 By the terms of the retainer, Nemeth was instructed to advise the Trustees in relation to their liability if the loan were made. Nemeth drafted the loan documentation; attended the Vapold board meeting on 21 June 2025 as Vapold's solicitor; provided advice on or around 26 June that there was no impediment to making the payment; stated in correspondence on that day that 'Vapold holds assets on behalf of the party'; and provided material legal advice to Vapold and its directors. It is very likely the plaintiffs will call Nemeth to give evidence and produce documents as to the instructions and supporting documents she received and the advice she provided to the Trustees about these matters. It is untenable in the circumstances that Nemeth continue to act for the defendants.

123 There is a significant risk that if one or more of the defendants, particularly the Trustees, are held liable for their actions in authorising and procuring the payment to Deeming, they may look to seek to hold Nemeth responsible for her role in drawing the loan documents and providing legal advice.

124 The various defendants appear to have conflicting interests, which may lead to Nemeth having conflicting duties in at least the following ways:

(a) the confidentiality of loan documentation that is confidential to Vapold, the Trustees, Pesutto and the loan guarantors, to which the remaining defendants are not privy;

(b) Davis' alleged breach of duties in his role convening and controlling the Administrative Committee meeting; and

(c) the different position in the litigation of Vapold and the Trustees to the remaining defendants.

125 The relief sought by the plaintiffs should not be granted lightly, where the effect would be to deny the defendants their choice of solicitor and impose significant financial cost on some or all of the defendants associated with obtaining alternative representation.

126 The defendants have provided clear material indicating that Nemeth was limited in her pre-litigation involvement to the transactional side of the loan to Pesutto, as opposed to advising as to the Division's or Vapold's power. Therefore, Nemeth is not a material witness.

127 There is no evidence that the loan documentation is defective or that Nemeth otherwise breached the retainer.

128 Sobels has deposed there is no conflict between the defendants. There is no reason to doubt her evidence that every defendant has expressed to her a desire that Nemeth continue to act. All of the defendants are robust individuals who hold senior offices to which they have been elected or appointed by the Division. They do not require the plaintiffs' assistance to determine where their interests lie.

129 Even if a Jones v Dunkel inference was available with respect to the defendants' failure to call Nemeth, this will not assist the plaintiffs as they make no allegation against Nemeth, who is not a defendant.

130 The Court has a broad, inherent jurisdiction to control its officers and protect its processes.[14] As part of this jurisdiction, the Court may restrain a legal practitioner from acting in a proceeding where the integrity of the judicial process would be impaired if the legal practitioner did not cease to act.[15] In Miller v Martin,[16] the Court of Appeal, discussing the exercise of this jurisdiction, said:

Instances where this jurisdiction has been exercised include where the legal practitioner is likely to be a material witness, where there is a material conflict between the interests of the client and those of the legal practitioner concerning the litigation in question or where, for any other reason, the independence and objectivity of the legal practitioner would be unacceptable compromised.[17]

In R & P Gangemi Pty Ltd v D & G Luppino Pty Ltd,[18] Sifris J referred with approval to a passage of Thomas J in Kooky Garments Ltd v Charton:[19]

Where the acts or omissions of the law firm, including situations where the actions of the client are based on advice given by the solicitors, are at the heart of the question in issue, the firm is, in a real sense, 'defending' its actions or advice. There is, in such circumstances, a danger that the client will not be represented with the objectivity and independence which the client is entitled to and which the Court demands.[20]

131 The jurisdiction is to be regarded as exceptional and is to be exercised with caution.[21] Considerable weight should be given to the public interest in a litigant not being deprived of the lawyer of their choice without due cause.[22] The timing of the application may be relevant, in that cost, inconvenience or impracticality of requiring lawyers to cease to act may provide a reason for refusing the grant relief.[23]

132 It is not inevitable in every case that a solicitor likely to be called as a witness should be restrained from continuing to act.[24] Relevant factors to take into account include whether the solicitor's credibility is likely to be challenged, or their personal integrity put in issue such that their personal interest is inconsistent with their duty to the Court or to the client.[25]

133 For the following reasons I conclude the plaintiffs' application to restrain Nemeth from acting for the defendants should be dismissed.

134 First, there is no dispute about Nemeth's documentation of the Pesutto loan. What is in issue is whether the resolutions carried at the Administrative Committee meeting on 19 June 2025 were in breach of the Constitution and thus invalid, and whether the payment was a breach of trust. The defendants obtained legal advice independent of Nemeth in relation to the legality of the loan. The possibility of a claim being made against Nemeth if the defendants are unsuccessful in the litigation is entirely speculative.

135 Second, while it is possible, as the plaintiffs submitted, that Nemeth will be called to give evidence at trial, it is not apparent that any evidence she will give will be particularly controversial; that her credibility will be subject to significant challenge; or that she will be in a position of conflict by reason of having to defend actions she took in the documentation and payment of the loan as against her duties to the Court and the defendants. While the scope of work contemplated by the retainer included advising the Trustees in respect of their liability if the Pesutto loan was made, Sobels evidence is that no such advice was given by Nemeth. There is no basis for concluding that the advice given by Nemeth on the evening of 25 June 2025 was inconsistent with the terms of the 26 June letter. In any event, that is a matter about which the Trustees can give evidence. Further, what advice was given by Nemeth may be peripheral to the central issues to be determined in this proceeding.

136 Third, the degree of prejudice to the defendants is a factor that weighs heavily against granting the restraint application. The proceeding is listed for trial on 23 March 2026. The timetable of interlocutory steps has been abbreviated in order to accommodate an early trial. Further interlocutory disputes are likely to arise between now and trial. There are good reasons why the defendants have retained Nemeth given her familiarity with the Division, Vapold and the circumstances that underpin this litigation. If Nemeth were restrained from acting for them, the defendants would face additional costs associated with instructing new solicitors that are likely to be substantial, and prejudice associated with ongoing interlocutory disputes and the impending trial.

137 Fourth, the issues of conflict between the defendants raised by the plaintiffs are more imagined than real. I accept Sobel's evidence that the defendants do not consider there is a relevant conflict between their interests that will interfere with them being jointly represented by Nemeth. It is not possible to see how forcing groups of the defendants to engage separate representation will facilitate the just, efficient, timely and cost-effecting resolution of the real issues in dispute in this proceeding.[26]

138 For the above reasons I conclude the plaintiffs' restraint application should be dismissed.

139 Before the hearing on 11 November 2025, the plaintiffs served 13 notices to produce documents on the defendants that they argue are relevant to the summary judgment and restraint applications. The defendants submitted the notices should be set aside because they are an attempt by the plaintiffs to depart from orders made on 25 September 2025 that put in place a regime to determine all issues relating to discovery.

140 The notices to produce require consideration of issues including relevance, privilege and confidentiality. There was no opportunity to deal with those issues at the hearing on 11 November 2025. After some discussion, the plaintiffs persisted only with a notice to Nemeth. I ordered that the defendants respond to that notice by filing and serving a list of documents in the following categories:

1. A copy of any document recording the terms of any retainer between Mary Nemeth and Indigo Associates entities (limited to the loan by the first defendant to John Pesutto) and the relevant time (May to July 2025) and any of the following:

(a) Liberal Party of Australia (Victorian Division);

(b) Vapold Pty Ltd (Vapold);

(c) Alan Robert Stock[d]ale in his capacity as:

(i) trustee of Vapold;

(ii) director of Vapold;

(i) trustee of Vapold;

(ii) director of Vapold;

(e) Christopher John Pearce in his capacity as:

(i) trustee of Vapold; and / or

(ii) director of Vapold.

1. A copy of any file notes taken in relation to:

(a) the Vapold board meeting that occurred on 21 June 2025 (21 June Meeting);

(b) any attendance to a meeting / call / conference pertaining to the Party or Vapold which occurred in the past calendar year.

1. A copy of any correspondence which occurred following the 21 June Meeting until 27 June between Ms Nemeth and Vapold (or any representative of Vapold).

141 On 14 November 2025, in accordance with the order, the defendants served a list of 183 documents. The defendants claimed privilege over 166 documents and raised confidentiality issues relevant to production of a significant number of documents. The parties have each filed and served submissions that address the privilege claims and touch on the confidentiality issues.

142 The defendants' objections to producing further documents raised the following issues:

(a) whether the documents in categories 2(b) and 3 are relevant to the applications;

(b) whether file notes of conversations between Davis and Nemeth that predate the retainer are privileged;

(c) whether privilege attaching to advice given by Nemeth to Vapold and the Trustees in respect to the Pesutto loan has been waived by pleadings in the defence, and the affidavits of the Stockdale and Sobels relied on by the defendants;

(d) whether correspondence copied to and file notes of conversations between Nemeth and Davis are privileged; and

(e) whether correspondence between Vapold and the Trustees, Nemeth and unnamed guarantors of the Pesutto loan are privileged, relevant and/or should be subject to a confidentiality regime.

143 Access to the documents was not necessary in order to determine the summary judgment application. That application fundamentally concerned whether the Vapold assets are held on trust for the Division. It is not possible to see how my reasons for dismissing the application would have been altered by the content of documents on Nemeth's Pesutto loan file.

144 It is conceivable, though unlikely, that there may be documents on the Nemeth file that are relevant to the question of whether she should be restrained from acting for the defendants in this proceeding. However, I concluded for the following reasons that despite that possibility I should not delay determining the restraint application. First, the plaintiffs took no steps to agitate the notices to produce before the day on which the summary judgment and restraint applications were to be heard. Second, production of further documents would inevitably result in the need to give the parties an opportunity to make further submissions delaying determination of the application until early 2026. I concluded, given the abbreviated timetable and the impending trial, that it was in the interests of the parties that the restraint application be determined without such a delay. Third, if further evidence comes to light in the process of discovery that would materially impact consideration of relevant issues the plaintiffs may be justified in seeking to reagitate the restraint application. Fourth, questions of relevance and confidentiality raised by the notice to produce are better resolved in the context of discovery.

145 It is difficult to see what possible relevance correspondence and file notes of conversations between Nemeth, the Trustees, and Davis in relation to the Pesutto loan in May and June 2025 could have to the central issue on the summary dismissal application, namely whether the assets of Vapold have been held on trust for the Division. It is possible that the correspondence and file notes are relevant to other issues in the proceeding, including the conduct of the Administrative Committee and the meeting on 21 June 2025; the relationship between the Administrative Committee, Vapold and the Trustees including in their role as directors of Vapold; and the conduct of the Trustees in making the loan to Pesutto. The question of relevance is more appropriately resolved in the context of the dispute about discovery.

Communications with Davis prior to the Vapold retainer

147 Davis said he first received an email from Pesutto requesting assistance in relation to the Deeming costs order on 21 May 2025. The subject of an email chain between Pesutto and Davis commencing 29 May and concluding 2 June is 'Administrative Committee: Request for support'. It is likely that the contested file notes relate to the Pesutto loan and matters discussed by Pesutto and Davis in late May and early June 2025, and possibly to the response by the Administrative Committee to the Pesutto request for support.

148 The plaintiffs are members of the Administrative Committee. If the file notes record information or advice obtained on behalf of the Administrative Committee, any privilege in those documents may extend to all committee members, including the plaintiffs.

149 It may be appropriate for the file notes to be reviewed by the Judicial Registrar hearing the discovery dispute to resolve questions of relevance and privilege.

150 Privilege in respect of legal advice or other communication is not waived merely by a party putting its state of mind in issue in a proceeding and pleading reliance on the communication.[27] The test is whether by their conduct in pleading the trustee's state of mind and relying on legal advice in that regard the defendants have put the advice in issue and therefore acted in a way that is inconsistent with privilege being maintained.[28]

151 In the statement of claim the plaintiffs allege the Trustees acted in bad faith and/or in breach of trust by causing, authorising or permitting the payment to be made by Vapold on 25 June 2025 in circumstances where they knew the terms of the Constitution and that there was a dispute about the validity of the Administrative Committee resolutions approving the Pesutto loan. The defendants deny that allegation and plead further:

(b) at all material times the Vapold Directors considered in good faith that the decisions of the Administrative Committee were valid and that the making of the loan to Mr Pesutto was a proper exercise of their powers as the directors of Vapold;

(c) without limiting paragraph (b) above, the Vapold Directors took and acted upon legal advice in approving the loan on 21 June 2025, in causing Vapold to enter into the loan documentation with Mr Pesutto on 25 June 2025, and in causing Vapold to make the Payment on 26 June 2025 by way of a drawdown of the loan;

(d) the mere making of an allegation that the loan was ultra vires, made by a person who opposed the making of the loan, and on the evening before the morning that the loan was to be drawn down as a matter of well-known urgency, was not a proper or sufficient basis for the Vapold Directors to cause Vapold to renege on making the loan as it had by then agreed to do.

1. At all times during my directorship of Vapold it has been my understanding that Vapold is the legal and beneficial owner of its assets and, as a director of Vapold, I have a duty to manage those assets for the benefit of the [Division] and its members. ...
2. During the course of the meeting the loan terms were discussed and the board considered whether the terms of the loan would deliver a satisfactory return to Vapold on its money lent. After considering those terms and legal advice provided to the directors, the board of Vapold concluded that the loan would deliver a satisfactory return to the company and passed a resolution ...
3. Following the meeting, Ms Nemeth of Indigo Associates was instructed to finalise the preparation of the loan documents to document the loan on the commercial terms which had been agreed between Mr Davis and Mr Pesutto and approved by the Administrative Committee. ...
4. We obtained advice to the effect that the mere threat of legal action did not prevent Vapold from proceeding to draw down the loan as had been agreed, and that we were not obligated to cancel the drawdown of the loan which was scheduled for the next morning. Having regard to that advice ... we instructed Vapold's lawyers that Vapold would proceed to make the loan unless directed by the Court not to do so. Vapold's lawyers accordingly issued a letter to Macpherson Kelley by email at 10.13 am on the morning of 26 June 2025 in response to Macpherson Kelley's letter of the evening before.

153 The relevant allegation by the plaintiffs is that the Trustees, having been put on notice that the Administrative Committee resolutions were invalid and that the loan was not permitted by the Constitution, acted in bad faith by causing Vapold to make the loan. The defendants put in issue the Trustees' state of mind as to the validity of the resolutions and the power to make the loan, and by alleging the Trustees obtained and acted on legal advice in approving the loan, entering into loan documentation and causing Vapold to make the payment, put that advice in issue. I conclude in those circumstances that privilege in legal advice contemplated by the pleading set out in paragraph [151] above has been waived.

154 For the same reason, privilege over the advice and any document containing the advice referred to in paragraph [56] of the Stockdale affidavit has been waived. Further, the contents of the advice are disclosed by what Stockdale has said and by the 26 June letter. The advice is relevant to the state of mind of the Trustees as pleaded in the defence.

155 The plaintiffs also rely on the following passages of Sobels' affidavit:

1. [T]he Indigo Defendants do not consider that any of their interests are in conflict with any other person for whom Ms Nemeth acts, or that Ms Nemeth or her firm ... have a personal conflict due to any matter preceding this litigation. Ms Nemeth's involvement in the transactions is known to each Indigo Defendant, and has been from the outset of this litigation.
2. Further, each Indigo Defendant wishes for Ms Nemeth and her firm to continue acting, both because she is familiar with the proceeding and with the operations of Vapold and the [Division] ...
3. I do not agree that Ms Nemeth is someone whose evidence would be "material to the determination of contested issues" ... There is no controversy between the [defendants] or any of them and Ms Nemeth in relation to her work on the Pesutto loan transaction or any advice provided by her. Nor is there any doubt about what Ms Nemeth did, or advised...

11(a) I formally retained Indigo Associates to act for Vapold in mid-June 2025 ... I had a preliminary discussion with Ms Nemeth in late May 2025, having become aware from media reports that Mr Pesutto would request a loan.

11(b) I was content for Mr Davis (on behalf of [the Division]) to communication directly with Ms Nemeth (on behalf of Vapold) about that matter, because Ms Nemeth was already instructed by Vapold in relation to the proposed loan...

11(d) Ms Nemeth told the Board that she was not instructed to consider if the resolution of the Administrative Committee was valid, but had been instructed that the [Division] had its own advice, being the advice of Mr Gisonda, which was shared to the Vapold Board on my instructions. Following her departure, the Board discussed the commercial terms of the loan, and also Mr Gisonda's advice. Ms Nemeth did not provide any advice to the Board, and none was sought from her, in relation to the commercial suitability of the loan or its terms. The reference in the minutes to legal advice was not, therefore, to any advice Ms Nemeth gave; ...

11(e) [T]he video meeting on 25 June 2025 referred to was in fact a telephone meeting. That telephone meeting dealt with a matter subsequent to Vapold's decision to enter into the loan, being the letter issued by Macpherson Kelly on the evening of 25 June 2025 on instructions from the First Plaintiff. I otherwise adopt Mr Stockdale's version of events, as contained in his paragraph 56, and confirm that the directors of Vapold formed the view that Vapold was not required to stop the drawdown only because of a Macpherson Kelly's letter, or anything stated in it. We remain of that view. We do not apprehend any circumstances in which we would contest or complain about any advice given by Ms Nemeth in that telephone meeting.

11(f) No advice was given by Ms Nemeth to Mr Stockdale, Mr Pearce and I in our capacity as Trustees nor did we not perceive any advice to have been given to us in that capacity. ... We did not ask Mr Nemeth for any advice about the [Constitution], and she did not provide us with any such advice.

156 I reject the plaintiffs' submission that anything said by Sobels is inconsistent with maintaining privilege over the Nemeth documents to which these passages relate.

157 A party is taken to have acted inconsistently with the maintenance of privilege if they knowingly and voluntarily disclosed the substance of a document to another person.[29] Conduct will not be inconsistent with maintaining privilege if the substance of a document is disclosed in the course of a confidential communication or to a person who had a common interest in an anticipated proceeding.[30]

158 The disclosure in this case was made by the solicitor for Vapold and the Trustees to Davis who is both president of the Division and chair of the Administrative Committee. I accept the disclosures made by Nemeth to Davis were in the course of confidential communications and in circumstances where Davis, the Trustees and Vapold had a common interest in respect of proceedings that could be anticipated. I conclude that privilege in the Davis communications that post-date the Vapold retainer have not been waived. However, if Davis received the confidential communications in his Administrative Committee role, privilege may extend to other committee members. That issue should be resolved by the judicial registrar, possibly after reviewing the document.

159 I understand the objection to producing the guarantor documents relates to confidentiality issues. Those issues should be addressed as part of the discovery dispute. If the documents are relevant to any fact in issue in the proceeding, an appropriate confidentiality regime should be agreed or imposed.

160 Orders will be made on the summary judgement application striking out paragraphs of the statement of claim and setting a timetable for the plaintiffs to replead. The restraint application will be dismissed. I will hear from the parties in relation to any consequential orders including as to costs.

[1] [2018] FCA 895; (2018) 358 ALR 263.

[2] Civil Procedure Act 2010 (Vic) s 63 ('CPA'); Lysaght Building Solutions Pty Ltd (t/as Highline Commercial Construction) v Blanalko Pty Ltd [2013] VSCA 158; (2013) 42 VR 27, 39 [29] ('Lysaght').

[3] CPA (n 2) s 64; Sternfein v Bloom and Guley [2025] VSCA 275, 0 [6].

[5] Matthews v SPI Electricity Pty Ltd/ SPI Electricity Pty Ltd v Utilities Services Corporation Ltd (No 2) [2011] VSC 168; (2011) 34 VR 584.

[6] Israfoods 2006 Ltd v J&D Consortium Pty Ltd [2019] VSCA 323, 17 [55]-[56] ('Israfoods'); Manderson v N&F Consulting (A Firm) and Incitec Pivot Ltd [2011] VSCA 444; (2011) 35 VR 98, 107 [32].

[7] Israfoods (n 6), 16 [52]; Sparkling Waters Pty Ltd v Burgess Rawson & Associates Pty Ltd [2023] VSC 30, [39].

[8] Bahr v Nicolay (No 2) [1988] HCA 16; (1988) 164 CLR 604, 618-9.

[9] Registrar of the Accident Compensation Tribunal v Commissioner of Taxation (1993) 178 CLR 145, 163 (Mason CJ and Deane, Toohey and Gaudron JJ).

[10] Cameron v Hogan [1934] HCA 24; (1934) 51 CLR 358; Stevens v Keogh [1946] HCA 16; (1946) 72 CLR 1.

[11] Supreme Court (General Civil Procedure) Rules 2025 (Vic) r 23.02.

[12] [2013] VSC 316, 9-12 [25].

[13] Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298.

[14] Miller v Martin [2019] VSCA 86 [17]-[18].

[18] [2012] VSC 168 ('Gangemi').

[19] [1994] I NZLR 587 ('Kooky Garments Ltd').

[20] Gangemi (n 18) [9], quoting Kooky Garments Ltd (n 19) 589-90.

[21] Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561.

[24] Re Giamo (No 2) [2025] VSC 55, 10 [31].

[25] Makripoulias v Arhontovasilis [2022] VSC 53.

[27] Viterra Malt Pty Ltd v Cargill Australia Ltd [2018] VSCA 118; (2018) 58 VR 333, 349 [67], 351 [73].

[28] Ibid; Evidence Act 1995 (Cth) s 122(2) ('Evidence Act'); Vic Hotel Pty Ltd v DC Payments Australasia Pty Ltd [2015] VSCA 101; (2015) 321 ALR 191.

[29] Evidence Act (n 28) ss 122(2), (3).