Rostirolla v Fiakos

Federal Court of Australia|2002-12-17|Before: Gyles J

REASONS FOR JUDGMENT 1 This case concerns the beneficial ownership of the proceeds of a policy of insurance over the life of Silvano Bruno Rostirolla ("the deceased") owned by Joan Fiakos, the first respondent ("Mrs Fiakos"), the deceased having died on 21 May 2001. The circumstances under which this issue comes to be litigated in this Court appear sufficiently from Rostirolla v Fiakos [2002] FCA 1058. The proceeds of the policy amount to $1,120,031 plus interest. The policy was issued to Mrs Fiakos on 20 January 1997. The deceased paid all of the premiums due in respect of the policy until late 2000, after which Mrs Fiakos declined to accept cheques in payment of those premiums. The applicants, Dayna Rostirolla and Peter Rostirolla, the daughter and son of the deceased, claim that the proceeds of the policy are held by Mrs Fiakos on trust. The principal claim is that the proceeds are held on trust for the applicants subject to deduction of the amount owed at the time of the death of the deceased by the deceased to Mrs Fiakos, with an alternative claim that the proceeds were held on trust for the applicants after retention by Mrs Fiakos of $300,000. 2 The contention of Mrs Fiakos is pleaded as follows: "… in about May 1996 she and Silvano Rostirolla made an agreement to the following effect: 5.1 To secure repayment to the first respondent of about $170,000 that the first respondent had lent him (which Mr Rostirolla then was unable to repay), he would transfer to the first respondent insurance policy No 21017383. 5.2 In consideration for the promise set out in paragraph 5.1, the first respondent agreed that, on receipt of the proceeds of insurance policy No 21017383, she would pay the proceeds to the following persons in the amounts set out opposite their respective names: 5.2.2 The first respondent: $ 170,000 5.2.3 Maria Rostirolla: $ 300,000 5.2.4 John Rostirolla: $ 110,000 5.2.5 Frank Rosetto: $ 115,000 5.2.6 Aldo Franko: $ 170,000 5.2.7 Gary Magyar: $ 75,000 5.2.8 MJ Rowles: $ 450,000 5.2.9 Sue Rowles: $ 40,000 5.2.10 Alex Tsalidis: $ 40,000 Total: $1,470,000 5.3 The first respondent further agreed with Mr Rostirolla that, after making the payments set out in paragraph 5.2, she would pay any remaining amount to the plaintiffs equally. Particulars The agreement was oral, was made in about May 1996 at the office of Mr Rostirolla, and was to the effect of what is pleaded in this paragraph 5" 3 The deceased was born on 15 July 1954, and so turned 42 in 1996. He was married. His wife's name was Toni. His daughter was born in September 1978 and his son was born in July 1980. He was a qualified accountant, and, after some years' employment with Wollongong City Council, he commenced practice on his own account in 1989. The deceased and his wife and Mrs Fiakos and her husband, Tass, became friendly through their children. In about 1991 Mrs Fiakos commenced working one day a week for the deceased, doing general secretarial duties. In about 1993 the deceased's full-time secretary resigned and Mrs Fiakos took her position. In that year Mrs Fiakos' husband left her and their three children. The deceased assisted her to negotiate a property settlement. In 1993 or 1994 the deceased told Mrs Fiakos that he was really desperate for money, and borrowed $30,000 cash from her. In addition to his accountancy practice, the deceased was involved in property development and record shops. By 1994 the record shops were in financial difficulties. In 1994 the deceased's wife left him. Thereafter, at a time which is not clear, a sexual relationship began between Mrs Fiakos and the deceased. At some stage (probably by early 1996) the deceased moved to the home of Mrs Fiakos. In late 1994 the deceased again told Mrs Fiakos that he desperately needed money, and, as a result of a suggestion from him, she mortgaged her unencumbered home and borrowed $100,000, which she gave to him on the basis that he would make the repayments to the lender. He later borrowed small amounts from her from time to time. 4 By the first half of 1996 the deceased had borrowed significant sums of money from other friends - in several cases the friends having, in turn, borrowed the money which they had lent to him. This included $110,000 from Frank and Celeste Rossetto, $75,000 from Gary Magyar, $430,000 from a company connected with Sue and Terry Rowles, $110,000 from John and Faye Rostirolla (no relation), $170,000 from Aldo and Lena Franco, and $40,000 in cash from Sue Rowles. The deceased had also apparently appropriated about $300,000, which had been received by him on account of his mother, to his own use. 5 In 1991 the deceased obtained a combined life and income protection policy from Tyndall Life Insurance Company Ltd ("Tyndall"). The life portion was a term policy. In late 1995 the deceased claimed under the income protection portion of the Tyndall policy on the basis that he was not able to work. On 3 July 1996 the deceased and Mrs Fiakos signed a memorandum of transfer of the life portion of that policy, as transferor and transferee respectively, and the document was sent to Tyndall requesting transfer of the life insurance portion of the policy. Mr Bailey, a life insurance agent, witnessed the signatures and an employee of his sent the request to Tyndall. On 18 July 1996 Tyndall responded, saying that the life component of the policy could not be separately assigned, and that to effect such a transaction it would be necessary to cancel the life portion and a new policy be issued. On 20 August 1996 the deceased, as the life assured, and Mrs Fiakos, as the policy owner, signed an application for a new life policy, and that was forwarded to Tyndall in September. This led to the issue of the life policy in question. 6 The evidence of Mrs Fiakos as to the arrangements concerning the life policy was as follows: "Mrs Fiakos, did there come a time when Mr Rostirolla, Mr Silvano Rostirolla, discussed with you a life insurance policy? --- Yes. To the best of your recollection when was that? --- About May '96 And what happened? --- He called me into his office and said "I've got a life policy and I'd like you to be beneficiary and because I'd like, you know, you would get to be looked after and the debts to my friends and any money left over to go to the children." … What, if anything, did you say? --- I said: "Is there no other way that this can be done because I really don't want to be a beneficiary to a life policy." What if anything did he say? --- He said well there is nobody else I can trust. What if anything did you say? --- I said well if that is the only way I said organise the documentation." Later, she said: "You have freely acknowledged, haven't you that the policy was transferred to you initially to secure your rights to $170 something thousand? --- Yes. And you were not to have initially, anything beyond that for yourself? --- No. Sil said that he wanted to assign the policy over to me so that I could take what was owed to me, pay out his friends and then what was left over would go to the children. At that stage I don't think an amount was mentioned. But there was never any suggestion that you should have the whole of the policy was there? --- For myself, no. … At the time of the original discussion of the transfer of the policy to you in mid 1996, I think you may have already told his Honour this, was there any list made of the friend/creditors? --- No. Was there any - at that point when first it was discussed was there any identification to you by Mr Rostirolla of the friends/creditors who were to be protected? --- No. So it was just left, was it, to your discretion as to which ones to protect? --- Yes. A discretion which you would, do I understand, exercise in accordance with instructions or request given to you from time to time by Mr Rostirolla? --- Not from time to time; from the - when it was originally - I go back to he called me into his office. He said I'm signing this policy over to you to look after yourself, pay out the friends and the balance goes to the children. But at that time no identification of who the friends were? --- No, no. … "MR CASSIDY: Would you please tell us what he said at that time to identify these persons who he wanted to be protected? --- I can't remember. I suggest to you that all that was said to you was that he had something to this effect: That he had friends who had lent money to him or to whom he was indebted and that he wanted to see them protected? --- Yes. Without identifying them name by name? --- Probably, yes. It was just left as a matter of the friends to be protected? --- Yes. And that you fully appreciated at that point that it was only friends who were going to be protected and not, for example, trade creditors? --- Yes. So at that point it was being left to you was it? --- Yes. To choose who should get the money? --- Not choose. Well I will put it another way; it was left in your discretion to determine how much was owed and whether a person qualified as a friend for the purpose of having a claim? --- Yes. Thereafter when the time came to discuss the trust deed that was narrowed down wasn't it? --- Yes. … Because at the time you discussed the trust deed, the two particular individuals to be protected were identified? --- Yes." … HIS HONOUR: Before we leave this topic I just do not want - I apologise for interrupting but in 1996 when you had these discussions did Mr Rostirolla say to you that the life policy would be excluded from his bankruptcy? --- Yes, I think so. And excluded effectively from his will? --- Yes." 7 Mr Frank Breckenridge had been a client of the deceased for many years, and had become very friendly with him by 1996. Mr Breckenridge is an insurance broker who had been in insurance all of his working life. At about that time, he spoke to the deceased on the telephone on a daily basis during the working week, discussing private and business matters. He gave evidence as to the deceased confiding in him as to the financial difficulties which the record shops were causing him and as to his desire to leave his wife, which was complicated because of his financial difficulties. He gave the following evidence: "MR ANGYAL: Are you able to identify the separate occasions on which Mr Rostirolla spoke to you about his life insurance policy? --- I can't tell you the dates when he spoke to me about them. What I can tell you is that he had two policies, he had one policy that had two parts. Could you try and - I know it's terribly difficult given the passage of time - can you try and recount the conversations as they occurred one after the other? --- Okay, the first one way [sic] to do with his salary maintenance portion. Please try and put it in direct speech. What he said and then what then you said in reply? --- How that started off was, he was running into financial troubles with his shops and other dealings that he'd had. He was looking as to where he could get money from, he knew he had an insurance policy that had salary maintenance and he spoke to me about how, is there any possibility of claiming under that. I said to him the only way I could see was if the policy covered stress. He then made some inquiries I understand with whoever sold him the insurance and put in a stress claim so that he could get his salary maintenance all the way through. Once he'd got that and then it got around to the stage where he was contemplating going into bankruptcy and what have you and to leave the marital situation, he was concerned with his life policy which was for quite a considerable amount that (a) that they may cancel it or (b) that if he decided to commit suicide that they wouldn't pay for it. He went away and checked and then he told me that the life policy could not be cancelled and that it included a clause for suicide, provided you'd had it for so many years and he qualified for that. I'm sorry to interrupt you, but when he said you had included a clause for suicide, what did you understand that to mean? --- That if he committed suicide that the policy would be paid. Thank you, please go on? --- It was around about that time that he was, as I said, not happy in his marital relationship and he'd said to me on occasions that he wanted to make sure that if something happened to him any beneficiary from that or anyone who would benefit from my policy would not be his wife. At the same time, still [sic] had borrowed money from --- … MR ANGYAL: Please restrict yourself to what Mr Rostirolla told you and anything you said in reply? --- All right, what he said at that time was that he was concerned that if something happened to him it would go to his wife. He didn't want that. He was going to sign the policy over to Joan Fiakos who was his secretary who he was very friendly with and one of the conditions on that was that if something happened to him could I ensure that I helped Joan to - when the insurance company paid the money to Joan, that she would be paid out, the other people, his friends and I think he'd spoken to Joan about those, I'm not sure of that arrangement, but those people that had lent him money would also be paid out. Anything left over would go to the children and on many occasions he would ring me and say "Don't forget what you promised that if something happens to me and I'm going to do myself in tonight, that you promised you will go down and help Joan because when I die all hell is going to break loose over this insurance policy". And that was said to me on a number of occasions. And what, if anything, did you say in response? --- In terms of the insurance policy I said that if you've signed it over to Joan and she's the beneficiary I'll go and help Joan if that's what you want me to do." Later, he said: "What he told me was that he did not want the money to go to his wife. MR CASSIDY: Yes? --- First Point. Right? --- The second point was, I am assigning the policy to Joan Fiakos as the total beneficiary of the policy. Yes? --- That policy will then, if something happens to him, all the money would go to her and she would distribute the money amongst the friends who had lent money to him and what was left over would be put with the children." Mr Breckenridge said that Mr Rostirolla spoke to him about the topic on more than one occasion. He could not recall the dates, but placed it as being around about the time of the bankruptcy of the deceased. 8 Mr Ian Bailey, the life insurance agent, gave the following evidence: "MR ANGYAL: You have heard what my learned friend Mr Cassidy said, did there come a time in the mid-nineties when Mr Rostirolla had a discussion with you about that Tyndall Life policy? --- They did. Where did the discussion take place to the best of your recollection? --- in Sil's office. Doing the best you can, when in terms of years and months did it take place? --- About mid-nineties. To the best of your recollection was he at that time bankrupt or not? --- Not to my knowledge. … MR ANGYAL: And doing the best you can and putting it in terms of what he said and what you said, what was the content of the discussion? --- He asked could the policy of life insurance on his life if [sic] Tyndall be assigned to Joan. Who did you understand him to mean by Joan? --- Joan Fiakos. What did you say, if anything? --- I said there was no problem in doing that and I asked him did he have a reason for doing it. What did he say? --- He said that Joan would do the right thing and he would look after - would look after people that he owed money to. Was there anything further to the discussion that you recall? --- No." Mr Bailey had fallen out with the deceased at the time of his death. 9 On 15 August 1996 the deceased consulted Dr Vaughan Turnbull, a consultant psychiatrist, who provided a report expressing the opinion that the deceased was suffering from depression. This was to support his claim for income benefits pursuant to the Tyndall policy. 10 On 3 December 1996 the deceased gave a promissory note to Mr and Mrs Alex Tsalidis to repay $40,000 on 31 January 1997. Neither gave evidence. 11 On 20 January 1997 (the date of the issue of the relevant life insurance policy) the deceased made a will which named Mrs Fiakos as the executrix, made a bequest to his son of a gold Omega watch and left the rest of his estate to Mrs Fiakos to pay his just debts, and to divide the balance between the applicants. The alternate executor and trustee was John Frank Rostirolla, who was a friend rather than a relation, and was a creditor of the deceased. 12 On 24 February 1997 Mr John McEwan, the deceased's solicitor, wrote to the deceased as follows (omitting formal parts): "Further to our recent discussion regarding your life policy the writer has placed a notation as to your desire for the disposal of the proceeds with your Will. As indicated this is of no testamentary effect as you advise that the policy has been unconditionally assigned. We confirm that the appropriate course of action would have been to have the benefit of the policy flow to your estate and leave specific directions as to its disposal to the executors. We note that you have elected not to do this. It would be of considerable assistance if there was some formal acknowledgment of the existence of the loans to Joan and your mother recounting the amount involved in each case, how it arose or when it was paid to you and further accounting the fact that it is repayable on demand. It would be appropriate that such documents be signed and witnessed and placed with your Will. Please let us know if we can assist in this regard." There is no direct evidence as to what the notation said. It was not with the will in the deed packet, the contents of which were given to Mrs Fiakos on the death of the deceased, and Mr McEwan was unable to recollect the contents of the notation. 13 In about February 1997 the deceased had visited Mr Gavin Thomas in the company of a Mr David Cawthorn, an accountant practising in Wollongong. The purpose of the visit was to talk about bankruptcy and the alternatives under Pt X of the Bankruptcy Act 1966 (Cth). In the course of the discussion, the deceased mentioned that he had a life policy and Mr Thomas says that he would have advised the deceased that life policies or endowment policies are not caught by the Bankruptcy Act and remain the property of the bankrupt. On 19 March 1997 the State Bank appointed a receiver to the deceased's accountancy practice, and on 18 April 1997 he declared himself bankrupt. On that day he moved out of Mrs Fiakos' home. On 18 June 1997 Mr Gavin Thomas was appointed trustee in bankruptcy for the deceased. 14 The statement of affairs prepared and signed by the deceased on 18 April 1997 showed the amount owing to secured creditors as $794,000 and the value of secured property as $657,000. It also disclosed unsecured creditors as being $1,253,755 with virtually no assets. The policy number 21017383 was disclosed in relation to contributions, but the owner of the policy was noted as Mrs Fiakos. The listed unsecured creditors included the following information in relation to personal loans: Creditor's Name Full Address (including postcode) Nature of debt & account number Joint Date incurred Sum owing ($) debt? Yes/no Mr G Magyar 23 Moolabar Drive Personal loan No August 1993 120,000 Moolabar Qld Mr J Rostirolla 62 Hospital Road Personal loan No Mid 1996 110,000 Bulli Mrs J Fiakos 17 Northview Terrace Personal loan No June 1994 130,000 Figtree Mr F Rossetto Lot 17 Calguda Road Personal loan No February 1996 85,000 Robertson MJ Rowles & Sons Pty Ltd 1 Short Street Personal Loan No September 1995 450,000 Unanderra 2516 Mr Franco 43 Sherwood Drive Personal Loan No August 1995 130,000 Balgownie

15 Mr Aldo Franco gave evidence of two particular conversations in which the policy was mentioned. The deceased was a cousin of Mr Franco's wife and the deceased was a close friend of Mr Franco as well as his accountant. His evidence as to the first conversation in cross-examination was: "And will you tell me again what he said to you about the policy on that occasion? --- What he said that, "In case something happen to me, you will be well looked after, and Mrs Fiakos is in charge of the policy and she will, you know, share the money or distribute the money." But in your earlier version you said that included in that conversation was the statement, "I have assigned the policy to her"? --- Yes, well, wasn't that the same thing. Sorry, I thought - I thought it was the same thing, you know. Well, did he say in that conversation, "I have assigned the policy to her"? --- Yes." Although the evidence as to timing was somewhat confusing, the better view is that the witness put that conversation as being in the middle of 1996. 16 The second occasion was a couple of weeks after bankruptcy, at the deceased's then office, which the witness recalled as being at the Flinders Street Tiltadoor office. His evidence was: "Doing the best you can, again, what did he say and what did you say? --- He apologised and sorry about outcomes but he said, don't worry, one way or the other I will get myself going and I will fix you up. If that doesn't happen because I said, if something happened to your health, what's going to happen? He said, don't worry, I'm covered and Joan will look after you. Did he say anything else about the policy in that discussion? --- Not really. I vaguely remember another time that he said --- Let's just say with that discussion? --- No ---" 17 Mr Frank Rossetto first met the deceased at high school, and they became very close friends. Indeed, the deceased was the best man at his wedding. He gave the following evidence: "MR ANGYAL: You said a moment ago, Mr Rosetto, that you had a conversation about a life policy with Mr Rostirolla before he went bankrupt? --- Yes. Doing the best you can, what was the substance of that conversation? --- This is stretching the memory a bit. It was in his office and we were talking about his financial affairs broadly, because I never got involved with what he was doing and we were talking about the possibility of him going bankrupt or losing the business and I asked him was there any provision for the people and myself in relation to compensation if the business did fold. If the business did fold? --- Yes. If the business did fold. If the business did fold? --- Yeah. If the business did fold. And he mentioned a life insurance policy. Doing the best you can and put it in the words he actually said, what did he say? --- Well I asked him if the business did fold would the insurance be used for paying out the creditors or the people that came to his assistance. And he said and this is from memory - Yes, that it was going to be used to pay off the creditors first, the people that assisted him, and then what was left over was going to be sorted out amongst his family." In cross-examination he said: "I don't want to know what you asked him, I want to know what he said to you? --- Okay. He had an insurance policy and that the money from that, if something was to happen to him, was to pay off the people that came to his assistance." He put the time of that conversation as 1994-1995. 18 Mr Rossetto also gave evidence of another conversation after bankruptcy, at a place that the deceased was renting, he thought at O'Briens Road. The version he gave in evidence-in-chief was: "Doing the best you can, what was the substance of the conversation you had with Mr Rostirolla? --- I asked him if Joan his ex-secretary still had the policy in her hands and was it going to be used for paying off the creditors and he said, "Yes, Joan has still got the policy and yes, she was going to use that money for paying out the people that he owed money to". I said to him afterwards, it's obvious that whatever is left over will be given to his children and he said, "Yes, that was the proviso". In cross-examination he fixed the time of that conversation as being around the time he received an acknowledgment of debt dated 23 March 1998. He said he had first asked for the acknowledgment approximately twelve months before that. His further evidence as to the second conversation was as follows: "Yes, the second conversation? --- He said that the insurance money was still in Joan's hands and that she was going to use that money to pay the people that he owed money to." … What did you say to him immediately before he said that to you? --- I asked him if Joan still had the policy in her hands to which he said, yes. … And in the course of this conversation did Mr Rostirolla say to you, "Joan has a life policy on me, and if I die she will repay all of my debts"? --- Yes. But you already knew, when you held this conversation in 1998, that she had a life policy on him, didn't you? --- Well, he had the life policy, and she was the beneficiary of it, to act on that policy, to distribute the money from it, and what was left was to go to the children." Mr Rossetto also said that on one occasion the deceased said to him: "No Toni is not going to get the money because if she got it no-one else would see any of it." It was pointed out in cross-examination that the acknowledgment did not contain any reference to the insurance policy. 19 Mr David Rowles is the nephew of Terry Rowles, the husband of Sue Rowles, and was a 50% shareholder in the business of MJ Rowles Pty Limited in 1996 and 1997. The deceased had become the accountant for that business in 1989. He gave the following evidence: "Did you have a conversation with Mr Rostirolla in 1997 about the money that he had borrowed from M.J. Rowles and Son? --- Yes. Doing the best you can, and trying to put it in "I said", "he said" terms; Firstly, where did the conversation take place? --- In his office in Young Street, Wollongong. In Young Street? --- Wollongong. And what was said by him and by you? --- In '97 he said that he would try and repay the money to the best of his ability from his indemnity policy that he was getting $12,000 a month for, and that as a backstop he was going to assign his life assurance policy to Joan Fiakos and she was to, if anything happened to him, she would pay out his friend that he owed money to. And did you, as best you recall, say anything in that conversation? --- Didn't really touch on that because it was a life insurance policy so we didn't think it would happen, but I asked him about the indemnity how much he could give me out of the indemnity policy and he couldn't tell me." In cross-examination he put that conversation at late 1996 or very early 1997, a matter of months before the bankruptcy. 20 It is convenient at this point to refer to evidence given by Mrs Sue Rowles, who was called by the applicants. She, her husband, Terry, the deceased and his wife, Toni, and Mrs Fiakos and her husband, Tass, had all been very friendly. By 1995 all the marriages had split up. She was not asked any questions in chief concerning her early knowledge as to arrangements concerning the life policy. In cross-examination she said the following: "MR ANGYAL: You heard from Ms Fiakos in 1996, didn't you, that the reason for the transfer was to benefit Mr Rostirolla's creditors? --- Not from memory. I know that it was transferred over. And my assumption was from those conversations, and it is a long time ago, that Ms Fiakos was to be looked after and her debts paid out and the rest to - balance to his children. I know there was some people that he would have liked to have paid back. The closer friends maybe. But not under the circumstances you are saying. Not as direct as that, no. You must have been very concerned then that your loan was not going to be repaid from the balance of the proceeds when you heard that? --- I would have liked to have it paid back but given the time and the circumstances I tended to think that, you know, this is going to be longwinded and the trouble that I had getting small payments back that that would be an ongoing situation where I would take small payments. Why didn't you on your evidence say to Mr Rostirolla, look, why is Joan being looked after and not me? --- I think because she was, I was such a good friend for Joan, I knew her situation but I think that, you know, that was what couples did, they were a couple at that stage. Mrs Rowles, it's your evidence, isn't it, that Ms Fiakos told you that the transfer to her was for the benefit of Mr Rostirolla's creditors? --- I can't remember that, no. Do you deny that she told you that? --- I can't remember so I can't deny it. Can I suggest to you that if you hadn't been told that you would have pursued Mr Rostirolla to inquire whether he hadn't made provision for you? --- As I said it was a very difficult situation. I wa [sic] friends with both of them and I was getting paid back in small amounts I assumed, and when you think about a life insurance policy at that stage, you know, like, what was I going to do, wait for him to die 20 years down the track before I got my money?" 21 Mrs Rowles was cross-examined by counsel for Mrs Fiakos about a meeting which took place close to the point of bankruptcy which she and her former husband's nephew, David Rowles, attended. She recalled that John Rostirolla, Frank Breckenridge and Aldo Franco were present. She was not sure as to the presence of Ian Bailey, Frank Rossetto, Gary Magyar and Alex Tsalidis. The cross-examination was as follows: "At some point Mr Rostirolla told those present, didn't he, that Ms Fiakos would pay their debts from the proceeds of the life policy over his life? --- No, I don't remember that conversation per se, no. What do you remember being discussed at the meeting? --- Of how, you know, how it ever evolved to this and is there going to be some repayments. I think at that stage there was still hope that the [sic] would still be working and be able to repay people and if the life insurance policy was actually discussed then I can't remember the exact form of that conversation. You must have been very concerned that your loan was not going to be repaid ever at that point? --- It was a very emotional time for us all. Sorry? --- It was a very emotional time for us all. Why was that? --- Because people had given money to a friend and was hoping for repayments. They had to chase for those payments all the time so they were angry as well. It was an emotional time, wasn't it, for you if you were concerned that your loan was not going to be repaid?--- I think I always had at the back of my mind that he would still pay. You knew that Mr Rostirolla to that point had not repaid your loan in full? --- In full, yes, but I know that he had also tried to make repayments when he could when I asked. You knew he was now bankrupt, didn't you? --- I'm not sure when that meeting was. As I said, I'm vague on that, whether it was before or after the bankruptcy. I'm not sure on that. If it was before his bankruptcy you knew perfectly well, didn't you, that at that point his bankruptcy was imminent? --- It was --- … MR ANGYAL: When you attended the meeting of creditors that you've described, Mrs Rowles, you believed, didn't you, that Mr Rostirolla was either bankrupt or shortly thereafter was going to become bankrupt?--- As I said, I don't know that anyone fully understood the financial circumstances as a whole on where it was standing. And as I said, I can't remember whether this meeting was before or after, so if it was before then people were just trying to come together to have an understanding of, you know, payments and be aware of what was owed and make a decision from that, I think, of if they were going to be paid back. As I said, I'm hazy on that meeting. It was at that meeting, wasn't it, that you first came to understand just how many people were owed money by Mr Rostirolla? --- That is correct. Until you attended that meeting you had no idea, did you, that he had borrowed money from so many people? --- That is correct. You had no idea, had you, until you attended the meeting just how much money he borrowed from people? --- That is correct. You were very concerned when you found out at that meeting how much money he had borrowed from so many people, weren't you? --- Yes. You became very concerned, didn't you, that your loan would never be repaid? --- As I said, I do think that you still hold in the back of your mind that this is a friend and he will repay. But you knew he had no means to repay you, didn't you? --- At that stage I knew that there probably wasn't enough to go around and some of us would get small amounts here and there like I had been getting previous to that, and MJ Rowles, their amounts had been paid here and there, so hopefully enough and over a period of time the people would be repaid. But you knew there was nothing to go around at that point, didn't you? --- No, I didn't know that. Well, you knew Mr Rostirolla was bankrupt? --- As I said, I don't remember whether that was before bankruptcy or after bankruptcy. The truth is that you were told at that meeting, weren't you, that Mr Rostirolla had transferred a life policy over his life to Ms Fiakos for the benefit of his creditors? --- As I said, I cannot remember that being actually said, no, but if it was then I may not have - I may have been talking to someone, I truly do not remember that specific conversation. Did you come away from the meeting with that understanding? --- Come away from the meeting I think very disgruntled and saying, well, where do we go from here, we keep on pressuring him for payments that we can get. But Mr Rostirolla said at the meeting, didn't he, If you sue me none of you is going to get anything, or words to that effect? --- I think - no, I think he kept on coming from the point of view that if, I keep on working then I may be able to repay you. You came away from the meeting, didn't you, with an understanding that the life policy over Mr Rostirolla's life had been transferred to Ms Fiakos for the benefit of Mr Rostirolla's creditors? --- I knew that before any of this. I'm not sure of time spans but I was informed he had transferred the moneys over to Joan but when that happened and whether it happened at that meeting I'm not sure. Is this the situation, that at least by the end of that meeting you had an understanding that the life policy had been transferred to Ms Fiakos for the benefit of Mr Rostirolla's creditors? --- As I said, I'm not sure. I'm sorry? --- I'm not sure. I can't remember. You said a moment ago that you ---? --- Well, beforehand, not at the meeting. What was the source of that understanding, Mrs Rowles, how did you come by that understanding? --- From what, from when - why Sil signed the policy over to Joan? Yes. … THE WITNESS: As I said, I think it was mainly to protect moneys owed to Joan, a couple of other people, and the balance to go to his family. MR ANGYAL: Who were the couple of other people, Mrs Rowles? --- On discussion, this was when it was actually signing over so I don't - nothing was actually said then, but it was after the fact when Joan and Sil had broken up and decided to come to an agreement to sign part of the policy over where actual figures and names were discussed with me. Well, let's stay with the situation before the meeting you've been describing. You said a moment ago that your understanding was the policy had been signed over to Ms Fiakos and a couple of other people? --- Well, I may have been mistaken. I know that it was a policy that was there and he wanted to look after Joan's debt to him. You knew perfectly well didn't you that you were one of those couple of other people, Mrs Rowles? --- I was hoping so, yes, my name was mentioned and further down the track it was actually mentioned as a definite." 22 When Mrs Fiakos came to give evidence, her evidence-in-chief concerning that meeting was as follows: "Do you recall a meeting at Mr Rostirolla's office involving yourself and other persons after his bankruptcy? --- Yes, I do. Can you tell us how that meeting came to take place? --- I don't know who made the phone calls, it may have been me, I can't remember but we all went up to Sil's office. Doing the best you can, who attended the meeting? --- Mr Breckenridge, Rosetto, John Rostirolla, Aldo, David Rowles, Sue Rowles, myself, I don't think there was anybody else. When you said Aldo, did you mean Aldo Franco? --- Aldo Franco, sorry, yes. When you said, Rosetto did you mean Frank Rosetto? --- Yes. Did Mr Rostirolla play any part in the meeting? --- He was there initially, Frank Breckenridge sort of took over and explained as to why we were all there. … MR ANGYAL: Do you recall Mr Rostirolla saying anything to the meeting about the life insurance policy which is now exhibit 11? --- The life policy? No, I don't remember about the life policy. When you say you don't remember about the life policy, do you mean you don't remember him saying anything about it? --- That's right." The only cross-examination on the issue was a question as to where the meeting had taken place. Little other relevant evidence was given about that meeting. 23 Mr John Rostirolla was a lifelong friend of the deceased, and the deceased was accountant to he and his wife until 1997. He was the alternate executor nominated in the deceased's will of January 1997. In 1995 he and his wife had lent the deceased $110,000. He gave evidence about a conversation with the deceased in about July 1997 at the office the deceased was occupying at Macnamara Matthews, a firm of accountants, as follows: "MR ANGYAL: The question I asked you, Mr Rostirolla, was doing the best you can, what was the discussion you had with Mr Rostirolla on the occasion that you just mentioned? --- I went to his office there to ask him, you know, if he could pay some of the interest that was owing and he said look, he said "have a look at this" and he showed me a Family Law Court document which detailed on it how much was being paid out on his income protection policy and that amount was about $5000 a month roughly. Did he say anything else? Did he say anything? --- He said obviously he had to pay his rent and he had to pay other bills and everything else and he said there's not much money left sort of thing. I basically asked --- … If you do your best to recall what was said by each of you it would be very helpful? --- So I basically asked him how he intended to pay for it and he said look --- MR ANGYAL: How he intended to ---? --- How he intended to pay the interest and the loan and he said look, he said "I've signed a policy over to Joan" and he said "And you'll get fixed up out of that". He said "There's about a mil". About a? --- About a mil, that's what he - that's his words at the time. Was there anything further that you recall in that discussion? --- No, well, I just basically said that's not much good to me now. It's what? --- I said to him "it's not much good to me". HIS HONOUR: You are about his age, I suppose? --- He's a couple of years younger than me." There was no significant variation from that evidence in cross-examination. He did add that the deceased had said something to the effect that he would try to pay while he was working. 24 The evidence in relation to family law proceedings between the deceased and his wife is sketchy. According to the statement of affairs dated 18 April 1997, the deceased was required to pay $1,200 per week to Toni Rostirolla and this seems to be consistent with evidence from Mr John Rostirolla in cross-examination. It is not clear whether those orders were made before or after the cancellation and re-issue of the life policy. It is clear enough that family law proceedings were either on foot or in prospect by early 1996. 25 The next relevant flurry of activity was sparked by the hospitalisation of the deceased in early 1998, with a bleeding oesophagus. The deceased had been drinking heavily and, in addition to the immediate problem, had liver damage. The applicants were apparently advised by a doctor that he would not survive. On 3 February 1998 the applicant, Dayna Rostirolla, called Mr Ian Bailey, and, although there is some dispute as to the precise wording of the conversation, I have no doubt that, in accordance with the contemporaneous note taken by Mr Bailey, the gist of the conversation was that the deceased could die and that the insurance policy should be changed back to her and her mother. Mr Bailey's response was to the effect that Mrs Fiakos was the owner of the policy. At this time the applicant, Peter Rostirolla, found out for the first time that the life insurance policy had been effectively transferred to Mrs Fiakos. 26 The deceased signed at least two documents bearing the date 20 February 1998. The first was described as an acknowledgment addressed to Mrs Fiakos. Its terms were as follows: "I, Silvano Bruno Rostirolla hereby acknowledge an indebtedness to you in the borrowing of money or the payment of monies you have made on my behalf over the last 4 years. This amount is $46,066 at present. I undertake to pay this amount to you at any time you require it and I charge my estate with the payment to you of this amount in the event of my dying before being repaid. I acknowledge that this amount will vary as you may advance other monies or pay other accounts on my behalf from time to time and this additional amount will be repaid as well. I also acknowledge the housing loan with the Greater Building Society in the amount of $100,000 was borrowed on my behalf and charge my estate with this amount to be repaid also. I will be forwarding a copy of this acknowledgement to my Solicitor, Mr John McEwan for safe keeping." It was signed by the deceased in the presence of Mr McEwan, solicitor. 27 The other document (also witnessed by Mr McEwan) was headed "Monies Owing to Joan Fiakos" and was in the following terms: "$ 19.5.1995 Housing Loan, The Greater 100,000 1995 Cash money 17,000 6.1997 Money borrowed from Sue Rowles to meet lease repayments 10,000 6.1997 Money borrowed from Natalie to meet lease repayments 3,500 ESANDA Repayment 2,035 Wages/The Greater (difference) 70 ESANDA 1,603 Jacaranda Avenue plumbing account paid to client of practice 148 6.2.98 ESANDA 570 6.2.98 ESANDA 1,040 13.2.98 Pay for beds delivered to O'Briens Road 1,100 Payments which still need to be made to ESANDA Finance and State Bank 9,000"

28 There are two other documents in similar typing, each headed "To Whom It May Concern", signed by the deceased, which are undated and not witnessed. The first was in the following terms: "I, SILVANO BRUNO ROSTIROLLA, of 244 O'Briens Road, Figtree, being of sound mind, desire that the following statement be attached to my Last Will and Testament and should be read in conjunction thereto: On the 20th January, 1997 I assigned the Term Life Policy number 1/21078097 with Tyndall Life to Mrs. Joan Fiakos of 17 Northview Terrace, Figtree. I clearly understand that this action entitles Mrs. Fiakos to all the proceeds under the Policy and I have done this in the full knowledge of the consequences of my actions. I have taken this action because of my personal feelings towards Mrs. Fiakos and an acknowledgment of the support both financial and emotional that she has provided to me over a number of years. I continue to enjoy a close and harmonious relationship with Mrs. Fiakos and have no desire to alter the current arrangements in respect of the assignment of the Policy." The second was: "I, SILVANO BRUNO ROSTIROLLA, of 244 O'Briens Road, Figtree, being of sound mind hereby authorise that, in the event of my death, the relevant death certificate IMMEDIATELY be given to Mrs. Joan Fiakos of 17 Northview Terrace, Figtree." 29 Mrs Fiakos gave evidence that the first document was dictated by the deceased to her and typed by her, and was given to her after it was signed. She was unable to recall when this took place, but noted the reference in it to the last will. Her recollection was that the deceased said to her that: "He knew that when the time came there would be problems and he tried to do what he could to lessen that for me. … Toni and the children will cause a fuss about all this, about the policy being transferred over to me." So far as the second document is concerned, she recollected him saying: "You will need this when the time comes, this will help you to get the will, to then be able to put the payment of the policy into place, the pay out of the policy." It is unclear whether these documents were signed in early 1997 in connection with the will and the issue of the policy, or in early 1998 in conjunction with the documents dated 20 February 1998. Another possibility is that all four documents were prepared in or about February 1997, albeit not necessarily signed at the same time. It is possible that the first document headed "To Whom it may Concern" is the notation referred to as having been attached to the will of 1997 in the letter from Mr McEwan of 24 February 1997.

30 Upon his bankruptcy the deceased lived at his office for some weeks and then moved in with his mother at 14 Grafton Street, Fairy Meadow. After leaving hospital in February 1998 he lived with his son, Peter, at 244 O'Briens Road, Figtree, until May 1999, when he moved, with Peter, to another adress.

31 After his bankruptcy, the deceased came to an arrangement with a firm of accountants, Macnamara Matthews, to use a desk and office at their premises. Mrs Fiakos was employed by the firm as a receptionist, and also looked after secretarial work for the deceased. After about three months Mrs Fiakos left because she could not get on with one of the persons connected with the firm of accountants. The deceased decided to leave also. Thereafter he mainly worked from home, but had an arrangement with a company called Doorland to use a desk there to see clients if necessary. Mrs Fiakos was employed at Doorland for secretarial work. She also looked after secretarial work for the deceased. During the period after bankruptcy, although Mrs Fiakos and the deceased were not living together they remained friendly and continued with sexual relations, at least until late 1998. According to Mrs Rowles, she had commenced a sexual relationship with the deceased by late 1998. It is not clear whether Mrs Fiakos knew about that relationship then. She certainly did know about it in due course. Mrs Fiakos and Mrs Rowles had been very close friends until then. Afterwards they did not speak. 32 Mrs Fiakos gave evidence that towards the end of 1998 the deceased raised with her signing a declaration of trust about the insurance policy. Her evidence was: "He said "I want part of that policy transferred over to the children". Did he say anything else? --- No, that I - oh well, that I should keep what was mine and a couple of other people and that he wanted the rest transferred over to Peter and that he - Peter would then be responsible, he would let Peter know what he wanted him to do with that amount of money. What if anything did you say? --- I kept putting it off cause I kept saying well, I don't really think Peter would look after the people that he promised that he would look after and I sort of tried to keep putting it off but he kept persisting that he wanted something drawn up. What happened next as far as ---? --- Well then I said okay, I said well, you know, get your solicitor to draw something up and we'll see what comes out of it. I don't have any idea of this sort of legal documents that, you know, formalise things or wanting to change things. What did he say if anything? --- He said yes, okay, I'll get McEwan to draw something up and I said oh well, get him to - I'll have to have a solicitor look after it and send it over to Hanson's." 33 Mr McEwan gave the following evidence in a written statement: "6. Prior to SR instructing my firm to act in relation to the declaration of trust in late 1998, the issue regarding the beneficiaries of the proceeds of his life insurance had been a regular topic of conversation at our weekly luncheons. In the course of those lunches and telephone conversations throughout 1996, 1997 and 1998 SR said to me words to the effect: "I have transferred title to my life policy to Joan (Fiakos) because she paid some debts for me. I want to make sure she gets her money back. The rest of the policy will go to my children. I have agreed that with her." SR also said in one of these conversations words to the effect: "I want to make sure Toni (wife) doesn't get any of the proceeds of the life policy. The kids are to share the rest of the policy after Joan gets her bit." In conversations at my regular lunch meetings and telephone calls with SR he said to me on many occasions in the period from 1997 to 1998 words to the effect: "I am still paying the premiums on the life policy." "I want to make sure Joan gets her money back and the rest goes to the kids." We talked frequently about the need for Joan to sign a Declaration of Trust to ensure SR's wishes were carried out ie that Joan gets the money owing to her and the kids get the rest. The conversations almost invariably concluded with SR saying "I'll talk to Joan again and see if she will sign a Declaration of Trust". 7. In the course of a lunch with SR at Leonie's Courthouse Tavern in Wollongong in late 1998 he said to me words to the effect "Joan has finally agreed to put this policy thing in place. Will you handle it?" I said "It's not my field and I'm too close to it. I would rather put you on to my partner Roger Downs"" 34 In his oral evidence, Mr McEwan put the conversations as particularly taking place about 1997, although he was vague about timing. 35 Mr Downs, a partner of Kell Heard & McEwan, wrote a letter to Mrs Fiakos dated 23 November 1998, the terms of which (omitting formal parts) were as follows: "We presume that Mr Rostirolla will have spoken with you recently regarding the insurance policy on his life which was transferred to you sometime ago. Our client seeks to formalise the arrangement under which you hold the ownership of the policy in trust for yourself and for our client's son, Peter Rostirolla. On our client's instructions we enclose:- · Declaration of Trust in triplicate. The declaration of trust, when signed by you, constitutes a declaration that you hold the insurance policy on trust for yourself as to an amount of $300,000.00 and as to the balance of the proceeds of any claim on the policy for Peter Rostirolla. We understand this reflects the agreement that you have with Mr Sil Rostirolla. We would recommend that if you have any questions or concerns regarding the document, you should seek independent legal advice as to the terms of the document. As the document represents our understanding of the arrangement, we invite you to seek that independent advice. Our client would very much appreciate the document being concluded and returned as soon as possible. We await your early contact." 36 The recitals in the draft declaration of trust were as follows: "A. The Trustee is the owner of life insurance policy no. 21017383 with Tyndall Life Insurance Company Ltd held on the life of Silvano Bruno Rostirolla ("the Trust Estate"). B. The Trust Estate was transferred to the Trustee by the original beneficial owner of the Trust Estate namely Silvano Bruno Rostirolla. C. The Trustee at all relevant times has agreed to act as Trustee in respect of the Trust Estate and hold the Trust Estate as Trustee for herself and for the Beneficiary in the proportions set out in the Schedule." The declaration of trust was as follows: "The Trustee declares that she holds the Trust Estate and all proceeds of any claim on the Trust Estate and any interests accrued or to accrue upon trust for herself and the beneficiary in the proportions set out in the Schedule and agrees to pay and deal with the Trust Estate and any proceeds of the Trust Estate in accordance with the terms of this Deed and the proportions set out in the Schedule." Other relevant clauses were as follows: Provision of information 5 The Trustee will at all times provide full and complete copies of all correspondence documents and materials received by the Trustee in respect of the Trust Estate to the Beneficiary and shall not complete any claim form or other documents or provide any other information to the said insurance company without the prior written consent of the Beneficiary. … Appointment of new Trustee 7 The power to remove the Trustee and appoint a new trustee is vested in the Beneficiary. Upon the resignation or removal of the Trustee, the Trustee shall do all things reasonably required by the Beneficiary to vest title in the Trust Estate in the Beneficiary or a new Trustee as the Beneficiary may require PROVIDED ALWAYS that the new Trustee or the Beneficiary shall be obliged to declare that the Trust Estate is held upon the same terms and trusts as are set out in this Deed so as to reasonably protect the entitlement of the Trustee to her proportion set out in the Schedule. … Documents of Title. 9 The Trustee shall at the request of the Beneficiary make available to the Beneficiary the insurance policy or other documents of title which may have come into the hands of the Trustee by virtue of the Trustee being registered as the holder of the Trust Estate under this Deed. The schedule was as follows: "Joan Fiakos $300,000.00 Peter Lawrence Rostirolla Balance of Trust Estate" 37 Mrs Fiakos instructed Mr Kyriakoudes from Hansons Lawyers to act on her behalf. The substance of his reply to Kell Heard & McEwan dated 1 December 1998 was as follows: "We act for Mrs J Fiakos who has received your letter dated 23 November, 1998 and the declaration of trust enclosed therein. We have advised Mrs Fiakos in relation to the declaration of trust and have been instructed to raise the following matters in relation to the deed:- 1. Recital C should be amended by deletion of the words of the first line "At all relevant times" and insert in lieu "has from the date of this Deed". We are instructed that the arrangements proposed in the Deed are new arrangements and our client for the sake of accuracy does not want the recitals to state that at all relevant times this has been the arrangement. 2. Clause 5 is to be amended by deletion of all words after the word "Beneficiary" on the third line. We consider that there should not be an effective veto in favour of the beneficiary as proposed by the deleted part of clause 5. 3. Deletion of clause 7 in its entirety. Mrs Fiakos is most uncomfortable with the fact that she may be removed as the trustee which would require the assignment of the legal ownership of the insurance policy to the new trustee. In her position as the owner of the policy she is aware that the policy is current and that the premiums are or are not being paid and she would also have control over the proceeds so as to ensure that she and the beneficiary receive their rightful entitlement in accordance with the Deed. 3.[sic] Delete Clause 9. Mrs Fiakos is of the view that as owner of the policy she should hold the policy documents but she is happy for there to be a provision that she make available copies of all documents and all correspondence pertaining to the policy, to the beneficiary whenever any such documents or correspondence is received. However, the existing clause has the effect of requiring her to part with possession of the policy documents at the request of the beneficiary and this is not acceptable. The beneficiary is safeguarded by the creation of the trust. Please obtain instructions in relation to the above. Our client is prepared to execute a declaration of trust but regards the submitted declaration as required in the above amendments." 38 The reply from Kell Heard & McEwan to Hansons of 4 January 1999 was in the following terms: "We refer to your letter of 1 December 1998 and have received further instructions from our client. We enclose:- · Draft Amended Declaration of Trust. We comment on the amendments made by reference to the numbered paragraphs in your letter of 1 December 1998. 1. We are instructed that your client has agreed that the Recital correctly reflects the intention of the parties. 2. Agreed. Please note that we have added the words "or forwarded" in the second line. The expansion of the obligation of the Trustee to provide copy documents to the Beneficiary is necessary because of the amendment to the clause. 3. We draw your attention to the amendment to the first sentence of paragraph 7 which reduces the circumstances in which the Beneficiary may remove the Trustee. Please confirm if this is acceptable. 4. We have included the words "copies of" at the beginning of the second line. If the amended document is acceptable will you please arrange to have it executed and returned in duplicate as soon as possible." 39 Mrs Fiakos' evidence was that she made an appointment with Mr Kyriakoudes to see him about the amended document. Her evidence-in-chief was as follows: "I made an appointment and I went to see Mr Kyriakoudes and he had the amended document and before we went into it he says, why are you doing this? And I said, because I've been pressured into it and that. He says, if you sign this it waters down your position once Mr Rostirolla secures the greater part of the money for his children. He may decide to stop paying the policy and then you would have to, and your mortgage, and then you would have to find that amount of money for as long as, you know, as long as he's alive I suppose, and I said, yes, I can see your point, and I sort of said, well can we just say that we're not going to sign the document and then it sits there in abeyance or whatever. And he said, yes, I'll write back to them and just tell them we're not going to sign it and that was it." Her evidence was that following this meeting Mr Kyriakoudes rang her and told her what he was going to write, and she told him that that was fine. 40 The letter in response dated 4 February 1999 was as follows: "We have been instructed by our client that our respective clients have reached agreement that due to a change in circumstances, this matter is to be left at present in obeyance [sic]. We understand that the amended Declaration of Trust is in a form our client is agreeable to execute and we have retained that Declaration in Safe Custody at our office on our client's behalf in order that it may be executed in the future if it is the wish of our respective clients. We have been instructed to forward our Memorandum of Fees to your firm on the basis that your client will attend to their payment. We thank you in anticipation for payment of our account." 41 Mr Downs was not able to add anything of substance in his evidence-in-chief as to these events. Mr Kyriakoudes gave evidence identifying a memo to file of 4 February 1999, the substance of which was as follows: "Telephone attendance upon Mrs Fiakos today, 3 February. · She indicated that she will not be signing the Declaration of Trust. She has spoken to Sil Rostirolla and he has agreed to leave the Declaration of Trust on hold. He was just concerned when Tass moved back in with our client. · I was instructed to put the second draft of the Deed in our client's Deed packet and then send our account to Mr Rostirolla's solicitors and close the file." 42 Having looked at the documents in question and, in particular, the evidence from Mr Kyriakoudes, in my opinion, it is more likely than not that the face-to-face conference was in relation to the original draft deed rather than the amended draft deed. Mr Kyriakoudes agreed that there was no notation in his records, nor did he have any recollection that Mrs Fiakos had disputed the truth of what had been suggested by Kell Heard & McEwan. So far as the final letter is concerned, he said that his recollection was that Mrs Fiakos had agreed to the terms of the deed and that all that happened was that it was not at that stage to be formalised by signature. There was no examination in the evidence of the statement in the file note of Mr Kyriakoudes relating to Tass moving back in with Mrs Fiakos. 43 Mrs Fiakos gave the following evidence as to what she described as the "arrangement with Sil" when being questioned as to later events: "That's how the 300,000 for the declaration of trust was made up. It was my 170 and Sue was always meant to be part of that 300, and Alex Tsalidis, which was another 40, a smaller amount. These - I think these were --- … Sorry, please go on? --- It came about I think, these were small amounts, and they were people that didn't have businesses, that you know, this money really meant a lot to them and, anyway, he agreed to that. He said, you know, "Keep the difference, you know, we'll just round it off to 300." When you used the phrase a moment ago, the declaration of trust, did you mean by that the document that had been ---? --- He wanted me to - he said - the conversation was that, you know, he wanted to hand some of the money over to the children or that it be, so he could secure it that it would be in their name. It sort of then, needed to figure that I could keep to look after me and then Sue was included that and Alex and with all the calculations, 300 just tidied it all off and he knew that there was a little bit extra in there. He was pressuring me, so I said, okay, then I said how, the document was never ever signed." 44 In cross-examination, she said: "At that stage, Mr Rostirolla had put to you that a total of $300,000 would be retained by you out of the proceeds of the policy to be dealt with in a way I will go through in a moment? --- Yes. And the balance to go equally to his children? --- To Peter and he would give Peter instructions as to what to do with that money. I see, thank you. And of that $300,000 you were to keep $170,000? --- Well, it was a little bit more than $170,000. How much more than $170,000 was it? --- $300,000 take out $40,000 for Sue Rowles, $40,000 for Alex Tsalidis and the balance would come to me. Whatever that figure is. As I understand it and at that stage, you said, okay? --- For the documents to be drawn up, yes. You received independent advice? --- Yes." 45 Mrs Fiakos claimed that she had refused to sign the deed of trust because it did not provide for his friends, at least until there was a written document which made clear what Peter Rostirolla would be bound to do in that respect. In evidence-in-chief Mrs Fiakos had said: "What was as best you recall, the conversation you had with him? --- I rang him and said I wasn't going to sign the document because I didn't think that Peter would pay out all the friends and that and Mr Rostirolla said that he was going to leave instructions with Peter as to what to do with the money. Try and put it in direct speech please? --- He said, I will let Peter know what I want done with the money and I said, well I don't know whether that will happen. I said, well if that is the case, if you're going to give Peter instructions why don't you put it in writing and we can add it to the declarations so there is a list of what your wishes will be. He said, no he would not do that, that he would just give Peter the instructions and I said, "Well" and he said, "You'll just have to take my word for it." I then said to him, "Well, are you saying that your word is better than my word?" I said to him, "Well, your track record hasn't been very good so far" and that was I think the end of the conversation." 46 Mrs Rowles gave evidence in cross-examination as to what she described as the writing up of a contract which was obviously a reference to the events which took place in late 1998/early 1999. The evidence was as follows: "You became aware, didn't you, that there were negotiations between Mr Rostirolla and Ms Fiakos with respect to the life insurance policy over his name? --- Yes. Did he tell you that? --- Joan broached the subject with me first from memory where this contract was going to be written up. This was when - before we had our differences of opinion and then Sil asked me if that had been confirmed that that was the right way and did I - happy with that and I agreed, yes, I was happy with that arrangement. I'm sorry. I am really having trouble hearing. Who asked you that? --- Joan brought the subject up first that this was going to be actually she'd agreed to sign an agreement or a document saying that part of the life insurance policy was going to be put aside, put aside for her and a couple of other people including myself. At a later date, how long after I'm not sure, Sil did ask had I spoken to Joan regarding this and was I happy with that and I agreed. Joan Fiakos never told you, did she, that she'd agreed to execute a declaration of trust over the policy? --- It came from Joan first. Joan discussed with me that this is what she was going to do. She told you, didn't she, that she was having negotiations with a view to signing a declaration of trust over the policy? --- Yes. And she asked your views about that and how she might negotiate it? --- We talked on many things and I would imagine so at that stage that she did discuss it with me. You said a moment ago that she consulted you about whether you were happy with the situation under which she received enough money from the policy to pay herself and yourself? --- And others, yes. You said that you were? --- Mm. But she never told you, did she, that she had agreed to do that? --- I had the assumption, well when you're talking about something like this that this is what she was going to do. I had the assumption that this the line that she was taking. You may have made that assumption Mrs Rowles but she never told you did she that she had agreed to make an agreement to that effect? --- I think she did. You know, like this was in process and I think she did. You became aware of the process, to use your word, but you were not told by her that she had agreed to that result, were you? --- She asked me if I would like the moneys owed to me to come out of an agreement that she'd set aside that she would get part of the money or the children. So yes, we did discuss this, that it was going to happen or was happening." 47 Evidence was also given by Mrs Rowles as to a conversation she had with Mrs Fiakos in June 2001 after the death of the deceased, which is consistent with an understanding on her part that $300,000 had been an agreed figure to be withheld from the children, to be disbursed in accordance with an agreement which had been arrived at with the deceased, rather than being all held beneficially by Mrs Fiakos. 48 Although there are some differences in language, the evidence given by Mrs Fiakos does not differ greatly in substance from that of Mrs Rowles in this respect. If Mrs Fiakos was to keep the $300,000 she acknowledged that she would pay Mrs Rowles the amount owed to her, that being the arrangement with the deceased. The relevant part of the conversation from this point of view is as follows: "Did you say anything else? --- She said - I said to - something to the, a fact [sic], "Well, out of that 300 you know that you will be paid," because she was one of the people, out of that 300 the arrangement with Sil was that I would get paid, that Sue would get paid her 40, which was, that's what it was at the time, and Mr Tsalidis would get his 40. There was a little bit extra, he said, "Well, you can keep that little bit extra." And I said to her that, you know, she knew that if I got the money that she would be paid. And at that stage she was with the children and I said to her, "You have probably made arrangements that if it doesn't go that way," that she would get the money from the children, so she was looked after either way. And I proceeded to say to her, "Well, why should we get paid just because we had slept with him, and not the other friends?" And did she say anything in reply? --- She - I think she just said, "Well, it's not fair," and I think the conversation ended after that." She then went on with the passage set out at [43]. This discussion was related to negotiations between Mrs Fiakos and the applicants after the death of the deceased for division of the monies. Mrs Rowles acknowledged that she has an arrangement with the applicants that she will be paid if they succeed. 49 Ruth Ellis was called by the applicants. Her former husband was the owner of the Doorland business. The deceased was accountant to the business, and he and Mrs Fiakos had worked at the premises. Mrs Fiakos continues to work there on a part-time basis. Mrs Ellis had been a friend of Mrs Fiakos for some time. In circumstances which were not explored in evidence, she had lived in the same house as Mrs Fiakos about a year before the death of the deceased. The present state of her relationship with Mrs Fiakos was not explored. Her evidence was unsatisfactory. She was decidedly nervous and uncomfortable in the witness box. This made her evidence disjointed and difficult to follow. On relevant issues it was somewhat equivocal, and I was left with a distinct impression that she may not have come up to proof. She certainly supported the conclusion that Mrs Fiakos saw maintenance of the policy as of importance in securing her own loan. However, she did say that Mrs Fiakos wanted to look after certain creditors who she could not identify. She also gave the following evidence: "I want to know what conversation you had about that 300,000 with her? --- Joan told me it was 300,000 approximately was the figure that I remember. She always said that she only wanted the money that she was owed and that 300 accumulated by the fact of he owed, I asked her what was the breakup of the figure and she said that she only wanted what she deserved and that was 100,000 for her loan, there was $50,000 that she had loaned to Frank Ostermeyer only because of Sil's guarantee that that was safe for her to do so and that there was people like Sue Rowles and others that she wanted to pay." She put the time of the conversation as a year or two before the death of the deceased. 50 The deceased was discharged from bankruptcy on 17 April 2000. 51 In or about November 2000 the deceased received about $200,000 (after payment of legal fees) from Tyndall as a lump sum payment on account of his rights under the income protection policy. According to Mrs Fiakos, with that money the deceased bought a new car (apparently for the second applicant), a laptop computer for the second applicant, furniture for where he was living, and took a holiday in Queensland. This is broadly corroborated by the applicant, Peter Rostirolla. At about that time, Mrs Fiakos said that she offered to transfer the life policy to the deceased if he repaid to her the amount that he owed her, but he refused. At about this time she resigned from his employment and thereafter refused to accept cheques he tendered in payment of the life insurance policy premiums and in repayment of her home mortgage, which had been taken out to lend him the money in the first place. She said this was because she did not want to get involved with his cheques. In my view, the real reason was that she knew by then that a dispute with he and his family was brewing and she wished to preserve the security of the policy. Up until that time the deceased had met these payments, albeit on an irregular basis. 52 The deceased had, over the years, threatened suicide on various occasions, and had actually attempted suicide on at least one. 53 On 14 May 2001 the deceased was taken by Mrs Rowles to and was admitted to Wollongong Hospital with liver failure caused by his chronic alcoholism. On 17 May 2001, on the initiative of the applicant, Dayna Rostirolla, he told his solicitor, Mr McEwan, that he was not likely to live much longer and he would probably die during that admission, and he gave instructions for preparation of a will. Shortly after 4pm that day he made a statutory declaration and a will. The statutory declaration (sometimes called the dying declaration) was as follows: "On this the 17th May 2001, I Silvano Bruno Rostirolla of 5 Darragh Drive Figtree do solemnly declare as follows: 1. I am the life insured under policy number 21078087 and policy number 21069159. 2. I cannot recall which Tyndall Life policy number it was in respect of which I had dealings with Joan Fiakos. Whichever number it was, I recall that it was started by me in about 1991. The monthly premium in respect to the policy was about $330.00 I paid the monthly premium from the beginning. 3. In about 1995 my wife and I separated and sub sequentially, in about 1996 I established a relationship with Joan Fiakos. During this time I resided with Joan for a short time of approximately 5 months. At that time partly as a consequence of the marital separation and the effect it had on my finances I had difficulty managing. I had severe mental problems and it was difficult for me to generate income. Joan Fiakos who was still at that time my secretary, lent me money so that I could get by and meet my liabilities. 4. The problems worsened and I was made bankrupt in 1996. At that time I needed to make sure, as far as I could, that Joan would be repaid. We had a conversation in words to the following effects: I said "The only thing because it is really the only asset I have is to give you the security of my life insurance policy." She said "That's very kind of you but isn't the payout of at least $960,000.00." I said "That's right." She said "Well you only owe me $170,000.00." I said "Yes, the idea is that you should repay yourself the loan and after that give the rest to my children. It is what I have always intended to leave them." She said "I know that and of course I will make sure that the rest go to them." I said "There is an assignment page and I will sign that now so that you are in the policy. All you need to do is send it to Tyndall." As I recall added at that time words to the effect: "I will talk to the trustee (referring to the trustee in my bankruptcy) to make sure there is not a problem. I cannot see that there will be a problem because the thing has no immediate value and requires payment of premiums to be continued to have any value." 5. I recall then speaking with my trustee who said words to the effect: "I agree with you. This is not property, which can be distributed. As far as I am concerned you can do what you wish with it (referring to the policy)." 6. I continued to pay the premium. As I was unable to use regular banking or credit card methods, Joan paid the premium on her credit card. Each month I gave her the amount of cash, which corresponded with the payments she had made. 7. That arrangement continued until late 2000. At that time my personal relationship with Joan had been finished with Joan for some months. Joan continued to do some secretarial work up until late 2000. It was when she finished working for me that she started to refuse payments in respect to the policy premiums. 8. From about November 2000 I started to send cheques. She did not bank this money and indeed in respect of one cheque she tore it up and returned it to me by leaving it in my letterbox. 9. I have on several occasions attempted to contact Joan and at "Annexure A" to this declaration are various draft letters, letters and transcripts of telephone conversations. 10. During January 2001 Joan became aware that I was continuing legal action in order to have the policy returned to my ownership, Joan contacted me by telephone we had a conversation with words to the following effects: She said "I will transfer the policy ownership as you wished if you give me $200,000.00. I said "No" She then repeated my answer of "No" and ended the phone conversation." It was declared before a Justice of the Peace and a resident medical officer, who declared that he was present when it was made and was satisfied that the deceased understood at that time the content of the declaration and had sufficient capacity to swear as to its truth. That medical officer gave evidence and did not alter his opinion. 54 The will was witnessed by Mr McEwan and a nurse and was in the following terms: "THIS IS THE LAST WILL AND TESTAMENT of me, SILVANO BRUNO ROSTIROLLA of 5 Darragh Drive, Figtree in the State of New South Wales, 1. I REVOKE all former Wills and Testamentary Dispositions made by me and I DECLARE this to be my last Will and Testament. 2. I APPOINT my daughter DAYNA MAREE ROSTIROLLA of c/- 33 Gorrell Crescent, Mangerton, my son PETER LAWRENCE ROSTIROLLA of 14 Grafton Street, Fairy Meadow and TONI ANN COSTELLO of 33 Gorrell Crescent, Mangerton as joint executors of this my Will. 3. I GIVE DEVISE AND BEQUEATH the whole of my estate both real and personal of whatsoever nature and kind and wheresoever situate unto my daughter the said DAYNA MAREE ROSTIROLLA and my son PETER LAWRENCE ROSTIROLLA equally as tenants in common. 4. In the event that either my daughter or my son predecease me then I DIRECT the share which they would have taken under this my Will had they survived me shall pass to any child or children of them or if so such child or children survive them then the share of the child who predeceases me shall pass to the survivor of my children. IN WITNESS WHEREOF I have hereunto set my hand to this my Will this 17 day of May 2001." 55 Dayna Rostirolla and Mrs Rowles spent much time with the deceased during his period in hospital. He was allowed home leave for some hours each day and Dayna took him home, where he would endeavour to do some accountancy work. The dying declaration was, according to Dayna Rostirolla, dictated by him and typed by her. 56 The hospital clinical notes indicate that the deceased was very ill during the period after admission, including evidence of disorientation, depression and suicidal tendencies. He was also plainly in a bad physical way. He was, no doubt, in a weakened and vulnerable state. However, taking into account the evidence of the medical and nursing staff and Mr McEwan, I would not conclude that he was not able to understand what he was doing when he made the declaration and executed the will. In my view, he was subject to pressure from the applicants and his former wife, in respect of both the new will and the dying declaration, to regularise his affairs in favour of his children. Dayna Rostirolla made the contact with Mr McEwan. The appearance of the former wife of the deceased as a co-executrix of the will is particularly telling in this respect. In any event, by then his conduct upon receipt of the lump sum from the insurer had shown that he was no longer troubled by any sense of responsibility to his friends who had lent him money. Another sub-text was that the deceased had taken up with Mrs Rowles and cut the painter with Mrs Fiakos. Those two and Toni Rostirolla had once been close friends. It is clear enough that Mrs Rowles was on good terms with the deceased's family in the period before his death, and co-operated in looking after him. Mrs Rowles and Mrs Fiakos were not speaking and Mrs Fiakos and the former wife of the deceased were at arms length. 57 There are some anomalies to consider. The first is the position of Maria Rostirolla, the mother of the deceased. She was not a friend who was a creditor, and apparently the assets in question were held by the deceased to avoid his mother having her pension reduced or eliminated. Mrs Fiakos claims that at one stage the deceased said to her "I want you to look after my mother". There is no satisfactory evidence as to when or under what circumstances this took place. The other anomaly is the position of Mr and Mrs Tsalidis, who did not lend the deceased money until 3 December 1996, which was after the arrangements were made but before the policy had issued. These anomalies highlight an issue which was explored with Mrs Fiakos in cross-examination, namely, the extent to which she understood that the instructions as to the policy proceeds were flexible, contemplating, for example, part payment of or the reduction of the debt of friends, the emergence of further creditors who were friends and so on. This reached its clearest form in the negotiations concerning the deed of trust in late 1998/early 1999 when what was at least contemplated was an amount to cover the debts owed to Mrs Fiakos, Mrs Rowles and Mr Tsalidis, with the balance to the son, Peter. Mrs Fiakos, of course, was also prepared, in late 2000, to assign the policy to the deceased on payment to her of her indebtedness.

Primary Trust 58 I have no hesitation in rejecting the primary trust claimed by the applicants. The only evidence which supports it is the so-called dying declaration made on 17 May, just before the death of the deceased, the recital to the deed proposed in late 1998, which Mrs Fiakos, through her solicitor, expressly sought to change, and (on one view) the evidence of Mr McEwan. There is no good reason to doubt the general thrust of the evidence of Mrs Fiakos as to the initial arrangement. It accords with the inherent probabilities of the situation. The deceased was an accountant, who was accustomed to planning and organising the affairs of his clients to best advantage. He had separated from his wife and family law proceedings were either on foot or in prospect. His financial affairs were in a disastrous state because of the failure of the record shops. He had borrowed monies from relations and lifelong friends, by misleading, if not fraudulent, conduct, and had apparently misappropriated monies beneficially owned by his mother. He had significant unsecured trade creditors and secured creditors with a deficiency of assets to meet their indebtedness. He was drinking heavily and had some form of depression, although it was no doubt exaggerated. He was plainly insolvent by a fair margin, and had been for some time. He had no chance of repaying his friends or restoring assets to his mother. Bankruptcy was looming. He was staving off the evil day by continuing to work, whilst at the same time collecting monies for income protection from the insurer on the basis that he was disabled from work. He obviously believed that, if it was assigned, the life policy would be excluded from bankruptcy and from his estate, and would not, in the meantime, amount to an asset for the purposes of family law. In due course he had his views broadly confirmed by an experienced insolvency practitioner. He wanted to make sure than neither his wife nor his trade or secured creditors could get their hands on the proceeds of the policy. He no doubt saw the potential proceeds of the policy as being the means of placating, to an extent, those friends who had lent him considerable sums of money at great personal cost and, to that extent, assuaging his own conscience. Mrs Fiakos was his trusted confidential secretary, personal confidante and lover. She had also advanced him considerable sums of money. She knew which friends had lent him money and the amounts. He trusted her to do the right thing. 59 The friends of the deceased who gave evidence of the deceased's statements to them about the policy have an interest in establishing a legal or moral claim to the proceeds of the policy. Further, not unnaturally, it was clear that some of them harboured some resentment towards the deceased for what he had done. There are some issues as to the timing of some of the alleged statements by the deceased. However, I do not doubt the essential truth of their evidence. The effective assignment of the policy to Mrs Fiakos did occur and she does not assert beneficial ownership. Mr Bailey, at least, was very much involved in that and has no motive to not tell the truth about the matter, notwithstanding that he later fell out with the deceased. The same may be said as to the evidence of Mr Breckenridge. They each support her case. 60 By late 1998 the deceased had been living with his son, Peter, for some time, and, according to the evidence of Mrs Rowles, he had commenced sexual relations with her. There is also the unexplained contemporaneous comment about Mrs Fiakos' husband returning to live with her. The health of the deceased was deteriorating. There were continuing problems with Tyndall about the income protection policy. He was bankrupt. He was carrying on his practice in unsatisfactory circumstances. He was plainly on a downward spiral, both personally and financially. In those circumstances, the insurance policy was the only means by which he could leave anything to his family. I have no doubt that his hospitalisation in February 1998 led to pressure upon him, both from his children and his former wife, to ensure that something went to his children. The degree to which the interests of his friends who had lent him money would be taken into account by the children was a matter between he and they. By the end of 1998 he did not want control to be exercised by Mrs Fiakos. His treatment of the lump sum he received from Tyndall exemplifies the extent to which the interests of his erstwhile friends who had assisted him in his hours of need were by then ignored. The priorities of the deceased had changed. I find that the negotiations at the end of 1998 and the beginning of 1999 and the declaration made whilst in hospital were attempts by the deceased to achieve that change. The latter was deliberately misleading in the account given of the original arrangement. 61 I do not think that Mrs Rowles' evidence should stand in the way of these conclusions. In the first place, it does not directly negate any of the other evidence. In the second place, it is equivocal in itself. In the third place, she has placed herself in the camp of the applicants and is plainly at arms length with Mrs Fiakos. A falling-out between good friends over personal matters can lead to some distortion of perception on both sides. The evidence of Mrs Ruth Ellis, although unsatisfactory, supports the conclusion that creditors other than Mrs Fiakos were to be benefited by the policy, and is therefore inconsistent with the primary trust. 62 The evidence of Mr McEwan requires consideration. If his written version were accepted, it would indicate either that the deceased was saying different things to different people or that the evidence of Mrs Fiakos and those who support her version should not be accepted. I am not satisfied that Mr McEwan's original recall of the date of the discussions is correct. He said he was vague about timing. I find that the conversations in question did not take place until after the bankruptcy of the deceased at the earliest, and could have been much later 63 Even if a trust was created by the events of 1996 and early 1997, it was not that pleaded by the applicants.

Alternative Trust 64 This issue is more difficult to resolve. In the first place, the initial arrangement was informal. In the second place, the arrangements in late 1998/early 1999 were informal or, at least, inchoate. In the third place, the subject matter of the arrangements was the proceeds of a term life insurance policy, which would only come into existence upon the death of the deceased if the policy remained in force. In the fourth place, avoidance of the effect of bankruptcy and family laws was very much involved. 65 It is clear enough from the findings I have made that the deceased changed his mind during 1998 as to what he wished done with the proceeds of the life policy. The first question is whether he was entitled to do so. If the answer is "no", then the applicants cannot succeed. If the answer is "yes", the next question is whether, to be effective, the change of mind required the consent of Mrs Fiakos. If the answer is "yes", the question is whether there was agreement as to the basis upon which the monies would be held by January 1999. If the answer is "no", the question is whether the change of mind was conveyed with sufficient certainty. 66 It needs to be borne in mind that this is not an action by the executors or trustees of the estate of the deceased. The applicants must positively establish a trust in their favour. This issue involves the arcane topic of precatory trusts and the intersection between express trusts and other concepts such as resulting and constructive trusts, powers of appointment, revocable mandates, equitable liens, contracts for the benefit of third parties, conditions, equitable personal obligations and testamentary powers and contracts (see generally Jacobs - Law of Trusts, Meagher & Gummow, 6th Ed ch 2 and ch 5). 67 Counsel for the applicants presented an ingenious argument with various facets, the effect of which was that the arrangement was variable at the will of the deceased, and was varied first in 1998 and then by the dying declaration, even if the latter is rejected as a truthful account of what occurred in 1996, but was nonetheless a trust. 68 I approach the issue on the basis that, for relevant purposes, the policy was assigned to Mrs Fiakos, although the mechanism was surrender and issue of a new policy. 69 An important factual issue under this head is the extent to which (if at all) the arrangement was communicated to the friends who were creditors by the deceased. I have held that the substance of the evidence of the witnesses in that category as to the communication by the deceased to each of them was correct. 70 Another significant factual issue which arises under this head is whether, if the arrangement was variable, agreement was reached between the deceased and Mrs Fiakos in late 1998/early 1999 in accordance with the amended draft deed of trust. I find that it was. The contemporaneous correspondence is consistent only with that conclusion. It is possible that Mr Kyriakoudes completely misunderstood the instructions he received from Mrs Fiakos. His contemporaneous note is not decisive as to the point. However, Mrs Fiakos accepts that the critical letter was read over to her and that she raised no problem with it. Furthermore, the evidence given by Mrs Fiakos, Mrs Rowles and Mrs Ellis, although not entirely consistent, points in the direction of there having been a clear understanding between the deceased and Mrs Fiakos from January 1999 limiting her interest to $300,000 to cover herself, Mrs Rowles and Mr Tsalidis. I do not doubt that Mrs Fiakos was put under pressure to agree to that. I also accept that she initially resisted that pressure. However, at the end of the day, she had no claim herself to any amount beyond her debt, plus something for possible expenses, and the other parties involved were not her creditors. There is no evidence that she had assumed any express personal responsibility to any of them. By that time, her personal relationship with the deceased had clearly changed. It also needs to be borne in mind that Mrs Fiakos depended upon the deceased to continue paying the premiums on the policy to secure her loan and paying instalments on her mortgage to safeguard her home. In those circumstances it is not surprising that she would ultimately agree. Although the matter was not investigated in evidence, based upon the deceased's general approach, it is possible that stamp duty considerations may have played a part in the arrangement not being formalised. He was also, at the time, bankrupt, and although there may have been no technical ramifications, he may have judged it better to avoid complications. Family law considerations may still have been relevant. 71 I do not regard anything which the deceased did after January 1999 as altering any relevant arrangement by agreement or otherwise. There is no evidence of any such discussion between the deceased and Mrs Fiakos. In particular, the so-called dying declaration was not such a communication. As Mrs Fiakos was the owner of the policy, no uncommunicated intention could affect the terms upon which the policy was held by her. 72 It is clear that the arrangement was not simply a revocable mandate as Mrs Fiakos was a creditor and at least the policy was held as security for her debt. Her consent would be required to any assignment. Counsel for Mrs Fiakos accepted that the policy was held on trust as pleaded on her behalf, no doubt for forensic reasons. However, there is no cross-claim, and the claimed beneficiaries are not parties. There is some equivocation in the submissions for the applicants as to that concession. On the one hand, it suits their arguments as the starting point is a trust which, it is said, can be varied but remains a trust. On the other hand, one argument advanced was that what occurred was a revocable mandate, at least in relation to amounts above the net amount lent by Mrs Fiakos to the deceased. 73 Counsel for the applicants submitted an argument (and ultimately indicated a preference for it) that the arrangement was a post-mortem trust which was inherently variable in nature. He referred to Russell v Scott (1936) 55 CLR 440 as explaining the difference between a testamentary disposition and a post-mortem trust. That case dealt with a joint bank account between aunt and nephew to which the deceased aunt made all deposits, and was used solely for her purposes during her life. It constituted a chose in action against the bank which would survive for the nephew on her death. There was evidence that the aunt intended that the nephew should take any balance on death. It was held that the aunt had the right to reduce the account to nil during her life but that, whilst there may have been a resulting trust during life, the nephew would take any balance beneficially upon death. It is not clear to me how it is said that this was a case of a post-mortem trust. It, rather, seems to be a case where no trust was imposed post-mortem. There are, nonetheless, some parallels with the present case. The property is a chose in action, and the legal estate is vested in the party sought to be burdened with a trust. For relevant purposes, the premiums were paid by the deceased as were the deposits by the aunt. 74 Counsel referred to Blackwell v Blackwell [1929] AC 318, a case of a classic secret testamentary trust in which it was confirmed that such a trust did not contravene legislation governing wills. I have some difficulty in seeing the analogy with the present case, where the legal estate was with Mrs Fiakos at all times, although it is true that the proceeds of the policy are only received post-mortem. A passage from Lord Summer at 334-335 which was referred to by counsel does give a clear account of the basis for equitable enforcement of a secret trust, whether inter vivos or post-mortem, particularly the following: "A Court of conscience finds a man in the position of an absolute legal owner of a sum of money, which has been bequeathed to him under a valid will, and it declares that, on proof of certain facts relating to the motives and actions of the testator, it will not allow the legal owner to exercise his legal right to do what he will with his own. This seems to be a perfectly normal exercise of general equitable jurisdiction. The facts commonly but not necessarily involve some immoral and selfish conduct on the part of the legal owner. The necessary elements, on which the question turns, are intention, communication, and acquiescence. The testator intends his absolute gift to be employed as he and not as the donee desires; he tells the proposed donee of this intention and, either by express promise or by the tacit promise, which is signified by acquiescence, the proposed donee encourages him to bequeath the money in the faith that his intentions will be carried out. The special circumstances, that the gift is by bequest only makes this rule a special case of the exercise of a general jurisdiction, but in its application to a bequest the doctrine must in principle rest on the assumption that the will has first operated according to its terms." (emphasis added) 75 Another illustration of the same principle is Voges v Monaghan (1954) 94 CLR 231, with some parallels with the present. That was a case where a married businessman left his whole estate to a married woman who had assisted him to manage his personal and business affairs. The issue was whether the beneficiary was bound by a trust to pay to two persons a particular sum per week. The applicable principle was expressed by Dixon CJ (at 233) as: "To make their respective cases it was necessary for the plaintiffs to establish a state of fact, the chief elements of which were that the testator had a definite intention that the defendant, as his executrix and universal legatee, should be bound to pay to each of them respectively three pounds a week during her lifetime, that this intention was communicated to the defendant during the testator's lifetime, that she expressly or impliedly undertook the obligation, that is either by agreement or acquiescence, and that on the faith of her carrying out his intention he made his will as it has been admitted to probate or left it unrevoked." After reference to Blackwell v Blackwell, Dixon CJ went on: "But all these elements must be established to the reasonable satisfaction of the court. The evidence may be circumstantial or it may consist in admissions by the legatee upon whom it is sought to fix the trust, and the admissions may be express or by conduct or the proof may consist in both admissions and circumstantial evidence. When the issue is contested it will seldom include direct evidence of what passed between the testator and the legatee. But, in particular, the evidence must prove satisfactorily that the trust was ascertained and what it was." Although Dixon CJ dissented as to result, there was no dispute as to the principle. There was also no dispute that the testator had suggested that there be weekly payments to the plaintiffs. The issue was whether that was to be at the discretion of the beneficiary. The trial judge (from whom a direct appeal lay) imposed the trust. The majority of the High Court did not disturb that finding. In a perceptive passage Fullagar and Kitto JJ said (at 251): "It is certainly not impossible that the testator may have intended, while mentioning some benefits which he thought the appellant might bestow for reasons either of kindness or of prudence, nevertheless to leave her completely free of all legally binding obligation. The question is whether the probabilities should be regarded as in favour of that view or against it when the evidence is considered in the light of the trial judge's opinions as to the credibility of the witnesses." 76 These cases, and Guest v Webb [1965] VR 427, were cited to show that in those situations the testator could revoke the instructions at any time before death, or, indeed, could alter or vary the will. This is no doubt correct, at least in the absence of a contractual promise to the contrary. I do not regard the analogy with the present case as compelling in that respect. The legal estate in the policy was vested in Mrs Fiakos, and she was owed a present debt at the time of the assignment to her. 77 The decision in Kauter v Hilton (1953) 90 CLR 86 (another joint account case) shows that it is dangerous to generalise too much from Russell v Scott. In that case, Dixon CJ, Williams and Fullagar JJ said (at 100-101): "The effect of Joliffe's Case is that the mere opening of an account under the section by one person in trust for another is not necessarily sufficient to make that person a trustee for the other person. All the relevant circumstances must be examined in order to determine whether the depositor really intended to create a trust. Even where it is held that a trust is intended it is still material to ascertain its terms. The fact that the opening of the account was not communicated to the purported beneficiary may lead to an inference that the trust, if any, was not intended to be irrevocable: In re Cozens; Green v Brisley; Radcliffe v Abbey Road and St John's Wood Permanent Building Society. But where a person not only opens an account but hands the passbook to the purported beneficiary and thereafter consults that beneficiary on the basis that the latter is the beneficial owner of the moneys or of some interest in them, the evidence tends strongly towards establishing that the depositor intended to create an immediate trust in favour of that other person. The fact that the depositor reserved a right to revoke the trust would not prevent an immediate trust arising and if the trust was not revoked by the depositor in his lifetime the beneficiary would be just as much entitled to the money as a beneficiary under an irrevocable trust: Beecher v Major; Fadden v Deputy Federal Commissioner of Taxation. The mere fact that the donor intends the trust to take effect in possession upon his death does not make the gift testamentary. As it is pointed out in the joint judgment of Dixon J and Evatt J in Russell v Scott: "Law and equity supply many means by which the enjoyment of property may be made to pass on death. Succession post mortem is not the same as testamentary succession. But what can be accomplished only by a will is the voluntary transmission on death of an interest which up to the moment of death belongs absolutely and indefeasibly to the deceased." The trust proved in the present case is not a trust of the amount which happened to be to the credit of the trust accounts at the death of the testator. If that had been the trust it would have failed in the case of all the accounts, except the Neutral Bay account, irrespective of the question whether such a gift would be of a testamentary nature, because all the moneys had been withdrawn from the other accounts in the lifetime of the testator. The trust that arose on his Honour's finding was an irrevocable trust attaching to the moneys upon their deposit in the trust accounts, although the beneficial enjoyment was postponed until the death of the testator, and it would have been a breach of trust for the testator to have disposed of these moneys apart from the interest without the consent of the plaintiff. The passbooks contain a notice that withdrawals may be made by the depositor personally on production of the passbook and the necessary completed withdrawal form or to the bearer of a completed withdrawal form signed by the depositor and presented with the passbook. The presentation of the passbook is therefore required before any moneys can be withdrawn from an account and the handing of the passbooks to the plaintiff by the testator should have ensured that no moneys were withdrawn from the accounts without her consent." (emphasis added) 78 It was submitted for the applicants that if the trust is inter vivos, then, if it were as asserted by the respondent, it was for the benefit of creditors and so subject to revocation or variation, citing Smith v Hurst (1852) 10 Hare 30, at least so far as that in excess of the debt to Mrs Fiakos was concerned. The headnote summary of the facts is as follows: "A debtor executed a deed, expressed to be for the better management of his affairs and for the liquidation of his debts and engagements, and he thereby conveyed and assigned his real and personal estate and effects to one of his creditors, leaving it to the discretion of the creditor in what order and in favour of what creditors the proceeds should be applied, and giving him powers of management and sale, and to negotiate and enter into arrangements and apply the proceeds of the estate and property in carrying them into effect, such powers to terminate with his life or upon his resignation; and the debtor then went abroad, that the arrangement of his affairs might be facilitated by his absence." The Vice-Chancellor held that, ignoring the fact that the trustee was a creditor, the instrument was a mere deed of management which it was competent for Hurst at any time to revoke or alter (44). After considering the particular facts, the Vice-Chancellor said (at 47): "Many of the cases upon voluntary deeds were cited and commented upon in the argument of this case; and I have thought it right, therefore, to examine the authorities upon the subject. They appear to me to result in this, that, in the cases of deeds vesting property in trustees upon trust for the benefit of particular persons, the deed cannot be revoked, altered, or modified by the party who has created the trust; but that in cases of deeds purporting to be executed for the benefit of creditors, the question whether the trusts can be revoked, altered, or modified, depends upon the circumstances of each particular case. It is difficult, at first sight, to see the distinction between the two classes of cases; for, in each of the classes a trust is purported to be created, and the property is vested in the trustees; but I think the distinction lies in this:- In cases of trust for the benefit of particular persons, the party creating the trust can have no other object than to benefit the persons in whose favour the trust is created, and, the trust being well created, the property in equity belongs to the cestui que trust as much as it would belong to them at law, if the legal interest had been transferred to them; but in cases of deeds purporting to be executed for the benefit of creditors, and to which no creditor is a party, the motive of the party executing the deed may have been either to benefit his creditors or to promote his own convenience; and the Court there has to examine into the circumstances, for the purpose of ascertaining what was the true purpose of the deed; and this examination does not stop with the deed itself, but must be carried on to what has subsequently occurred, because the party who has created the trust may, by his own conduct, or by the obligations which he has permitted his trustee to contract, have created an equity against himself. Each case of the latter description being thus governed by its circumstances, any further examination of the authorities would, I think, be useless. It would lead to the ascertainment of no principle, and would only involve the question whether the principle has been rightly applied." (emphasis added) 79 It was submitted for the applicants that, leaving aside the debt to Mrs Fiakos, the arrangements were in the former category identified by the Vice Chancellor. There is some substance to this submission. No other creditor was a direct party to the arrangement. There is no evidence that any creditor made the loan on the faith of the arrangement, that any creditor forbore to take any action because of the arrangement, that there was any communication by Mrs Fiakos to any creditor as to the arrangement, or that any creditor has acted any differently on the faith of anything said or done by Mrs Fiakos or the deceased as to the policy. Indeed, the financial position of the deceased at all relevant times was such that there was no realistic step which any creditor could have taken. The deceased was hopelessly insolvent at all material times. Any benefit would have been a bonus, as the debts were extinguished by bankruptcy. Incidentally, in that respect, I reject the submission that this meant that after bankruptcy no party could answer the description of friend and creditor. The use of the description of creditor by the deceased in that connection was informal. On the other hand, I have found that the deceased did communicate the gist of the arrangement to a number of the relevant creditors, some before and some after bankruptcy. 80 Reference was also made to Re Ashby; Ex parte Wreford [1892] 1 QB 872 where (for relevant purposes) property was settled upon trustees for a term of years to raise, by way of mortgage, certain sums of money to pay (inter alia) the private debts of one of the settlors, George Ashby, which were scheduled in the deed, with the remainder held on trust during the life of George Ashby to permit him to receive the income until he should become bankrupt, with a discretionary trust over, in the happening of that event, for the benefit of George Ashby, his wife and children or relations, with remainders over. The trustees raised the money, and had paid some of the debts, when they received a written notice from George Ashby not to pay any more. George Ashby was adjudicated bankrupt shortly thereafter. At 877-878 Vaughan Williams J said: "The other point I have to deal with is one in which the trustees of the settlement of 1888 are in no wise interested. A sum of money had, according to the terms of that deed, to be raised for, amongst other purposes, paying the debts of Nicholas Ashby, and also the debts of George Ashby which were enumerated in the schedules which were attached to the deed, and the only question I have now to determine is, whether I ought to treat the provision for the payment of the debts of George Ashby, in so far as those debts have not been paid, and there is money in hand wherewith to pay them, as a revocable mandate to George Ashby or as an irrevocable provision which gives those creditors the right, notwithstanding the bankruptcy, to have this balance of Ł719 odd applied to the payment of their debts to the exclusion of the others. I am very clearly of opinion that the provision for the payment of these creditors is a mere revocable mandate. It is quite plain that the creditors, who were not parties to the deed and to whom the deed does not seem in any way to have been communicated, have themselves no interest whatsoever in the matter and no locus standi at all. Sometimes, however, and particularly in the case of the administration of insolvent estates, creditors get preferential payments because it is the only way of doing justice between the bankrupt and other persons; and if in this case there was anything in the deed to shew that the other parties to the deed, or Nicholas Ashby, had an interest in the payment of these debts of George Ashby, why, the mandate might then be irrevocable. But I can find nothing to shew that Nicholas Ashby had the slightest interest in these debts being paid. When I asked what interest it was that Nicholas Ashby had in the payment of these debts, the answer was that if these debts were paid Nicholas Ashby would have had the advantage of having for his heir some one who at some period of time would apparently have been absolutely free from debt. In my opinion, that is an advantage of so shadowy a kind that it cannot for one moment be supposed that George Ashby and Nicholas Ashby had in their minds that any such advantage would accrue to Nicholas Ashby; and under those circumstances I direct that the trustees of that settlement shall hand over the Ł719 odd to the trustee in bankruptcy to be dealt with as part of the general estate of the bankrupt." (emphasis added) 81 The case of Garrard v Lord Lauderdale (1831) 2 Russ & M 450 is of some interest for present purposes as well as historically as it related to the affairs of the then Duke of York. The Lord Chancellor said (at 455-456): "Upon the principle laid down in Ellison v Ellison it is clear that no particular form of words is necessary to constitute a trust; but I take the real nature of this deed to be, like that in Wallwyn v Coutts, not so much a conveyance vesting a trust in A for the benefit of the creditors of the grantor; but rather that it may be likened to an arrangement made by a debtor for his own personal convenience and accommodation, - for payment of his own debts in an order prescribed by himself, - over which he retains power and control, and with respect to which the creditors can have no right to complain, inasmuch as they are not injured by it, they waive no right of action, and are not executing parties to it. … Now two things, if not more, were done in the lifetime, and by the authority of, the Duke of York, which were inconsistent with the continuance of the arrangement in the present case. His Royal Highness himself paid off several of the scheduled creditors, and to a large amount in the whole, out of monies of his own; and further, the trustees, by his direction and at his request, paid back to him a considerable portion of the fund which the trust deed had placed in their hands; circumstances tending strongly to shew the intent and understanding of the parties themselves with respect to the nature and effect of the transaction. It is unnecessary, therefore, to inquire what might have been the case if the party executing the instrument had never thought fit to do any act inconsistent with its provisions; but the question might then be liable to a very different consideration." 82 A similar approach in the present case might point against a trust as the deceased and Mrs Fiakos acted as if the arrangements might be varied as between themselves. This is consistent with the memorandum, signed by the deceased and expressed to be attached to his will, which acknowledges the entitlement of Mrs Fiakos to the proceeds but concludes: "I continue to enjoy a close and harmonious relationship with Mrs Fiakos and have no desire to alter the current arrangements in respect of the assignment of the Policy." This would seem to envisage that there was the power to alter the arrangements if, for example, the relationship was no longer close and harmonious. Indeed, if the arrangements remained only between the deceased and Mrs Fiakos, there would be an argument that the deceased would have remained free to vary his instructions to Mrs Fiakos as to the balance of the proceeds. Indeed, that was the view she acted on when she offered to reassign the policy shortly before the death of the deceased. She has never asserted any moral or legal entitlement to the balance above her debt. It is also consistent with the deceased continuing to pay (and to offer to pay) the premiums. However, communication of a trust to a beneficiary is not essential to validity (Rose v Rose (1986) 7 NSWLR 679 at 686). 83 What was the effect of communication to the friends who were creditors? In particular, did it prevent the deceased and Mrs Fiakos from varying the arrangements such that those friends would not benefit from the proceeds? It certainly might, in particular circumstances. It could make clear that a trust, rather than a looser arrangement, was intended. If the creditor acted upon an assurance to the detriment of the creditor, then contractual or equitable obligations may be created. I cannot discern any identifiable detriment suffered by any creditor from acting upon the statements by the deceased. They involved a bonus which may not have come home for many years as the deceased was only forty-two at the time of issue of the policy. It is possible that a full examination of the dealings between the deceased and each of the creditors might reveal that one or more of them may have had some personal equity against the deceased. That is not in issue here. No such case has been mounted against the estate of the deceased or Mrs Fiakos. Indeed, there is no evidence that Mrs Fiakos played any part in such communication as took place. 84 Notwithstanding these factors, the communications by the deceased to the creditors (and to Messrs Breckenridge and Bailey), although informal and not couched in the language of trust, did not indicate a provisional or temporary commitment liable to be varied or revoked depending upon the exercise of discretion on his part or, indeed, on the part of Mrs Fiakos. This accords with the evidence of Mrs Fiakos. She was to pay out the friends who had lent him money. Those were not precatory words. They were the language of commitment. The friends were entitled to order their affairs accordingly. I find that when the arrangements were made in 1996 the deceased did not expressly reserve to himself the right to vary them in the future, and no such reservation should be implied in the face of the communications made. He intended then that what he arranged with Mrs Fiakos and communicated to his close friends was to be honoured. This would be enough to find an intention to create a trust which would negate any resulting trust (see Re Australian Elizabeth Theatre Trust (1991) 30 FCR 491 at 502-503 and 505; Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588 at [33]-[41]; Calverley v Green (1984) 155 CLR 242 at 280-271; Kauter v Hilton; Blackwell v Blackwell). This conclusion is consistent with a proper understanding of Smith v Hurst and Re Ashby. Garrard v Lord Lauderdale was obviously a special case. The creditors were not parties to or privy to the deed. There was no finding as to communication of the arrangement to creditors in that case. 85 That conclusion is fortified by the existence of a gift over to the applicants after the payment out of Mrs Fiakos and the friends who had lent him money, which is a strong indication of an intention to constitute an irrevocable trust, even if not communicated. In Godfrey v Poole (1888) 13 App Cas 49 the Privy Council (on appeal from New South Wales) dealt with a case in which a debtor conveyed all his real estate upon trust to sell and pay off his debts, and as to any ultimate surplus, to pay the same to trustees to be held in trust for his wife for life and after her death in trust for his children. At 502 their Lordships said: "It was contended by the plaintiff's counsel, on the authority of Walwyn v Coutts, and Garrard v Lord Lauderdale, that Mooney's conveyance to Billyard and McMillan, in trust for his creditors, was a revocable instrument, which passed nothing to the trustees, but left Mooney the same interest in, and control over, his property as though he had never executed it, inasmuch as it had never been executed or assented to by the creditors nor even communicated to them. There is a great distinction, however, between those cases and the present, in which there was an ultimate trust for the benefit of the wife and children which was binding upon the debtor and rendered the deed irrevocable by him." 86 In my opinion, the trust was fully constituted when the policy issued in January 1997 on the terms expressly agreed in 1996. The fact that the proceeds would not be realised until a time in the future is not to the point. The policy was in existence although the chose in action was inchoate until death (Associated Alloys Case at [30]). Possession and ownership of it was all that was required to collect the proceeds. It is not necessary to consider what the effect of lapsing of the policy might have been. That did not occur. 87 There is no barrier to the oral constitution of a trust of personalty, subject to any particular statutory requirement (Jacobs at [704]). The provisions of the Life Insurance Act 1995 (Cth) such as ss 200-203 and s 227 do not provide any such barrier. In the case of voluntary trust it is necessary that it be completely constituted. Here, the subject matter is not in doubt. It was effectively assigned to the trustee by issue of the policy, and, assuming the other requirements are met, is completely constituted. There was faint reference during argument to s 23C(1)(c) of the Conveyancing Act 1919 (NSW). That has no operation in a situation where the assignment to the trustee is complete, and an oral trust is found (Last v Rosenfeld [1972] 2 NSWLR 923; Bloch v Bloch (1994) 180 CLR 390 per Brennan J at 403). 88 The essentials are certainty of intention, subject matter and object. I have held that there was certainty of intention. There is no doubt about subject matter. In my opinion, there is sufficient certainty of object. The trust was to pay out of the proceeds what remained outstanding to Mrs Fiakos and the other friends of the deceased who had lent him money, with the balance on trust for the applicants. Something was sought to be made of the inherently variable nature of the trust alleged by Mrs Fiakos. I do not accept that this was so. I would regard the class of creditor/friend as closed in May 1996 (or possibly January 1997), and restricted to those who, although not expressly identified by name, were, on the evidence, well-known to both the deceased and his confidential personal secretary. The fact that all or some of the amounts may have been repaid prior to death is a machinery matter. For what it is worth, I would not regard the deceased's mother as coming into the category of friends who were creditors, and the evidence does not enable any conclusion to be drawn in relation to Mr and Mrs Tsalidis, assuming the cut-off was in January 1997. The fact there may be an issue for the trustee after death as to identification of all the persons who fall into the class does not matter. They can be ascertained. The fact that I may not agree with the categorisation of the particular beneficiaries pleaded by Mrs Fiakos is not significant. This is not a suit in the administration of the trust. My findings are limited to deciding whether the trusts which are propounded are established. I am not asked to grant any relief related to any other trust. The proceeding is not properly constituted to do so. (See Jacobs at par 523) 89 For the applicants to succeed on their alternative claim they must establish that the change in arrangements which was agreed to by January 1999 amounted to an enforceable trust in their favour of the proceeds of the policy in excess of $300,000. I have held that it was not open to the deceased and Mrs Fiakos to agree to so vary the arrangements to the disadvantage of the friends who had lent money to the deceased. The alternative claim fails on that basis. 90 If I be wrong as to that conclusion, then it would follow that it is questionable whether the arrangements of 1996 and 1997 amounted to a trust at all. If that were the case, it is difficult to see how the 1998/1999 arrangements would take on that character.

Further Claims 91 The applicants claimed an implied trust of the proceeds above $300,000 based upon the same facts as the express trust to the same effect, and the claim fails for the same reasons. 92 The applicants also make a claim described as unconscionable conduct and unjust enrichment. To the extent that this depends upon the allegation that Mrs Fiakos took advantage of the vulnerable position of the deceased, I reject the allegation. Little was said about it by counsel for the applicants in address, and for good reason. If anything, the converse was true. 93 Counsel for Mrs Fiakos submits that the claim was misconceived in any event. Any cause of action would lie with the estate of the deceased rather than the applicants. Counsel for the applicants seeks to sidestep that difficulty by, effectively, imposing a constructive trust upon Mrs Fiakos as she has no proper claim to beneficial ownership of the proceeds above her own debt, or over $300,000. I cannot see a basis for such a claim. The remedy, whilst flexible, is not at large (Re Australian Elizabethan Trust at 509-510; Giumelli v Giumelli (1999) 196 CLR 101 at [2]-[10]). In any event, I cannot see that a constructive trust in favour of the applicants would result. However that may be, such a claim cannot stand with the findings I have made concerning the 1996/1997 arrangements. 94 A claim for accounts stated is based upon the same facts as the failed claim of an express trust, and accordingly fails. 95 A claim for estoppel is an attempt to plead the primary trust in another way, and falls with that claim.

Conclusion 96 The application is dismissed. The proceeding will stand over for argument as to costs. I certify that the preceding ninety six (96) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.

Counsel for the Applicant: DI Cassidy QC and I Raine

Solicitor for the Applicant: Williamsons Solicitors

Solicitor for the Respondent: Keith Hurst & Associates

Date of Hearing: 17, 18, 19, 20 September, 1, 2 and 4 October 2002

Life Insurance Act 1995(Cth)ss 200-203, 207

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