Sino Iron Pty Ltd & Anor v Worldwide Wagering Pty Ltd & Ors [2017] VSC 101

UNJUST ENRICHMENT - Whether other defendants who indirectly received traceable proceeds of the stolen funds as volunteers are liable to make restitution - Held: in the absence of change of position defence, other defendants liable as indirect recipients - Fistar v Riverwood Legion & Community Club Ltd [2016] NSWCA 81; (2016) 91 NSWLR 732 , 746 [62]-[64] applied.

TRUSTS - Innocent recipient of stolen funds by fourth defendant - Fourth defendant a volunteer - Fourth defendant became constructive trustee of funds when obtained sufficient knowledge of fraud - Whether other defendants who received traceable proceeds of stolen funds as volunteers also liable to account as trustees - Held: defendant recipients held traceable proceeds of stolen funds on trust for the plaintiffs - Black v S Freedman & Co [1910] HCA 58; (1910) 12 CLR 105; Heperu Pty Ltd & Ors v Belle [2009] NSWCA 252; (2009) 76 NSWLR 230, 253 [92], 264-8 [145]-[163]; Fistar v Riverwood Legion & Community Club Ltd [2016] NSWCA 81; (2016) 91 NSWLR 732, 746 [62]-[64] discussed and applied.

TRUSTS - Knowing receipt of trust funds - Knowing assistance in breach of trust - Whether defendants had sufficient knowledge to become liable for knowing receipt of trust funds or knowing participation in breaches - Held: defendants had requisite knowledge at relevant times - Baden v Société Générale pour Favouriser le Développment du Commerce et de l'Industrie en France SA [1993] 1 WLR 509, 575-6 [250]; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89, 163-4 [171]-[178] discussed and applied.

REAL PROPERTY - Torrens system title - Indefeasibility of title - Real estate purchased with traceable proceeds of stolen funds - Whether natural defendants obtained title to real estate as a result of fraud, so that the statutory exception to indefeasibility applies - One natural defendant had actual knowledge of both the fraud and the use of the stolen funds before property purchased with traceable proceeds - Other natural defendant had actual knowledge of fraud but not of use of proceeds of stolen funds to complete the purchase - Held: fraud exception applied to both natural defendants - Knowledge of first mentioned defendant brought home to other defendant on agency principles - Bahr v Nicolay (No 2) [1988] HCA 16; (1988) 164 CLR 604, 614; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89, 163 [174]; Macquarie Bank Ltd v Sixty Fourth Throne Pty Ltd [1998] 3 VR 133, 143-4; Cassegrain v Cassegrain [2015] HCA 2; (2015) 254 CLR 425, 437-45 discussed and applied.

REAL PROPERTY - Torrens system land - Indefeasibility of title - Real estate purchased with traceable proceeds of stolen funds - Whether plaintiffs have in personam remedy against defendant proprietors of land so as to fall within exception to the indefeasibility principle - Held: in personam exception established - Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89, 169 [193]; Bahr v Nicolay (No 2) [1988] HCA 16; (1988) 164 CLR 604, 637-8, 653 discussed and applied.

EQUITY - Tracing - Plaintiffs' stolen funds mixed in bank account containing funds of others with beneficial claims on money in account - Whether first-in first-out rule in Clayton's case should be applied - Prospect that all other beneficial claims satisfied by time of judgment - Held: (1) Clayton's case inappropriate for use as tracing method; (2) Court required further evidence to determine appropriate tracing method and amount - Re Global Finance Group Pty Ltd (in liq); Ex Parte Read and Herbert [2002] WASC 63; (2002) 26 WAR 385, 406-411 [93]-[120]; Heperu Pty Ltd & Ors v Belle [2009] NSWCA 252; (2009) 76 NSWLR 230, 256-7 [112]-[114], 259 [121]; Re Sutherland: French Caledonia Travel Service Pty Ltd (in liq)' [2003] NSWSC 1008; (2003) 59 NSWLR 361 discussed and applied.

GAMBLING - Whether stolen funds 'paid to a person as or on account of a wager or bet' placed in Victoria - Bets placed in New South Wales - Whether Gambling Regulation Act 2003 (Vic) s 2.6.3 applied to bets - Held: section not intended to have extra-territorial operation and thus inapplicable - Gambling Regulation Act 2003 (Vic) s 2.6.3, Interpretation of Legislation Act 1984 (Vic) s 48(b) - Horgan v Sieber [1976] Qd R 25 discussed.

Cooper Mills (as town agents for Sullivan Fernan Lawyers)

1 The plaintiffs, Sino Iron Pty Ltd and Cape Preston Port Company Pty Ltd, are part of the Citic Pacific Mining group of companies. They are involved in the development of Australia's largest magnetite mining and processing project, known as the Sino Iron Project, conducted at Cape Preston in the Pilbara, Western Australia. In the course of the development of that project, the plaintiffs incurred large debts to Monadelphous Engineering Associates Pty Ltd and received invoices for those debts.

2 On 30 May 2016, the plaintiffs were defrauded by a person pretending to be an authorised representative of Monadelphous. That person contacted the plaintiffs and requested that amounts invoiced by Monadelphous to the plaintiffs be paid into a new bank account ('the fraud'). The fraudster gave the bank account details for the fourth defendant, Worldwide Wagering Pty Ltd, a company incorporated in Norfolk Island. At the time, Worldwide carried on a wagering business specialising in international sporting events under the unregistered business name 'Pinnaclebet'.[1]

3 Worldwide's sole director is the fifth defendant, Robert Hill. Its general manager is the sixth defendant Nicholas O'Connell. They hold the same positions in respect of the third defendant, The Odds Broker Pty Ltd, which conducts another wagering business specialising in Australian horse, harness and dog racing.

4 As a result of the fraud, on 30 May 2016 the plaintiffs paid a total of $2,147,689.40 (the 'stolen funds') into Worldwide's bank account at the Bondi Junction, New South Wales, branch of the ANZ Bank ('Worldwide ANZ account'). The stolen funds were comprised of $1,750,189.65 paid by Sino Iron and $397,499.77 paid by Cape Preston.

5 Mr O'Connell and Mr Hill initially suspected that the stolen funds may have been fraudulently paid, as a similar fraud, involving a theft from La Trobe University, had occurred about two weeks earlier. They reported the fraud to the police. However, after they spoke with the Worldwide customer who claimed an entitlement to bet with the funds, Andrew Sigalla, they arranged for Worldwide to credit the stolen funds to Mr Sigalla's betting account. The two amounts comprising the stolen funds were credited to Mr Sigalla's betting account on 1 June 2016 at 1:51 pm and 1:57 pm respectively.

6 The stolen funds were then gambled on international sporting events and most of them were lost. The defendants had actual knowledge of the fraud at 1:13 pm on 7 June 2016. Before then, Worldwide paid out $550,000 to Mr Sigalla on winning bets. The remaining credit in Mr Sigalla's betting account ($70,479.40) has been repaid to the plaintiffs. What happened with the balance of the stolen funds ($2,077,210) is explained below. A diagram of the money flows is also attached to these reasons.

7 Between the time the stolen funds were credited to Mr Sigalla's betting account and the time the defendants had actual knowledge of the fraud, the stolen funds were used by the defendants or related companies in accordance with the table set out below. The numbers in brackets refer to the last three digits of each bank account number.

8 After the defendants had actual knowledge of the fraud, the stolen funds were used by them or related companies in accordance with the table set out below.

Hill CBA (356) (part of a larger transfer of $797,681.54).

Withdrawal for the purchase of a property at Bondi Junction (part of a larger transfer of $797,681.54).

Total Access Payments, another company owned and controlled by Mr Hill.

Worldwide Westpac (440) (part of a larger transfer of $70,000).

Disbursements paid to various recipients for Worldwide's debts, including settling customer winning bets.

9 The activity on Mr Sigalla's betting account may be summarised as follows:

Seven bets on American baseball games. Four winning bets. Three losing bets.

Balance of Mr Sigalla's betting account. By this time, Mr Sigalla had placed total bets of $1,925,000.

Mr Sigalla was paid $100,000 from the Worldwide ANZ account, as part payment of the credit balance in his betting account.

Mr Sigalla was paid $450,000 from the credit balance in his betting account.

Mr Sigalla meets Mr O'Connell and endeavours to withdraw all or most of the credit balance in his betting account. Request refused.

Mr Sigalla bets on American basketball game. Bets lost.

Credit balance of Mr Sigalla's betting account following result of American basketball game.

Balance of Mr Sigalla's betting account paid by Mr Sigalla's domestic partner to the plaintiffs' solicitors' trust account.

10 In summary, following Mr Sigalla's betting account being credited with the amount of the stolen funds, but before any bets were placed by Mr Sigalla on that account, Worldwide paid $800,000 to The Odds Broker ('the $800,000') and $500,000 to another bank account maintained by Worldwide, with Westpac Banking Corporation at its Norfolk Island branch (the 'Worldwide Westpac account'). Later, during the course of Mr Sigalla's betting activity, Worldwide transferred another $500,000 from the Worldwide ANZ account to its Worldwide Westpac account on 6 June 2016. I will refer to these two amounts of $500,000 as 'the $1 million'

11 The $1 million transferred to the Worldwide Westpac account was utilised in the following way:

(1) $200,000 was paid to an international bookmaker with whom Worldwide maintained a wagering account for the purposes of laying-off bets placed with it. This payment was made on 6 June 2016, before Worldwide had actual knowledge of the fraud;

(2) $450,000 was paid to Mr Sigalla from the net balance of his betting account at 12:02 am on 7 June 2016, shortly before Worldwide had actual knowledge of the fraud; and

(3) $345,000 was paid to Total Access Payments, another company owned and controlled by Mr Hill, after actual knowledge of the fraud. That sum was later returned to Worldwide's Westpac account and used to pay Worldwide's creditors, including wages to employees and pay-outs to Pinnaclebet customers.

12 The $800,000 paid to The Odds Broker was paid to Mr Hill in two tranches on 2 and 3 June 2016 and, following transfers of that amount or its traceable proceeds between Mr Hill's personal bank accounts, $796,000 of the stolen funds was used by Mr Hill to purchase a bank cheque for $797,681.54 on 10 June 2016. The bank cheque was used on 14 June 2016 to settle the purchase by Mr Hill and Mr O'Connell, as tenants in common in equal shares, of a property in Bondi Junction (the 'Bondi Junction property'). That bank cheque was purchased after Worldwide had actual knowledge of the fraud.

13 The plaintiffs claim the balance of the stolen funds ($2,077,210), or specific traceable proceeds of them, on a number of grounds.

14 The plaintiffs' third further amended statement of claim ('statement of claim') contains a range of allegations within a series of broad or rolled-up allegations and some more specific allegations. Having identified the parties and their respective roles, the statement of claim pleads the fraud and the resulting mistaken payments of the stolen funds to Worldwide. These are defined as 'the Payments'.

15 Paragraphs 6 and 7 of the statement of claim allege:

1. The Payments were received by Worldwide, in breach of a trust that arose upon and as a result of the [fraud].[2]
2. Worldwide credited the Payments to the wagering account of one of its customers, Andrew Sigalla, in its books of account, and allowed Mr Sigalla to make wagers on that account and withdraw funds from that account.

16 Paragraphs 7A to 7D allege payments of the $800,000 by Worldwide to The Odds Broker, by The Odds Broker to Mr Hill, and the use of the $800,000 (in fact, the $796,000) towards the purchase price for the Bondi Junction property.

17 Paragraph 8 of the statement of claim is in the following terms:

1. In receiving and dealing with the Payments and their traceable proceeds, each of the defendants:

(a) wilfully shut [his or] its eyes to the obvious fact that the Payments had been misappropriated, alternatively wilfully and recklessly failed to make such inquiries as an honest and reasonable person would have made, alternatively acted with knowledge of circumstances that would have indicated the fact of the misappropriation to an honest and reasonable person; and

(b) had constructive knowledge of the fact that the Payments had been misappropriated.[3]

18 The receipts and dealings alleged in paragraph 8 are clearly all those alleged in paragraphs 6 to 7D. This includes: the initial receipt by Worldwide; crediting the stolen funds to Mr Sigalla's betting account; allowing him to place bets on, and to withdraw funds from, that account; and the payments and receipts dealing with the $800,000.

19 Paragraph 9 of the statement of claim alleges that the defendants had actual knowledge of the fraud by 1:13 pm on 7 June 2016. Paragraphs 9A to 9G build upon that allegation, and allege that after actual knowledge was obtained Worldwide used $345,000 of the traceable proceeds of the stolen funds to pay its personal liabilities, that this conduct was a fraudulent and dishonest design in breach of the trust alleged in paragraph 6 and that, accordingly, Mr Hill and Mr O'Connell assisted Worldwide in that fraudulent and dishonest design. These are the more specific allegations.

20 Paragraph 10 alleges a series of causes of action based on the above allegations, as follows:

10. As a result of the matters set out above:

(a) the Payments, alternatively so much of them as remain in the Worldwide [ANZ] Account or otherwise in the possession of the defendants, remain the property of the plaintiffs and the plaintiffs are entitled to their repayment;

(b) the defendants hold any traceable proceeds of the Payments on trust for the plaintiffs;

(ba) the Bondi Junction Property:

(i) is held by [Mr Hill and Mr O'Connell] on trust for the plaintiffs; alternatively

(ii) is held by [Mr Hill and Mr O'Connell] on trust for the plaintiffs and [them] in proportions that reflect the contributions that each of them made to the purchase price of that property; alternatively

(iii) is charged or subject to an equitable lien in favour of the plaintiffs to secure payment of that part of the proceeds of the Payments as can be traced into that property;

(bb) the sum of $1,750,189.65 is recoverable by Sino Iron from Worldwide pursuant to s 2.6.3 of the Gambling Regulation Act 2003 (Vic).

(bc) the sum of $397,499.75 is recoverable by Cape Preston from Worldwide pursuant to s 2.6.3 of the Gambling Regulation Act 2003 (Vic).

(c) Worldwide has had and received:

(i) $1,750,189.65 to the use of Sino Iron; and

(ii) $397,499.75 to the use of Cape Preston;

(d) Worldwide has had and received [the] $1,000,000 to the use of the plaintiffs;

(e) The Odds Broker has had and received [the] $800,000 to the use of the plaintiffs;

(ea) Mr Hill and Mr O'Connell have had and received [the ] $800,000 to the use of the plaintiffs;

(f) the plaintiffs are entitled to equitable compensation from the defendants for any loss that they suffer as a result of the Payments being used as set out above; and

(g) the plaintiffs are entitled to an account of profits from the defendants for any profits that they made as a result of their use of the Payments.

21 The prayer for relief is in the following terms:

1. In so far as the first plaintiff is concerned, $1,750,189.65, further or alternatively equitable compensation in that amount.
2. In so far as the second plaintiff is concerned, $397,499.75, further or alternatively equitable compensation in that amount.

1. An order that the defendants account to the plaintiffs for any profits that they have made on or as a result of the use of the Payments.

1. A charge over the Worldwide Account and the Bondi Junction Property to secure payment of any amounts found to be owing to the plaintiffs.
2. Orders for the sale of the Bondi Junction Property and the payment of the proceeds to the plaintiffs.

22 In summary, the plaintiffs claim amounts representing the whole of the stolen funds from each of the defendants, an account of profits, and proprietary relief in respect of the Bondi Junction property. Read in the context of paragraph 10 of the statement of claim, the claims for all the stolen funds should be understood as including alternative claims for lesser amounts, traceable to the stolen funds, for which any defendant may be found liable on the causes of action pleaded in paragraph 10.

23 The defendants' defence admits the receipt of the stolen funds and the subsequent dealings with those funds between them. The other allegations are denied. The following positive defences are raised:

(1) The defendants did not have any knowledge of the fraud until 1:13 pm on 7 June 2016. Prior to that time, they were entitled to rely on statements from Mr Sigalla that the stolen funds belonged to him (or those for whom he was acting as agent)[4] and were legally obtained. Accordingly, the stolen funds were received by Worldwide, and thereafter dealt with by it and the other defendants, as a bona fide purchaser for value without notice of the fraud.

(c) laying-off those bets with 'back-to-back-bets' or 'bet backs' made with international bookmakers with whom Worldwide maintained 'wagering accounts' using its own funds; and

(d) paying Mr Sigalla $550,000 in respect of winning bets,

Worldwide changed its position on the faith of the receipt of the stolen funds (the 'change of position acts'). As a result, Worldwide's liability to the plaintiffs is limited to the $70,479.40 balance of Mr Sigalla's betting account, being the only traceable proceeds of the stolen funds in its possession, which sum has been paid to the plaintiffs. This change of position defence involves the contention that, once bets totalling more than the amount of the stolen funds were accepted on Mr Sigalla's betting account, the amount of the stolen funds became the property of Worldwide to deal with as it saw fit; and, as a result, even dealings by the defendants with the stolen funds after they had actual knowledge of the fraud are not subject to challenge.

(3) Worldwide did not receive the stolen funds on trust as alleged, because at the time of receipt it had no knowledge of the fraud.

(4) None of the other defendants (The Odds Broker, Mr Hill or Mr O'Connell) received the stolen funds or any part thereof.

(5) Insofar as part of the proceeds of the stolen funds may be traceable into the Bondi Junction property, the proprietary and other relief sought by the plaintiffs over that property is barred by the indefeasibility principle in s 42 of the Real Property Act 1900 (NSW).

24 With the exception of the strict liability claim under the Gambling Regulation Act 2003, which fails, all of the claims, or the defences to them, involve close scrutiny of the facts relating to the defendants' actual or constructive knowledge of the fraud at the time of relevant dealings with the stolen funds. The onus of proof as to the defendants' knowledge, or lack of knowledge, at relevant times varies depending on the claim or defence under consideration. The Court's determination of these knowledge issues is central to the outcome of the various issues in the proceeding.

25 Given the importance of knowledge issues, and the serious nature of the plaintiffs' allegations in that regard, the defendants complained in final submissions that the plaintiffs' evidence and puttage in cross-examination extended beyond the precise scope of the particulars of knowledge in the statement of claim, and that the plaintiffs were bound by the particulars given. After the conclusion of closing submissions, the defendants filed a document listing the matters they considered the plaintiffs had relied upon in submissions which were outside their particulars. The parties filed further submissions concerning whether the plaintiffs should be permitted to rely on the allegedly unparticularised matters.

26 I ruled on the papers that, in all the circumstances, there was no unfairness to the defendants resulting from the matters which were unparticularised. In my view, having regard to the pleaded and particularised claims, and the conduct of the trial, the knowledge claims advanced against the defendants at trial were sufficiently clear so that the defendants could answer them.[5] On this basis, I allowed the plaintiffs to file amended particulars to correspond with the case advanced at trial, and allowed the defendants to file further written submissions in response to the amended particulars.

27 In order to make findings as to the knowledge issues, it is convenient to first summarise the relevant categories of knowledge which will suffice for the various claims and defences. In Baden v Société Générale pour Favouriser le Développment du Commerce et de l'Industrie en France SA,[6] Peter Gibson J summarised the relevant categories (which I will refer to as the 'Baden categories') as follows:

(3) wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make;

(4) knowledge of circumstances which would indicate the facts to an honest and reasonable person; and

(5) knowledge of circumstances which would put an honest and reasonable person on inquiry.

28 The Baden category which constitutes sufficient knowledge for the purposes of a relevant claim or defence varies according to that particular claim or defence.

29 The allegations in the proceeding include that the defendants knowingly received and dealt with stolen funds, and that Mr Hill and Mr O'Connell knowingly assisted a fraudulent and dishonest design by Worldwide in breach of trust. Where serious allegations of this kind are made in a civil case, the Court must be persuaded to what is often called 'the Briginshaw standard'.[7] While the balance of probabilities remains the standard of proof, the Briginshaw standard requires the Court to feel an 'actual persuasion' as to an allegation made by a party.[8] Actual persuasion does not, however, require that the Court exclude every rational inference which is inconsistent with a finding of serious impropriety.[9]

30 As the majority stated in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd & Ors:

The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary 'where so serious a matter as fraud is to be found'. Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a Court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct.[10]

31 It is accepted that the Briginshaw standard has not been displaced by the Evidence Act 2008. In particular, s 140(2)(c) of that Act requires the Court, in determining factual issues on the balance of probabilities, to take into account 'the gravity of the matters alleged'.[11]

32 I turn to consider the facts in detail and to make relevant findings. Some repetition of the above summary is necessary.

33 It is first necessary to describe how the Worldwide (Pinnaclebet) business operated.

34 The business was under the day-to-day control of Mr O'Connell as general manager, with Mr Hill's involvement generally being limited to receipt of regular reports from Mr O'Connell while Mr Hill engaged in his other business interests. Mr O'Connell managed a team of 10 to 12 staff at Worldwide's Bondi Junction offices. Those staff were also engaged in the business conducted by The Odds Broker. Mr O'Connell was also responsible for 14 staff working in offices in Manila, the Philippines.

35 The Manila staff were directly managed by Karren Cad. Ms Cad was the Manila Operations manager for the businesses of both Worldwide and The Odds Broker. Her role was to manage the staff and ensure that the websites and other computer systems for the two businesses included all necessary information concerning sporting events on which authorised customers could bet and were otherwise operating as designed.

36 The Filipino staff included customer support staff, who would deal with customers by a variety of means, including online 'live chat' sessions and email inquiries. There were also 'payments staff' who were responsible for ensuring that payments from customers were verified, that payments due to clients were paid, that all payments were correctly recorded in the systems, and for balancing both the bank accounts and 'wagering accounts' of the two businesses.

37 Worldwide did not operate the Pinnaclebet business as an ordinary bookmaker would. Rather than accepting direct responsibility for bets that were placed with it, Pinnaclebet would instead lay off all bets by placing an identical bet on one of its wagering accounts with various international bookmakers. The Pinnaclebet computer systems were programmed to only accept a customer's bet if that bet was bet back in this way. Within the Pinnaclebet business, this process was referred to variously as 'betting back', placing 'back-to-back bets' or a 'bet back'. By placing back-to-back bets Pinnaclebet neither absorbed the risk of paying out on bets that were successful nor made any significant profit from individual bets which were lost. Instead, as described in more detail below, Pinnaclebet generated revenue from commissions on the bet backs with international bookmakers, or by arbitraging the odds offered to customers against those which applied to the bet backs.

38 'Pre-funding' of Worldwide's wagering accounts with international bookmakers was central to the Worldwide business model, as it enabled customers to bet on international sporting events immediately after deposits to their betting accounts had been verified. Pre-funding was required as international bookmakers would not give credit. Initially, to get the Worldwide business started, it was necessary for Mr Hill to pre-fund Worldwide's wagering accounts by lending the necessary funds to Worldwide. Further loans were made from time to time as required. Worldwide kept no accounts or other business records of these loans and nor did Mr Hill. In substance, Mr Hill's pre-funding loans represented his investment in Worldwide's Pinnaclebet business. Notwithstanding that no records of the loans were kept, Mr Hill treated the amount of credit balances in wagering accounts which were not required to keep the business running as his own to deal with.

39 As the Worldwide business grew, it became increasingly unnecessary for Mr Hill to lend money to Worldwide to pre-fund wagering accounts, because money deposited by customers to the credit of their betting accounts was used to pre-fund bookmakers as required.

40 Worldwide maintained two principal bank accounts for the receipt of funds to be credited to its customers' betting accounts:

(2) the Worldwide Westpac account. One purpose of this account was to receive large bets placed by 'big players', such as Mr Sigalla.

41 The funds in these bank accounts were also used for other purposes, including receiving credit balances from wagering accounts to enable payments to be made to customers on winning bets, for general business purposes such as payment of Worldwide's staff and business creditors, and repaying Mr Hill for his loans that enabled 'pre-funding'.

42 As appears in the above table of payments made after the defendants had actual knowledge of the fraud, Total Access Payments Pty Ltd also maintained a bank account. Mr Hill gave evidence that Total Access Payments was a non-trading entity which was deregistered in May 2016, and that this account was not one which was used frequently.

43 Worldwide's Pinnaclebet computer systems included a separate accounting of each customer's betting account and an administration system, which showed the net position between Worldwide and the international bookmakers on the wagering accounts. Ms Cad monitored the wagering accounts and reported to Mr O'Connell as to the state of those accounts. Mr O'Connell would decide how much was required to replenish the wagering accounts with sufficient pre-funding to enable the business to continue, and instruct Ms Cad as to the amounts to be transferred between wagering accounts or from the Worldwide bank accounts to the wagering accounts. Mr O'Connell also made decisions as to the amount of the credit balances in Worldwide's wagering accounts required to fund payments to Pinnaclebet customers of their winnings and instructed Ms Cad accordingly. Mr O'Connell had the banking 'token' for Worldwide's bank accounts and, I infer, the Total Access Payments account. He would give the relevant code to Ms Cad to enable her to effect the transfers as required.

44 The Pinnaclebet computer systems interfaced with the computer systems of the international bookmakers. This enabled the customer's proposed bet to be bet back in about five seconds. On acceptance of a bet back, the bookmaker's computer system would send a bet identification number to the Pinnaclebet computer system which would accept the customer's bet and issue a bet slip to the customer with information relating to the bet, including an identifier number of the bet. If the bet back was refused by the international bookmaker for some reason, the customer's proposed bet would not be accepted by the Pinnaclebet system. Mr O'Connell and Ms Cad described this process as 'the logic' in the Pinnaclebet computer system.

45 The international bookmakers utilised by Worldwide for most bets were Top Sport and Pinnacle Sports (which, despite its similar name, was not related to Pinnaclebet). The odds that were offered by Pinnaclebet to its customers came directly from a live 'feed' from these bookmakers.

46 For larger bets by big players, Ms Cad gave evidence that Worldwide had a 'trading team' of 'about three' staff. Ms Cad said that Mr O'Connell managed the trading team and that, by a system with which she was 'not really particular', the trading team configured the Pinnaclebet computer systems to redirect large bets from certain customers to 'probably a dozen bookmakers' located in the Philippines. Ms Cad explained that the Pinnaclebet computer systems accepted customers' bets which were placed by the trading team with one of these bookmakers in the same way as bets placed with Top Sports or Pinnacle Sports, because the computer systems of the bookmakers who accepted bets in this fashion:

[gave] us a feed and a response of a reference ID for that particular bet to show it was accepted. So the trading team is just like a provider for us.

47 Mr Hill gave evidence that the trading team was established about four or five months before he gave evidence at trial in September 2016, through one of his contacts with licenced bookmakers in the Philippines. Mr Hill said that he was not involved in setting up the trading team, but said that he would 'probably know a number of the bookmakers that are involved'.

48 Mr O'Connell gave evidence about the trading team, as follows. He first met with different betting shops in Manila in October or November 2015 with a view to establishing a relationship with traders there. A trading team was formed comprising three men, and Mr O'Connell was responsible for dealings with them. The trading team placed bets with between eight to twelve bookmakers, and facilitated bets with 'bigger limits' than other bookmakers in Australia were capable of. As with Top Sport and Pinnacle Sports, Pinnaclebet maintained a wagering account with the Manila trading team. That account was pre-funded through an intermediary.

49 Betting customers could deposit funds into their betting account with Pinnaclebet in a number of ways, designed to ensure security and avoid fraud, as follows.

(1) About 70 per cent of customers utilised the 'POLI payment gateway' to deposit funds from their bank accounts. The advantage of this method over direct deposits into one of the two Worldwide bank accounts was that a customer's betting account could be credited instantly at no fee. A customer could log into his or her account on the Pinnaclebet website, click on the 'POLI' deposit method, and the customer would be directed to his/her own internet banking portal to make a payment in real-time. The resulting credit to the Worldwide ANZ account would appear the next day, depending on the time the transaction took place.

(2) Most other customers deposited by logging into their betting account and using their credit cards. Pinnaclebet only accepted Visa or MasterCard, which Ms Cad believed were the most secure credit card options for depositing money.

(3) Customers could also transfer money to one of the Worldwide bank accounts by direct deposit from their bank account without using the POLI gateway. Ms Cad said that this was 'very rare'. When this deposit method was used, the Pinnaclebet website directed the customer to use their Pinnaclebet account number in the 'reference/transaction detail' section of their internet or other bank transfer form, and then:

...inform Customer Service of the deposit by emailing support@pinnaclebet.com.au and advise us of the following:

• Your Username

• Your Pinnaclebet Account Number

• Amount Transferred

• Date and Time of Deposit

• Reference used for deposit (Should be your Pinnaclebet Account Number)

• Customer's Bank Name (e.g. ANZ)

• Customer's Bank Branch Location (e.g. Suburb)

• Was transfer done on the Internet or at bank?

This is to enable the funds to be transferred into your Pinnaclebet account.[12]

In such cases, Ms Cad said that it was necessary to wait for the deposit to be cleared into the relevant Worldwide bank account and be verified against the information provided by the customer. Ms Cad said that it would normally take about two days before funds were credited to a customer's Pinnaclebet account.

50 The Pinnaclebet system included a number of other measures designed to protect against stolen money being deposited into a customer's account or the winnings from betting such moneys being paid from a betting account:

(1) Each customer had to complete 100 points of identification, including name, date of birth, a photo of the customer, a signature, and current residential address. Normally, the business would request a copy of the customer's passport, driver's licence and credit card. This information would be cross-checked by the support team with that provided at registration. The support team would also ensure the legibility of the identification provided. Customers would not be allowed to make withdrawals from betting accounts unless their identification had been verified.

(2) Worldwide had a policy of not accepting international customers, except for New Zealanders. Customers' IP addresses were checked by the Pinnaclebet website to ensure the customer was not overseas.

(3) Funds could only be deposited using credit cards, the POLI direct transfer system or by direct bank transfer with Australian banks in Australian currency. Where bank transfers were used, Ms Cad said she would 'always ask Mr Nick O'Connell or the Australian staff to call that customer to confirm that he is a legitimate customer and that is the amount that he deposited.' Credit card payments were facilitated by 3D Secure, which meant that a customer would have to log into his or her credit card account to make the payment.

(4) Ms Cad and her staff checked the processing of bet payments by reconciling the Pinnaclebet administrative system with the betting providers' systems three times per day. The team checked the bank accounts against Pinnaclebet's own records two to three times per day.

51 There were also measures in place to ensure that withdrawals were made securely to verified customers. The Pinnaclebet website did not allow a customer to withdraw funds unless those funds had been 'turned over' at least once. 'Turning over' refers to the requirement that a customer bet deposited money at least once before withdrawing it. I will refer to this requirement as the 'turnover rule'.

52 Differing evidence was given as to precisely what was required by the turnover rule. Both the terms and conditions and the general betting rules for the Pinnaclebet website suggest that a customer was required to bet the entire value of a deposit before they could withdraw an equivalent amount. The terms and conditions state:

The amount that you deposit must be turned over once (bet with) before a withdrawal or refund can be made.

53 Similarly, the general betting rules provided that:

PinnacleBet requires that any deposit into a Customer's Account be turned over at least once prior to authorising a withdrawal from the Customer's Account.

54 There was other documentary evidence which confirmed this position, including the following statement by Mr Hill in an email to Mr Sigalla:

... funds need to transact at least once before they can request a withdrawal (rules in Australia are very stringent) eg deposit $1 million requires bet sales of $1 million before a request for a withdrawal can be facilitated.[13]

55 The oral evidence of Ms Cad and Mr O'Connell was materially different. They said that customers could withdraw an amount equal to the amount that they had bet, regardless of whether they had bet the entire value of their deposit. For example, the following exchange occurred between counsel and Ms Cad:

If I deposit $100 into my account, I bet 50 and I lose 50, how much could I take out?---You bet $50 and you have $100 to start with, then you are eligible to withdraw the $50 because you turned over - you bet that particular amount of $50.

56 This evidence was corroborated by Mr O'Connell, who also said that this alteration to the published turnover rule was brought about because 'our competitors changed their policy and we changed ours.'

57 Given their operational roles within the Pinnaclebet business, I accept Mr O'Connell's and Ms Cad's evidence as to the content of the turnover rule in practice. Further, I find that similar rules are a standard practice within the gambling industry. So much is evident from Mr Hill's statement that the 'rules in Australia are very stringent', and Mr O'Connell's evidence that the turnover rule was changed in order to bring it into line with the policies of their competitors.

58 Further, customers who had deposited funds by credit card could only withdraw funds by having them 'pushed back' to the same card as the deposit (ie withdrawals would be paid to the credit card used for the deposit). All customer withdrawals had to be authorised by Mr O'Connell.

59 The Pinnaclebet business generated revenue from bets placed through the business. For Top Sport and Pinnacle Sports, Pinnaclebet received a commission on turnover - usually about .33 per cent, although this was subject to change at the particular provider's discretion. For bets placed with the Manila trading team, Pinnaclebet's revenue was from arbitraging the difference between lower odds which were occasionally available from the Filipino bookmakers for the larger bets and the less favourable odds offered through the Pinnaclebet system (which odds were obtained directly through Top Sport or Pinnacle Sports). Mr O'Connell said that the margins for such 'arbitrage' arrangements averaged about 0.8 per cent. Ms Cad said in effect margins were between .50 to a maximum of .80 per cent.

60 This business model is substantially different to standard bookmaking businesses, where the bookmaker's profit is represented by the net losses to gamblers. Mr O'Connell gave evidence that the Pinnaclebet business model was designed to attract as many winning bets as possible, as this would increase the betting turnover and hence the profits from commissions, and yield profits from arbitraging successful larger bets.

61 Mr Hill gave evidence that the Pinnaclebet business had not become profitable by the time of the fraud, as the turnover was not yet of sufficient magnitude. It is notable, however, that Mr Hill testified that he was not aware of Pinnaclebet's commission and arbitrage arrangements until his cross-examination by counsel for the plaintiffs. In any event, Mr Hill and Mr O'Connell maintained that the business was growing. Mr Hill testified that this growth, together with the opportunity for improvements which were under consideration, had a present value of about $20 million. Mr O'Connell gave evidence of an offer for a share in Pinnaclebet that would have valued the business at $30 million.

Prior knowledge of and dealings with Mr Sigalla

62 The first step in ascertaining the defendants' actual or constructive knowledge of the fraud at relevant times is to consider Mr Hill's and Mr O'Connell's prior knowledge of and dealings with Mr Sigalla.

63 It is first necessary to note that none of the parties alleges that Mr Sigalla was a party to the fraud. That remains an open question. Mr Sigalla did not give evidence.

64 In his evidence in chief, Mr Hill was asked how he knew Mr Sigalla. He said that he had attended the same school as Mr Sigalla - Sydney Grammar - but Mr Sigalla was a year or two younger than him and, although a friend of common friends, he was not one of Mr Hill's friends. Mr Hill said that he would 'bump into' Mr Sigalla every three or four years at the 'dog track ... typically after [Mr Sigalla] had had a day at the horse track.' Mr Hill said that, apart from these occasions, he 'never saw [Mr Sigalla] but his name cropped up, you know, quite often amongst common colleagues.'[14] He said that Mr Sigalla was 'definitely not' a person he considered a friend as at the beginning of 2016.

65 Mr Hill did, however, know of Mr Sigalla's reputation as a large gambler on horse racing. Given Mr Hill's involvement in the racing industry (gambling on greyhounds and horses) he heard anecdotally that Mr Sigalla 'was a very big gambler by reputation', and he considered Mr Sigalla to be a 'big player' whose name would come up frequently in the circles Mr Hill moved in. By a 'big player' Mr Hill understood Mr Sigalla to be 'a player that gambles consistently, probably more than $50,000 to $100,000 a week.'

66 Mr Hill was also asked in evidence in chief as to his understanding of Mr Sigalla's business reputation as at February 2016. He gave evidence that he would not have given much consideration to that question but 'would say that he was quite a savvy businessman'. This opinion was also based upon anecdotal statements from Mr Hill's colleagues in the racing industry, who would 'regale [him] with stories of [Mr Sigalla's] business acumen'. Mr Hill believed at the time that Mr Sigalla had been the CEO of 'numerous companies' and 'presided over one, possibly two, IPOs'.

67 Mr Hill then described in his evidence in chief how he met Mr Sigalla at Mr Hill's aunt's funeral in early 2016. He said that Mr Sigalla initiated a conversation with him, asked about how the Pinnaclebet business was going, and mentioned that he had an extensive background in capital raising. He offered his services to assist Mr Hill in raising capital for the Pinnaclebet business. Mr Hill then described how, about four weeks later, following discussion with Mr O'Connell, Mr O'Connell commenced discussions with Mr Sigalla with a view to involving Mr Sigalla in a possible capital raising for the Pinnaclebet business.

68 Later, Mr Hill became involved in those discussions following receipt of email correspondence from Mr Sigalla directly to him. The two men met at a coffee shop close to Mr Hill's home. The discussions came to no conclusion when Mr Hill became 'too busy'. In his own words, he was by this time 'fobbing [Mr Sigalla] off to a degree', as he did not consider the capital raising was urgent at the time. He acknowledged, however, that he had no 'lack of interest' in possibly using Mr Sigalla's services to raise capital in the future.

69 In cross-examination, a stronger degree of familiarity between the two men emerged. Mr Hill acknowledged that he knew the following matters before the fraud in this case:

(1) Mr Sigalla was married to Mr Hill's cousin, Melissa Caplice. They divorced or separated between two and four years before 2016 (Mr Hill's evidence differed in this regard). In re-examination, Mr Hill said he believed they were separated but not divorced.

(2) Melissa Caplice is the elder sister of another cousin of Mr Hill's, Seamus Caplice, who is a director of and holds one share in Worldwide.

(3) Mr Hill and his domestic partner, Mary McGowan, are good friends with Melissa Caplice and her (and Mr Sigalla's) children.

(4) Mr Sigalla had paid for Ms McGowan and Ms Caplice to holiday at a very expensive spa resort in Thailand. In re-examination, Mr Hill said that this was about '15 or 20 years ago ... very, very long ago'. (This demonstrates a very long and close friendship between the two women.)

(5) Mr Sigalla had sent money to Mr Caplice in Dubai for the purpose of investing it.

(6) Mr Sigalla said 'frequently' in conversation with Mr Hill that he was in court, and on more than one occasion indicated it was for cases where 'he was going to get paid money'. Mr Hill did not say when these conversations occurred or in what circumstances.

(7) Mr Sigalla told him of a case the Australian Securities & Investments Commission ('ASIC') had against him 'that ASIC lost and had to pay him an amount of money'. However, Mr Hill said he did not know what the subject matter of the case was and did not ask. Again, Mr Hill did not say when these conversations occurred or in what circumstances.

(8) Mr Sigalla had been the 'CEO or the chairman' of TZ Limited and there was 'some issue with TZ at the time' he met Mr Sigalla and his wife (his cousin, Ms Caplice) in New York in about 2009.

70 When it was put to Mr Hill that Mr Sigalla was 'close enough' to his family to come to his aunt's funeral, he responded:

Look, he attended the funeral. I don't know why he attended the funeral. I don't know whether he felt obliged. I actually was impressed that he turned up. I would say [Mr Sigalla and Ms Caplice] have been separated or divorced for maybe two or three years so I haven't seen him in the family unit for a very long time. I attended my cousin Melissa's birthday earlier in the year. He was not present. So as far as I know, I haven't seen him at any family gathering for a while.

What had you been told about the reason for their separation?---I hadn't been told anything.[15]

71 Apart from this evidence, in particular those parts in emphasis, Mr Hill gave no explanation as to why he had not mentioned his familial relationship with Mr Sigalla until cross-examination. There are two other noteworthy features of Mr Hill's evidence as quoted above. First, he estimated the time of Mr Sigalla's separation from Ms Caplice as 'two or three years' ago and not 'three or four years' ago as he had previously said. Second, given the close relationships between Mr Sigalla, Ms McGowan, Ms Caplice and Ms Caplice's brother Seamus, it is implausible that Mr Hill had not been told anything about the reasons for Mr Sigalla and Ms Caplice separating. In my opinion, Mr Hill's evidence concerning the nature of his relationship with Mr Sigalla, and his endeavour to downplay it, reflects poorly on his credit.

72 I infer that the purposes of Mr Hill's endeavours to distance himself from Mr Sigalla included enabling him to claim that he knew nothing about the subject matter of newspaper articles in major daily newspapers circulating in Sydney which reported on fraud allegations against Mr Sigalla connected with his gambling habits. The relevant newspaper articles are summarised below:

(1) 2 September 2009 - The Australian newspaper - finance section. In an article titled 'ASIC in the hunt for TZ millions', it was reported that ASIC had joined the directors of TZ Limited 'in the probe into millions of dollars allegedly missing from the small technology company'. The article named Mr Sigalla as one of several past directors of TZ who had received a letter of demand from the company 'seeking the return of material sums of money'. Mr Sigalla reportedly denied any liability.

(2) 30 December 2009 - The Australian newspaper - finance section. In an article titled 'Sigalla fined for contempt of court', it was reported that Mr Sigalla had been found to be in contempt of court following his involvement in the sale of an industrial property owned by a family company. The contempt finding was described as 'the latest legal worry' for Mr Sigalla. The contempt finding related to a breach by Mr Sigalla of a freezing order obtained by TZ against him. The article noted that Mr Sigalla and other former members of TZ's board were being sued by TZ 'which is attempting to recoup almost $14 million from former directors and their related parties'. The report stated that Mr Sigalla had denied TZ's claims and was suing the company for more than $1 million in termination fees.

(3) 15 January 2010 - The Sydney Morning Herald newspaper - business section. In an article titled 'MISSING MILLIONS', it was reported that: 'TZ has launched action against former directors including Mr Sigalla seeking to recoup up to $14 million in loans and payments. The claims have been denied.'

(4) 8 February 2010 - The Australian newspaper - finance section. In an article titled 'Sigalla faces further contempt charges', it was reported that: 'Troubled businessman Andrew Sigalla is facing a second batch of contempt allegations after the corporate watchdog [ASIC] accused him in court of breaching conditions of an order freezing his assets'. Reference was made to the previous contempt finding in respect of the freezing order obtained by TZ. The article noted that TZ was suing Mr Sigalla over missing funds and that Mr Sigalla was defending the claim and claiming $1 million from TZ in termination benefits.

(5) 15 February 2010 - The Australian Financial Review newspaper - Market Wrap section. In an article titled 'Sigalla nears end of a long and winding road', it was reported that Mr Sigalla, described as a '[h]orse flesh fancier and former TZ Ltd chief executive ... is on the receiving end of a bankruptcy petition from bookmaker Tom Waterhouse ... for what appears to be unpaid gambling debts of $2.59 million.' The article stated that the bankruptcy petition was apparently based on a judgment Mr Waterhouse obtained against Mr Sigalla for that amount, shortly before Mr Sigalla was ousted from the TZ board. The article referred to the bankruptcy court seeking details of freezing orders against Mr Sigalla 'such as the one imposed by TZ and [ASIC] last September, when the corporate plod joined the hunt for millions of dollars missing from the company'.

(6) 20 July 2010 - The Sydney Morning Herald - business section. In an article titled 'ASIC's each-way result on Sigalla', it was reported that ASIC had accused Mr Sigalla of breaching the freezing order against him 'by using his credit card to pay for "what are euphemistically called female models or escorts" and for betting on the TAB'. The article continued that the freezing orders obtained by ASIC were obtained 'to prevent Mr Sigalla dissipating funds while it investigates his conduct as executive chairman of [TZ] from April 2004 to June [2009]' and that a New South Wales Supreme Court judgment had 'revealed that ASIC's investigation includes suspicion of multiple criminal offences relating to the misappropriation of "many millions of dollars" from TZ'. The article referred to the civil action brought by TZ against Mr Sigalla, seeking to recover $13.2 million, and Mr Sigalla's counterclaim for $1.2 million in unpaid entitlements.

(7) 8 February 2011 - The Sydney Morning Herald. In an article titled 'TZ settles case against two directors', it was reported that TZ had accepted a $500,000 settlement from two former directors in its civil action to recover $13.2 million, but the claim against Mr Sigalla and two of his companies were continuing. Mr Sigalla was described as 'the now-bankrupt former chairman' of TZ.

(8) 1 March 2012 - The Sydney Morning Herald - business section. In an article titled 'ASIC nails Sigalla but pays a price', it was reported that Mr Sigalla had been found guilty of contempt of court 'as part of a long-running case brought against him by [ASIC]'. The article referred to a judgment in the New South Wales Supreme Court which found beyond reasonable doubt that Mr Sigalla had deliberately failed to disclose bank account and credit card transactions for escort services. The report quoted findings by the New South Wales Supreme Court judge expressly rejecting Mr Sigalla's claims that the escort services had been used by a guest 'who paid for them using his credit card and reimbursed him in cash'.

(9) 13 March 2012 - The Sydney Morning Herald - business section. In an article entitled 'Sigalla to continue the fight with ASIC', it was reported that Mr Sigalla had been ordered to undertake 120 hours of community service for his contempt of court in not fully disclosing all of his financial transactions, but planned to seek compensation from ASIC for 'malicious prosecution'. The article quoted Mr Sigalla as saying that ASIC was yet to bring a charge against him and that he had settled TZ's civil claim against him. It states that Mr Sigalla was then bankrupt and planned to fund his case against ASIC from 'the 75 per cent of his $600,000 in legal costs in the contempt case that ASIC was ordered to pay'. The article reports ASIC was so ordered because Mr Sigalla was only found guilty of nine of the original 45 contempt charges, and the judge had found that 'some of the charges were brought without reasonable cause'. The article concluded by referring to the settlement in 2011 of the civil case brought by TZ against Mr Sigalla for misappropriating funds.

(10) 17 May 2013 - The Sydney Morning Herald - business section. In an article entitled 'Sigalla faces jail sentence over dishonest use of TZ funds', it was reported that: 'Bankrupt businessman Andrew Sigalla could face jail after being charged with dishonestly using more than $6 million belonging to the company he ran to pay gambling debts to bookmaker Tom Waterhouse.' The report stated that Mr Sigalla had appeared in Sydney's Central Local Court on 16 charges of breaching his duties as a director of TZ, and that ASIC alleged that 'Mr Sigalla [had] dipped into the company's bank accounts 16 times between March 2008 and March 2009, using most of the money to pay Mr Waterhouse and the remainder to pay off a mortgage.' The article also referred to Mr Sigalla's previous contempt conviction.

(11) 17 May 2013 - The Australian Financial Review - features section. In an article titled 'July date for Sigalla - in court', it was reported that Mr Sigalla had faced a Sydney court on charges brought by ASIC that he embezzled more than $6 million from TZ to repay gambling debts to Tom Waterhouse.

(12) 17 May 2013 - The Australian newspaper - local section. In an article titled 'ASIC arrests former high-flyer on $6 million charges', it was reported that Mr Sigalla had been arrested 'at his "home" at the InterContinental Hotel overlooking Sydney Harbour on charges related to $6.1 million of company funds that allegedly were dishonestly channelled to him and his private companies'. The article stated that the arrest was 'the latest in a series of battles' between Mr Sigalla and ASIC and summarised the ASIC contempt proceedings against Mr Sigalla, his gambling debts to Mr Waterhouse and his settlement of TZ's claim against him for an undisclosed sum.

(13) 17 July 2013 - The Australian newspaper - finance section. In an article titled 'ASIC shows its hand in Sigalla fraud case', it was reported that Commonwealth prosecutors had compiled 37 folders of evidence against Mr Sigalla 'detailing the alleged defrauding of $6.1 million'. This article also contained a summary of the 16 charges facing Mr Sigalla, each carrying a maximum sentence of five years' jail, and referred to the legal proceedings between TZ and Mr Sigalla and Mr Waterhouse and Mr Sigalla.

(14) 25 November 2014 - The Daily Telegraph newspaper - news section. In an article titled 'Executive to face trial for $8.7m fraud', it was reported that Mr Sigalla had been ordered to stand trial for using $8.7 million of TZ funds to pay his gambling debts to Mr Waterhouse and for other loans, and that Mr Sigalla had 'declined to respond' at his committal hearing in relation to '24 embezzlement-related charges'. The article stated that the magistrate was satisfied there was sufficient evidence for a jury to hear the case, noted that seven further charges had been filed, and noted that Mr Sigalla had represented himself and been granted bail.

(15) 25 November 2014 - The Australian newspaper - business section. In the column titled 'Margin Call with Ben Butler' the committal hearing at which Mr Sigalla was committed to stand trial was reported, referring to the trial as a 'celebrity trial'. The charges against Mr Sigalla were colourfully described as 'ripping off the struggling TZ ... to the tune of more than $6.7 million, most of which went to pay gambling debts to his bookie, Tom Waterhouse.'

(16) 6 May 2016 - ABC News - article by police reporter. In an article titled 'Former executive Andrew Sigalla says he cannot afford lawyer in fraud case', it was reported that Mr Sigalla had sought to delay his criminal trial for dishonestly using TZ funds to pay his multi-million dollar gambling debts because he could not afford legal representation. The article included a summary of Sigalla's criminal charges and reported that Mr Sigalla was due to go on trial at the end of May 2016. Mr Sigalla's barrister was reported as asking for the trial date to be adjourned until October 'because Sigalla was insolvent and could not afford to pay for legal counsel'. The adjournment was sought to enable Mr Sigalla to find the money for legal representation. The article concluded by summarising the prosecutor's opposition to the adjournment request and noting that the judge had reserved his decision on whether an adjournment would be granted.

73 As appears above, and below, at the time of the ABC article on 6 May 2016, Mr Sigalla had been in discussions with Mr O'Connell for about two months, and from about 2 May 2016 with Mr Hill, with a view to Mr Sigalla possibly assisting Worldwide in a capital raising for the Pinnaclebet business.

74 Mr Sigalla's first email to Mr Hill on the subject was on 1 May 2016 concerning the proposed capital raising. Mr Sigalla said that he could not 'afford to work for free !!!' and said he would 'want some fuel in the tank to be involved'. At this stage, Mr O'Connell was insisting on payment by commission on any money in fact raised by Mr Sigalla, and Mr Sigalla was wanting to be paid for his work upfront and to also receive a commission, as with the other deals he said he was then working on.

75 In these circumstances, Mr Sigalla involved Mr Hill and began dealing primarily with him on this issue. On 2 May 2016, Mr Sigalla emailed Mr Hill and asked him to call when he was free: 'Preferably without Nick [O'Connell]'. After he got Mr Sigalla's telephone number from him, Mr Hill called Mr Sigalla. The two men discussed the proposed capital raising at a number of meetings in early May at a coffee shop near Mr Hill's home. Mr Hill described these conversations as involving a sense of urgency on Mr Sigalla's part, as he tried to 'push the envelope a bit harder'. Mr Hill agreed that Mr Sigalla was very keen to get paid work assisting Worldwide to raise capital for the Pinnaclebet business.

76 On 8 May 2016, Mr Sigalla sent an email to Mr Hill about the proposed capital raising. In that email, Mr Sigalla addressed Mr O'Connell's request that he work on a commission basis if successful and stated:

I have 4 real prospects that I would be staggered if they did not proceed in some way

...

I'm not going to do all the work for free because I have legal fees coming out of my ass, and I need to survive

...

Have a think about it if you want my involvement

It will cost you less to pay me to do the work than it cost me to send Mary [Ms McGowan] and Melissa [Caplice] to Chiva Son all those years ago

77 When Mr Hill was taken in cross-examination to the 8 May email from Mr Sigalla, and earlier emails in which Mr Sigalla told him and/or Mr O'Connell that he could not afford to work on the proposed capital raising unless he was paid for his time, Mr Hill gave evasive and argumentative evidence. He returned to a repeated theme of his evidence, to the effect that he was extremely busy and 'not one to read through' emails or, if he had read the email at the time, he could not now recall it. He denied knowing that Mr Sigalla was in a 'tight financial position' at this time, on the basis of his lack of attention to Mr Sigalla's emails, and pointed to the fact that Mr Sigalla claimed to be working on two IPOs and being paid both for his time and on a commission basis.

78 Both Mr Hill and Mr O'Connell denied reading any of the press reports concerning Mr Sigalla's alleged embezzlement from TZ, the resulting civil and criminal proceedings against him, or his convictions for contempt of court. In cross-examination, Mr Hill admitted that his cousins, Seamus and Melissa Caplice, were co-defendants with Mr Sigalla in TZ's civil proceeding, but denied that he knew this until after he knew of the fraud.

79 In cross-examination, Mr O'Connell said that he heard of the allegations for the first time when the plaintiffs' counsel read from the newspaper articles in his opening. He said he found the information in the articles 'shocking', although he did admit that he knew Mr Sigalla 'was into hookers and things', and described his impression of Mr Sigalla in the following terms:

As far as I knew, Mr Sigalla was a rich guy, a very well-to-do businessman. He spent a lot of money on hookers and parties and drugs and things like that but I knew the guy to be a high flying guy and I thought he was, like, I don't know, some sort of Wall Street like stockbroker. The guy lived a big life.

80 Mr O'Connell was taken to text messages from Mr Sigalla to him on 19 April 2016, in which Mr Sigalla apologised for being unable to meet Mr O'Connell because he had to 'prepare some evidence for a court hearing tomorrow' and arranged to call Mr O'Connell when he finished. Mr O'Connell said that he recalled this conversation well, and said Mr Sigalla told him that the court case related to him suing a bookmaker named Frank Hudson.

81 In re-examination, Mr O'Connell said that he did not read any newspapers 'in the period 2015 to 2016' because he was too busy to read anything except, occasionally, articles relating to sport or work he was doing. He did not read the business section of The Australian or the Financial Review at any time.

82 In short, Mr O'Connell denied even hearing rumours about the matters referred to in the newspaper articles.

83 Mr Hill also denied having read any of the newspaper reports concerning Mr Sigalla. Like Mr O'Connell, he maintained in cross-examination that he first learned of the subject matter of the newspaper articles, with one exception, when he heard relevant aspects of the articles read out by the plaintiffs' counsel as part of his opening address. The one exception was that he recalls Mr Sigalla telling him that ASIC had brought a case against him and 'that ASIC lost and had to pay him an amount of money'. He said in substance that Mr Sigalla did not tell him why ASIC brought the proceeding and he did not ask. Further, although he 'may have heard on the grapevine ... aside from Mr Sigalla that there was ASIC action against him', he said that he was 'not sure' what that action 'was to do with'.[17]

84 Mr Hill mentioned on three occasions that Mr Sigalla 'frequently' volunteered in conversation 'that he was in court' or 'was frequently in court'. In this context, Mr Hill said that Mr Sigalla would tell him 'about cases that he was involved in where he was going to get paid money'. Mr Hill said that, in these frequent conversations, Mr Sigalla:

made me aware of a case that ASIC had against him and he told me that ASIC lost and had to pay him an amount of money.

He did mention ASIC to me as an organisation that had pursued him for whatever - he didn't mention what - and that he had won a successful claim against them.

I certainly wouldn't ask him what he was in court for but he would, in general conversation, throw in that, 'ASIC paid me this' and 'This bloke owes me that'. He certainly didn't talk about any criminal allegation against him.

85 One of the 'blokes' Mr Hill was referring to was likely Frank Hudson. Like Mr O'Connell, Mr Hill recalled Mr Sigalla mentioning that he had sued Mr Hudson and won 'a large sum of money ... as a result'.

86 Mr Hill also denied knowledge of other matters involving the relationship between Mr Sigalla and his cousins. In particular, as appears above, he denied knowing until recently that TZ's civil action to recover embezzled funds included Seamus and Melissa Caplice as co-defendants with Mr Sigalla. In my opinion, this evidence, like Mr Hill's statement that he did not know anything about the reasons for Mr Sigalla and Ms Caplice's separation, and other statements diminishing the apparent proximity of his relationship with Mr Sigalla, was implausible in all the circumstances.

87 On 16 May 2016, an amount of $2,520,948.38 was deposited directly into the Worldwide ANZ account from the account of La Trobe University. Mr O'Connell explained why such payments into the Worldwide ANZ account were not in accordance with the Pinnaclebet business model, as referred to above. He gave evidence that the Pinnaclebet website had an inbuilt betting limit which was too small for the big players. It was for this reason that these gamblers were asked to deposit large amounts into the Worldwide Westpac account, and he and Ms Cad would then make arrangements for the Manila trading team to bet back large bets by these customers through a 'conglomerate [of] Manila bookmakers' or a 'multitude of bookmakers'.

88 The deposit from the La Trobe University account was the result of a similar fraud to the fraud in this case. Following the deposit, a Pinnaclebet customer named Tom Simpson claimed the deposit for his account. It appears that name is a fictitious alias for the fraudster. The first contact from the person purporting to be Mr Simpson was on 15 May 2016. He contacted a member of the Pinnaclebet support team by 'livechat' and said he had joined the Pinnaclebet website that day (ie become a Pinnaclebet customer) and deposited $2,520,948. He asked when that deposit would be credited to his Pinnaclebet account and was told that it 'usually takes 24-48 hours' and the amount would 'then be automatically credited to [his] Pinnaclebet account'. Given the amount of the deposit, the Pinnaclebet support representative informed Mr Simpson that he would need to notify his manager regarding the transfer and would keep Mr Simpson posted.

89 Mr O'Connell gave evidence that he recalled being informed by a support staff member of an earlier telephone call from a customer, about two or three days before the deposit, in which the customer said he 'would be sending [$2.5 million] and could we take large bets'. The staff member told him that the customer had said he wanted to 'bet big on American sport' and it was 'nothing for him to have $300,000 - $400,000' on a single event. Mr O'Connell recalled that he told the staff member:

he's probably a fantasist. We'll believe it when we see it ... [w]hen the money arrives we'll talk about it then.

90 Mr O'Connell's evidence in this regard was challenged in cross-examination by reference to information which Worldwide later supplied to Victoria Police in connection with the La Trobe University fraud. In answer to a question from the investigating officer, Detective Senior Constable Michael Howard, Ms Cad supplied information which did not specifically mention this telephone call:

Q: The details of phone numbers used to contact your business by these individuals and what phone number they would have dialled to reach your staff.

The customer contacted via livechat confirming that he had made a deposit to us of $2,520,948.38. Our support staff notified our management and the exact amount advised by Mr. Simpson had been credited to our ANZ bank account, accordingly the funds were credited to Mr. Simpson's betting account.

We are not sure if Mr Simpson had telephoned the office however we had received a telephone enquiry in the previous week asking about what size bets we would accept on American and international sports. Our customer service explained that our limits are shown on each bet type on our website, generally we receive many of these enquiries each week.

91 In my opinion, nothing turns on any discrepancy between Mr O'Connell's evidence and Ms Cad's response. The emphasised portion of Ms Cad's response is, however, highly relevant. It demonstrates that 'management' were in fact contacted by support staff about the La Trobe deposit before it was credited to Mr Simpson's betting account, and that 'management' advised Ms Cad and her staff that Mr Simpson's account could be credited - on the sole basis that 'the exact amount advised by Mr Simpson had been credited to [the Worldwide ANZ account].' I infer that the reference to 'management' is a reference to Mr O'Connell.

92 Mr Simpson was then allowed to bet with the La Trobe University funds in the period 17 to 21 May 2016. He gambled all of the money and lost all but $141,315.16. The defendants contend that this amount remains in the Worldwide ANZ account and Mr Hill said it will be repaid to La Trobe University when they ask. Mr Hill described these funds as being held in trust for La Trobe University.

93 The La Trobe University fraud was first reported to Mr Hill on 21 May 2016, by a telephone call from an officer of the ANZ bank. Mr Hill was initially suspicious of the report but soon accepted it as true. The bank officer told him that the investigating police officer was Detective Howard, who was stationed at the Darebin Crime Investigation Unit, which is situated at the Preston Police Station.

94 Detective Howard recalled that Mr Hill contacted him on 24 May 2016 in the afternoon. By the time Mr Hill was informed of the La Trobe fraud, however, Mr Simpson had already placed the bets which gave rise to the losses described above. Mr Simpson's betting account was immediately frozen.

95 Mr Hill could not recall the content of his conversation with Detective Howard. Detective Howard gave evidence that he told Mr Hill about the fraud, that he was based in Preston, that La Trobe University was 'within our catchment area' and sought information from Mr Hill. He followed up his oral request with an email that day. I infer that Mr Hill referred Detective Howard's request for information to Mr O'Connell to deal with. In turn, Mr O'Connell said he referred the request to Ms Cad for response. Ms Cad provided the information to Mr Hill and Pamela Enright, the in-house legal advisor to Mr Hill and his companies, by email on 26 May. Mr Hill forwarded that email to Detective Howard.

96 In response, Detective Howard sought additional assistance by email to Mr Hill on 28 May 2016. I infer that Mr Hill asked Mr O'Connell and/or Ms Cad to provide him with the further information sought. By email sent at 11:11 pm on 30 May 2016, Mr Hill forwarded the further information sought by Detective Howard. That information included the statement that Pinnaclebet did not archive customer's internet IP addresses in its 'transaction engine', which only recorded the most recent IP address that the customer had used to log in into his or her betting account.

97 Mr Hill gave evidence that un-rounded amounts, such as the amounts of the La Trobe University deposit and the stolen funds, were 'frequently' deposited into Pinnaclebet betting accounts. He explained that this happened often when a customer 'clean[ed] out' the balances in one or more betting accounts and transferred them to another account.

When did the defendants first have sufficient knowledge of the fraud?

98 The defendants admit that they had actual knowledge of 'a suspicion of' the fraud at approximately 1:13pm on 7 June 2016.[18] This pleading appears to relate to the fact that Mr Hill did not immediately accept the fact of the fraud when an ANZ officer, Irina Moskovitch, initially told him of it earlier on 7 June. But by 1:13 pm Mr Hill believed the stolen funds were 'likely' to have been fraudulent deposits, and on that basis he instructed Ms Cad to freeze Mr Sigalla's betting account 'for [the] present'. By 5:44 pm, when Mr Hill received an email from the Western Australian police providing 'solid' evidence of the fraud, he accepted it as a fact.

99 I find that Mr Hill had actual knowledge of the fraud in the first Baden category from the time he instructed Ms Cad to freeze Mr Sigalla's betting account. He had been told of the fraud, thought it was 'likely', told Ms Cad it was 'another fraud' and froze the account of a new and potentially valuable customer who (as appears elsewhere in these reasons) he and Mr O'Connell hoped would assist with growth of the Pinnaclebet business in preparation for its sale at a large profit.

100 As appears above, Mr Hill and Mr O'Connell testified that Mr Sigalla's first relevant involvement with Pinnaclebet was as part of their attempt to raise capital to expand the business before an eventual sale.

101 Mr Hill testified that when Mr Sigalla approached him at his aunt's funeral earlier in 2016, Mr Sigalla said he thought the Pinnaclebet business had 'a lot of potential', and offered to provide capital raising services to the company. Mr Hill and Mr O'Connell later discussed the need for funds to assist in implementing the new initiative Mr O'Connell had developed for Pinnaclebet: to 'maintain a platform where we could profile the customers and we could designate whether we could divest their bet or whether we could keep the bet'. Mr Hill estimated the necessary funds at between $2.5 and $6 million. In this context, Mr Hill told Mr O'Connell that it 'might be worth' him contacting Mr Sigalla.

102 Mr Hill could not recall the specific timing of this conversation but Mr O'Connell testified that the capital raising with Mr Sigalla 'had been discussed in January [2016]'. Mr O'Connell could recall having a couple of telephone calls with Mr Sigalla and then meeting him one day, in what he thought was February 2016, with Mr Hill at a café in Bronte in Sydney. Mr O'Connell also thought that the prospect of capital raising would have featured as part of other meetings with Mr Sigalla.

103 The documentary evidence before the Court shows that Mr O'Connell and Mr Sigalla exchanged text messages and emails in April and May 2016 about the capital raising.

104 On 19 April 2016, Mr Sigalla sent a text message to Mr O'Connell stating:[19]

Sorry nick I am going to have to see u when I get back

I have to prepare some evidence for a court hearing tomorrow

If u could email me...I can get started whilst you are away

105 In the course of further text messages exchanged that day, Mr O'Connell and Mr Sigalla attempted to arrange a time to meet.

106 On 26 April 2016, Mr Sigalla emailed Mr O'Connell an information memorandum for another company. I infer it was sent with the purpose of showing the sort of information that Pinnaclebet would need to provide as part of a capital raising.

107 It is apparent from a series of emails exchanged between Mr Sigalla and Mr O'Connell on 1 May 2016 that Mr O'Connell lost interest in procuring Mr Sigalla's services.

108 At 5:10pm on 1 May 2016, it appears Mr Sigalla emailed both Mr O'Connell and Mr Hill as follows:

Guys

I have given you my thoughts on which way you should progress

I think at the very least you need a financial model to present to any potential investor or debt provider

I can't assist unless I have at least that

I also can't afford to work for free!!!

I am highly confident that with financial numbers, I can achieve introducing you to the 5m or the 20m.

I am going to leave it to you to decide how you want to proceed, but I will want some fuel in the tank to be involved

109 Mr O'Connell responded 'mate we are looking to raise money and not spend it', to which Mr Sigalla replied:

I hope you do!!

But I can't afford to work on it I'm sorry, unless I am paid for my time.[20]

110 Mr O'Connell responded that 'any payment would only be on some kind of commission for money raised'. Mr Sigalla was clearly hoping for both an upfront payment and a commission, as is apparent from the following email:

Thanks, but I cant help you then, unfortunately.

I don't work that way. I already am working on 2 IPO at present, which I am getting paid for which also includes upside commission. I just don't have the luxury of dropping that work and working on yours.

I have already let you speak to 4 of my clients, and if I had the model and worked on it, then they would invest, I'm certain!!

I really do hope you guys are successful

Andrew

111 Mr Hill and Mr O'Connell both testified that, following this exchange, Mr Sigalla shifted his focus from Mr O'Connell to Mr Hill because Mr O'Connell had shown no interest in making any upfront payments to Mr Sigalla. As appears above, no arrangement was made with Mr Sigalla for his assistance in capital raising at that time, but the possibility of using Mr Sigalla's services in this regard was not foreclosed.

112 On 10 May 2016 Mr O'Connell met with Mr Sigalla at Danny's café, across the road from Worldwide's office. That meeting appears to have covered a number of matters.

113 First, Mr O'Connell recalled that Mr Sigalla had had difficulty joining the Pinnaclebet website as a new customer, as he had previously joined as a member and the system prevented him from joining again. Mr O'Connell then took Mr Sigalla back to the Pinnaclebet office to speak with two 'IT people' and resolve this issue.

114 Second, Mr Sigalla told Mr O'Connell about potential big players that he could introduce to Pinnaclebet. Mr O'Connell recalled Mr Sigalla saying that:

he had people calling him about the prospect or the intention of [becoming involved in] the Pinnaclebet business and they wanted to know more information about it and he also said he had been speaking to some of his stockbroker friends that bet very big and that many of them were interested in depositing funds to the website.[21]

115 Mr O'Connell gave evidence that Mr Sigalla told him about:

three ... high value customers that he knew. One guy wanted to deposit somewhere between $2 million and $3 million, another guy $4 million and another guy $10 million to $11 million and I said, 'Let's start with the smaller guy to start with and we'll see how we go from there.' He said that these guys bet very big on a multitude of sport events.[22]

116 Third, during the meeting, Mr O'Connell contacted Ms Cad by Skype to obtain the details of the Worldwide Westpac account into which Mr Sigalla and his gambling friends could deposit funds. Mr O'Connell said that once Ms Cad had given him that information over Skype, he took a screen shot of the information and sent it by text message to Mr Sigalla while he was still with him at the café.

117 The effect of Mr O'Connell's evidence was that he was expecting Mr Sigalla, or one of his associated big players, to deposit somewhere between $2 million and $3 million into the Worldwide Westpac account, as it was the details of that account which he had provided to Mr Sigalla that day. However, no monies were ever deposited by Mr Sigalla or any of his big player associates into the Worldwide Westpac account. Instead, on 30 May 2016 the stolen funds were paid by direct deposit into the Worldwide ANZ account, being the account specified on the Pinnaclebet website, notwithstanding that this account was not intended to be used for deposits of that magnitude.

118 Prior to that deposit, Mr O'Connell had been instructed by Mr Hill to contact Detective Howard immediately if another large amount like the La Trobe University deposit was paid into one of Worldwide's bank accounts without prior arrangement. Mr O'Connell said that he learned of the deposit of the stolen funds at about 10:00 pm on 30 May, and immediately commenced attempts to contact Detective Howard. He said that he eventually spoke with Detective Howard before midnight. Detective Howard gave evidence, consistent with his brief file note, that Mr O'Connell told him:

that he suspected the funds were stolen or fraudulent because they had entered the Pinnaclebet account via the same means, in that when they arrived they didn't have a reference to them for a customer. They were of a large value of over $2 million and he had yet to receive any contact from an owner of the funds which he said was uncharacteristic for the company and it was, in his view, the same as the initial funds that I was investigating.[23]

119 In response to the report from Mr O'Connell, Detective Howard told him that he had three or four detectives working with him on that night shift and would seek their advice. In these circumstances, he told Mr O'Connell that the:

primary goal was to freeze those funds so that we didn't run the risk of losing them like we did the last time and I told him that I would brief the other detectives with me, we would formulate a plan and I would be contacting him shortly thereafter with some directions or ways that they would be able to assist us. We considered this to be a live job because the funds were active and untouched and therefore, an offender would likely try and access them, so that we could have something in place within 24, 48 hours to effect an arrest.[24]

120 Following his conversation with Mr O'Connell, Detective Howard prepared and sent an email to Messrs O'Connell and Hill at 1:44 am.[25] In his email, Detective Howard thanked Mr O'Connell for his prompt advice that the stolen funds had been deposited, and continued:

I appreciate that nothing is confirmed as fraudulent yet and that we are suspecting the funds are going to be stolen based on the circumstances of their deposit.

We will start to get the wheels turning on our end. In the interim can I please request the following from Pinnacle:

• That the new funds (approx. $2 million) be 'frozen' so that they are not able to be accessed by an offender for the purpose of betting.
• That your relevant staff be briefed that an individual will likely make contact either via the online chat or by phone.
• That when the individual calls, all possible information be obtained that may assist the investigators ...[26]

121 At this time, the internet bank statements for the Worldwide ANZ account did not contain the names of the persons who had deposited the stolen funds. The internet statements included only the designation 'MTS' (money transfer system).

122 The plaintiffs called evidence from an ANZ bank employee to explain:

(1) the time at which the ANZ bank records would have enabled the bank to inform Worldwide of the names of the depositors if asked to do so by a person authorised to operate the Worldwide ANZ account; and

(2) the time when, in the normal course, the depositors' names would have been visible by persons with access to the internet bank statements for that account.

123 The bank employee's evidence was to the following effect:

(1) if requested, ANZ staff could have informed a person authorised to operate the Worldwide ANZ account from 5:23 pm on 30 May 2016 that the plaintiffs were the depositors of the stolen funds, as follows:

30 MAY ...

TRANSFER

FROM CAPE PRESTON POR CITIC PACIFIC $397,499.75

TRANSFER

FROM SINO IRON P/L SINO IRON $1,750,189.65

(2) ANZ normally completes its 'end of day process' for all transactions for a given day at about 2:00 am on the following day, and from that time 'full details' of the day's transactions 'are available in the internet banking system'. (I note that this means the plaintiffs' names appeared on the internet bank statements by about 2:00 am on 31 May 2016.)

125 At 5:21 pm on 31 May 2016, Mr Sigalla sent a text to Mr O'Connell saying 'please call me'.

126 Mr O'Connell telephoned Mr Sigalla at 5:40 pm and they spoke for less than one minute. During that conversation, Mr Sigalla told Mr O'Connell that he and a friend had deposited funds 'as arranged ... to the website'. Mr O'Connell said that he wanted to know more details about the deposit and so arranged to meet with Mr Sigalla at the Royal Oak Hotel in Double Bay.

127 Mr O'Connell said that he then contacted Mr Hill, who said to him: 'Let's go and meet the guy and hear what he has to say'. He drove to Mr Hill's home and the two men then went together to meet Mr Sigalla at the Royal Oak Hotel.

128 Mr O'Connell said that the meeting at the Royal Oak Hotel took place at about 6:00 pm and lasted about 15 minutes. In his evidence in chief, he gave brief evidence about what was discussed during the meeting as to the source of the stolen funds:

Mr Sigalla told us that he had organised his friend to send the funds to us. His friend was a guy called Alex Kamara and apparently he was some sort of high rolling stockbroker or some sort of money guy and he wished to do some betting with the assistance of Andrew.

129 Later in his evidence in chief, Mr O'Connell said that the discussions in the meeting also included reference to the fact that Mr Sigalla had introduced a big player to the Pinnaclebet website:

we were talking about the one that he introduced and he was talking about introducing more that week and I said he needed to sort of wait. The conversation I had is, 'Let's see how this guy goes, whether he likes the service, and then we will go from there.'[27]

130 This aspect of the conversation at the Royal Oak Hotel is supported by a text message sent by Mr O'Connell to Mr Sigalla at 8:31 pm that evening and Mr Sigalla's text response:

O'Connell text: Hey mate thanks for meeting up. Good to hear that our site will be popular with your big punting mates. I spoke to our IT and we can get you individual sub accounts without issue.

Sigalla response: That's good. See u for a coffee tomorrow around 12?[28]

131 After the meeting, Mr O'Connell drove Mr Hill home.

132 In cross-examination, Mr O'Connell agreed that the bar where the meeting took place was a large room with video screens on three or more of the walls, which were broadcasting racing and other sporting events. There were people standing around drinking beer and other beverages at tall standing tables. As to what was said and done during the meeting, it is necessary to set out the relevant aspects of the cross-examination:

During that meeting he showed you an e-mail [a reference to the 5:05 pm email from Alex Kamara described below] and the e-mail said: 'Below is a screen short' - obviously a typo - 'of the payment that already entered the betting account. CIVIC, is the name of the company where the fund is coming from. Please send a number to call you'?---I am not sure about that, Mr Maiden. I am familiar with the e-mail that you are talking about because I have seen it since but I am not sure if that's what he showed me on the evening or not.

You can't recall exactly what it was he showed you on the evening?---He showed me an e-mail with entry numbers being deposited and he was saying that him and his associate had made those deposits.

Can you open volume 2 please at 1489?---Yes.

Do you see the e-mail in the middle of the page?---I do.

Do you see the e-mail at the bottom of the page?---I do.

The e-mail in the middle of the page answers the description of what you just said you remember seeing at the hotel?---I didn't see it in this format, it was a totally different form. It was like some sort of banking screen shot, not just like black and white text. I believed it to be the mining company's payment system.

This e-mail that you saw; you believed the e-mail to be the mining company's system?---No, Mr Maiden, the screen shot that he showed me.

You didn't ask Mr Sigalla who actually owned the money, did you?---Yes, I did.

You did? What did he say?---He said that his associate in London, this guy called Alex, had investments in companies all around the world and that he would send the money from a local company.

His evidence was that Alex owned an investment in a company?---He just told me that the guy was a rich businessman who had companies everywhere or investments everywhere.

He didn't actually tell you who owned the money then?---He told me Alex owned the money. He said Alex had sent the money and he was the owner of the money.

When you say, 'I thought it was from the mining company's payment system', you didn't know until much later that the money was coming from a mining company?---I did. Mr Sigalla told me on the 9th. I remember clearly I said something like, 'It's called Seeno'. I called it 'Seeno' something and he said no, it's Sino Steel and that Alex was some sort of owner or hot shot there.

I see. So now your evidence is that you had seen the names of the companies before you met with Mr Sigalla?---No, Mr Sigalla told me it was from - because we had an argument about the name Sino and Seeno and I didn't pronounce it correctly. Not an argument, a discussion.

This is the first we have heard this piece of evidence?---You haven't asked the question before, Mr Maiden.

You were asked by Dr Hanak about this conversation. You didn't mention it then?---He didn't ask me about the screen shot.

...

The only thing that distinguished this scenario from the La Trobe scenario was the fact that - two things: first, this money had been claimed by a person who you knew; and second, that this person showed you an e-mail rather than just ringing up and claiming the money?---I think he did both but yes, you are correct.

So really, these were both situations where a person had contacted Pinnaclebet and said, without independent verification, that certain money in the Pinnaclebet bank account belonged to - I withdraw that. That certain money in the Pinnaclebet bank account had been paid for them to gamble with?---That's correct.

...

The mere fact that money had been organised by someone else for the use of Mr Sigalla didn't mean that Mr Sigalla couldn't have been part of a fraud, did it?---No.

Alternatively, it did not mean that he might not have been a stooge for some fraudsters preying on him?---I guess.

At this point before you spoke to Detective Howard again you were really in no better position regarding this money than you were in relation to the La Trobe funds, were you?---I was in a lot better position.

The only thing that differentiated it was the fact that you knew Mr Sigalla and he showed you something on a mobile phone that he said was evidence of authorisation?---He had also told me that money that we had been expecting for a couple of weeks for his customer to deposit and bet with had arrived and he knew intimate details of it.

Yes but again, your evidence is that that was the same with Mr Simpson; that he had contacted you and told you to expect money and it arrived?---Yes.

Mr Simpson's money ended up being a fraud?---It did.

Mr Sigalla's money could have been a fraud?---No, I don't think so. I asked Mr Howard who was the cyber crime expert and he said no...[29]

133 There was further cross-examination of Mr O'Connell concerning a 'screenshot' which Mr Sigalla sent by a later email to Mr Hill. Mr O'Connell denied that this was the 'screenshot' he was shown during the meeting. This issue is referred to below when considering the email correspondence with Mr Sigalla after the meeting.

134 In re-examination, Mr O'Connell was asked to describe the screenshot as shown to him at the Royal Oak Hotel meeting, as best he could:

(1) 'It was like a - it looked like some form of monitor or computer screen of some sort. It had - I don't know if it was red on blue or blue on red but it was definitely red with blue. It had black writing on it ...'

(2) 'the black writing - mentioned the amounts that had been sent ... - the only word I remember on there was the word ... Sino ...'

(3) 'The amounts were very specific. There was the $1.7 million and the other amount, I think it was 397 grand.' Mr O'Connell said he 'used that as a basis to check against what we had received.'

(4) 'It might have been [sent by] an e-mail, it could have been a text message. I am really not sure.'[30]

135 Before turning to consider Mr Hill's evidence of the Royal Oak Hotel meeting, it is necessary to note an important, and repeated, theme of Mr O'Connell's evidence in chief. He said that, based only on his prior dealings with Mr Sigalla, and what Mr Sigalla said and showed to him and Mr Hill during the meeting, he was satisfied that Mr Sigalla was entitled to bet with the stolen funds:

(1) 'Once Rob was satisfied that it was Andrew's money and he had proven that he was the owner of it we were okay to go'.

(2) 'In this instance, I had met Mr Sigalla before. He had proven to my satisfaction that he had sent the funds. The only way the funds could have come to us with him knowing the amount is that either he sent those funds or someone he knew sent those funds as he had a screen dump that he showed to us which meant he owned the funds in my view.'

136 Mr O'Connell maintained this position in cross-examination, although he added that he was reassured in his belief by the fact that, in an email sent by Detective Howard that evening at 9:50 pm, Detective Howard (who he said 'was the cyber crime expert') raised no objection to Worldwide allowing the stolen funds to be gambled. This aspect of Mr O'Connell's evidence is considered below.

137 In his evidence in chief, Mr Hill said that he first learned of the deposit of the stolen funds into the Worldwide ANZ account when he woke up on the morning of 31 May 2016 and saw the email from Mr Howard to Mr O'Connell sent at 1:44 am, which had been copied to him. At this time, Mr Hill said that 'we were dealing with it as funds that had landed in our account with no owner'.

138 Later that day, he arranged to meet Mr O'Connell to discuss business matters. However, when Mr O'Connell arrived he mentioned that Mr Sigalla had been in contact and he had agreed to meet him at the Royal Oak Hotel. Mr Hill said that he was 'pretty busy' and endeavoured to have Mr O'Connell attend alone, but 'relented' and accompanied him to the meeting. This differed from Mr O'Connell's evidence that Mr Hill suggested 'meet[ing] the guy and hear[ing] what he has to say'.

139 Mr Hill said that, on arrival at the Royal Oak Hotel, he immediately went to the bathroom and also 'checked out [the hotel's] TAB area'. Mr O'Connell made no mention of this in his evidence. When he found Mr Sigalla and Mr O'Connell in the bar, they were 'already in discussion'. To his recollection, the discussions in the bar were 'fairly brief'. It is necessary to set out the relevant portions of the evidence given by Mr Hill concerning the discussions:

(1) Prior to this meeting, in the general context of conversation with Andrew Sigalla in regards to capital raising, he had preempted that ... he would open an account with Pinnaclebet, that he would do some significant betting with Pinnaclebet and more than likely he would bring other customers to Pinnaclebet also. His stories were wide and varied so I won't bore you with the minutiae of them but the bottom line is he had a very specific target to get money into Pinnaclebet before - there were some very big events coming up. One was the French Open, one was the European soccer.

(2) Andrew claimed the deposit, the quantum of the deposit. ... I asked him a few questions in relation to the funds, were they his funds. He was very adamant that they were his funds. ... I asked Andrew Sigalla were the funds his. He said yes. I asked him - because we'd had this previous incident that related very directly to a previous [fraud] - I didn't want to obviously fill him in on the details but I was very careful to ask him those specific questions, 'Were the funds yours?' He said, 'Yes'. 'Were they legally sourced?' He said 'Yes, they are through business contacts. I am doing business with somebody in London' and blah, blah, blah. But he did, to the best of my belief, say the funds would be coming from an Australian company. I took from that that his overseas business contacts had interest in an Australian company.

(3) I asked him did he have any proof of this. He pulled out - I don't know if it was his phone or he had a separate PDA device ... There was something clearly that had amounts of money on there and where the funds had come from. ...

...

Did you see any amounts that you could - - -?---What I saw was clear was that there were three amounts, or it appeared to be three amounts. He was claiming three deposits. It was clear that there was numeracy, there was numbers written there and quite big numbers. It was clear that there was a name corresponding with the numbers. It looked like some sort of Excel interface. Possibly it was coloured.

(4) My eyesight is not the best, I am blind in one eye and nighttime not so good. I asked Nick to have a good look at the phone or the device that he had and see if those numbers corresponded with the ones that arrived in our account. I believe Nick pulled out his phone or he had his phone handy. He tapped into ANZ and he confirmed they were the same amounts that we had received in terms of deposit into our account.

How long did you look at that PDA for?---It would have been seconds. It was a bit full-on for me because when I looked at it, without pulling it this close I wouldn't have seen it in that light. It was quite - it was dim lit.

(5) How long did the meeting last?---It was pretty quick. Like, I would say about 15 minutes. So he claimed the fund. I asked Andrew Sigalla, I said, 'Listen, that's all good. That's your statement. He's warranted it in person. Do me a favour and put that in an e-mail for me, in an e-mail format, and we will follow up on it.'

140 Like Mr O'Connell, Mr Hill also placed great reliance on the email sent by Detective Howard to Mr Hill at 9:50 pm that evening, which included the statement: '[i]f your office is satisfied that Andrew is the owner, then we don't need any further involvement with those funds or a requirement for them to be frozen.'[31] Mr Hill said that he placed 'huge' significance on this email, regarded it as 'an endorsement' from Detective Howard (as a 'specialist') that 'validated [his] opinion' that Mr Sigalla was entitled to bet with the stolen funds, and made him 'feel very comfortable' that was the case.

141 Mr Hill also gave evidence, consistent with that of Mr O'Connell that, based on what Mr Sigalla said and did during the meeting at the Royal Oak Hotel, he was satisfied that Mr Sigalla was entitled to bet with the stolen funds; but he nevertheless sought some confirmation from Mr Sigalla:

I had no doubt with his conviction. When I met up with him, I would say the chances of him misrepresenting his situation in regards to his genuine belief that he owned the funds, the funds were his, I would say there was no chance he was misrepresenting but to be sure_, I wanted some e-mail documentation. I just wanted an opportunity to follow up and just ensure that his story was verified and checked out._ ...

... especially in [light] of the fact that we had had a previous fraud with a non-sighted player, Andrew Sigalla is well-known in the industry to be a very big player but if I had just received an e-mail out of the blue with no prior history, you would have to deal with it very suspiciously. The fact that I met up with him in person, he warranted in person that it was his funds. He was willing to put his name to e-mail and say, 'Yep, these are my funds', to me was significant.

...

142 Mr Hill completed his examination in chief concerning the veracity of Mr Sigalla's statements during the Royal Oak Hotel meeting, by referring to emails he received from Mr Sigalla after the meeting (the '31 May emails'), as follows:

(1) The 6:48 pm email. When Mr Hill arrived home from the meeting, he saw an email from Mr Sigalla to him, copied to Alex Kamara and Marty Dougherty (another associate of Mr Sigalla's), sent at 6:48 pm. The email was in the following terms:

Dear Rob

My associate in London has advised me that he has forwarded the below amounts to my Pinnacle Bet account

There are 3 deposits

1. 1,750,189

2. 397,500

3. 457,556

Alex can you please confirm those are the 3 amounts that you have sent to my account to bet with ?

Rob can you please confirm to me when the money hits your bank account .

Cheers

Andrew[32]

It appears this email also forwarded an earlier email from Mr Kamara to Mr Sigalla (copied to Mr Dougherty) at 5:05 pm that day, set out below.

(2) The 7:43 pm email. Mr Kamara sent an email to Mr Sigalla and copied it to Mr Hill and Mr Dougherty. In this email, Mr Kamara confirmed to Mr Sigalla that 'the payment was sent by my clients to you as the beneficiary with the reference numbers that have already given you'. The email chain included the 5:05 pm email.

Hi Andrew,

Below is a screen short [sic] of the payment that already entered the betting account.

CIVIC [sic], is the name of the company where the fund is coming from.

Please send me a number to call you.

Regards

Alex[33]

(4) The 5:05 pm email attached an image from a ledger. The copy ledger included details of the arithmetical make-up of the two deposits comprising the stolen funds, and a third amount of $457,556, referred to in the 6:48 pm email:

(5) Mr Hill said that he had 'a very good recollection' of the 5:05 pm email and the attached screenshot. As appears above, Mr O'Connell denied in evidence that this was the screenshot which he saw on Mr Sigalla's mobile phone (or what Mr Hill referred to as a 'PDA') during the Royal Oak Hotel meeting. Although not stated in his evidence in chief, he said in cross-examination that the screenshot he saw looked different and included a reference to 'Sino', and he and Mr Sigalla discussed the correct pronunciation of that name. Mr Hill and Mr O'Connell gave no evidence of seeing the name 'Citic' or 'CIVIC' on the screenshot they were shown.

(6) The 8:02 pm email. By this email, Mr Kamara emailed Mr Sigalla (copied to Mr Hill and Mr Dougherty) thanking him for an earlier email which noted that Pinnaclebet had only received two of the three payments (being the stolen funds).

(7) The 8:50 pm email. By this email, Mr Hill emailed Mr Sigalla and told him that only two of the deposits to which he referred had been received by Pinnaclebet. He said that he would inform Mr Sigalla when the third deposit 'hits the account' and concluded:

Do you want these funds credited to your PinnacleBet account, or are you acting as nominee and agent for this player? If so, you can supply the account holder details when they come to hand.[34]

(8) The 8:58 pm email. Mr Sigalla responded to Mr Hill (copied to Mr Dougherty and Mr Kamara) at 8:58 pm. He asked Mr Hill to credit the stolen funds to his account '[f]or the time being ... until further communication'.

(9) The 9:02 pm email. Mr Hill sent an email to Detective Howard in the following terms:

Michael - the owner/nominee for the funds that Nick O'Connell alerted you to contacted me today. He is an industry player that is known to me and I believe it's not related to the previous fraud. His deposit is consistent with what was mentioned to me as possible a few weeks back. I met with him tonight (he's in Sydney) to ensure that I wasn't receiving a fraudulent email. The funds are currently 'frozen' but he wishes to bet with them quite soon. Copy of his email conversation and my reply below...[35]

In fact, Mr Hill did not include a full copy of his email conversation with Mr Sigalla. Instead, he forwarded Detective Howard a cut-and-pasted version of only the 6:48 pm email and the 8:50 pm email, from which he had excluded all of the information containing the full names and email addresses of the senders and recipients of the emails. Thus, Detective Howard was informed only that the 'owner/nominee for the funds' (it was unclear which) was a man with the first name 'Andrew', who had an associate in London whose first name may have been 'Alex', and that 'Alex' had arranged for the transfer of the stolen funds to the Worldwide ANZ account. Mr Hill did not forward a copy of the 5:05 email to Mr Howard.

(10) The 9:06 pm email. A few minutes later Mr Hill emailed Mr O'Connell in the following terms:

Nick - can you credit the two deposits listed below to Andrew Sigalla Pinnacle account. Please keep the account frozen till I clear it with police investigator. I will revert when able to be accessed.

(11) The 9:50 pm email. Detective Howard replied to Mr Hill's 9:02 pm email in less than 50 minutes, as follows:

Rob,

That's good news.

I do not have a further victim reporting that they have been deceived of funds and given your information then there is no issue from our end.

Our only basis for believing the funds to be fraudulent were the notification from [Mr O'Connell], the similarity in value and no immediate reference displayed.

If your office is satisfied that Andrew is the owner, then we don't need any further involvement with those funds or a requirement for them to be frozen.

Thanks again and I'll speak with you soon,[36]

(12) The 10:25 pm email. By this email, Mr Hill forwarded Detective Howard's 9:50 pm email to Mr O'Connell, who read it closely.

143 In cross-examination, Mr Hill, like Mr O'Connell, was definite that the screenshot attached to Mr Kamara's 5:05 pm email (set out above) was not the one which was shown to him and Mr O'Connell during the meeting at the Royal Oak Hotel. When the attachment to the email initially forwarding that screenshot to him could not be opened, he raised the issue with Mr Sigalla and later received another email from Mr Sigalla with an attachment he could open. He described the screenshot produced by Mr Sigalla during the meeting as 'coloured, it had names, it had less numbers, from what I could see, and it looked like some sort of Excel spreadsheet'.

144 Mr Hill gave this definite evidence notwithstanding his own evidence that his vision was 'terrible' and he had only 'a fleeting glimpse' of the screenshot in the hotel before handing it over to Mr O'Connell for examination.

145 Mr Hill also maintained in cross-examination that, at the end of the Royal Oak Hotel meeting, he believed what Mr Sigalla had told him and he had no reason to believe Mr Sigalla was acting fraudulently or being used as the instrument of fraud by others such as Mr Kamara. When it was put to him that the fraud was no different from the earlier fraud concerning La Trobe University, he denied that was so and gave the following reasons:

(1) 'He arrived in person, he was a real person. So very different to the first instance where there was a guy claiming online to be the owner of funds.'

(2) 'This was a gentleman that we know in the industry to be a very big player.'

(3) He had previously forecast that he would be sending or having sent funds to Pinnaclebet. This turned out to be accurate.'

(4) 'He had full knowledge of the quantum of his funds, the arrival date of his funds. '

(6) 'He provided a supplementary e-mail qualifying what he had told me in person'.

(7) 'Then over and above that, that information was passed in advance to Victorian Police.'[37]

The stolen funds are credited to Mr Sigalla's betting account

146 I turn now to consider the circumstances in which the stolen funds were credited to Mr Sigalla's Pinnaclebet account.

147 Prior to receipt of Detective Howard's 9:50 pm email, Mr Hill sent his 9:06 pm email to Mr O'Connell, requesting him to credit the two deposits to Mr Sigalla's account but to 'keep the account frozen till I clear it with [Detective Howard]'. Then, following receipt of Detective Howard's 9:50 pm email, Mr Hill sent a copy of that email to Mr O'Connell at 10:25 pm. By a combination of the 9:06 pm email and the 10:25 pm email, I infer that Mr O'Connell understood that Mr Hill had instructed him: (1) to credit the stolen funds to Mr Sigalla's betting account; and (2) that he had obtained the clearance referred to in his 9:06 pm email. At 11:05 pm, Mr Hill emailed Detective Howard in response to his 9:50 pm email. Mr Hill's email informed Detective Howard that he had instructed his 'team to credit the player's betting account and allow him to access his funds'.

148 In his evidence in chief, Mr O'Connell said that he did not immediately instruct Ms Cad to credit Mr Sigalla's betting account. He waited until part way through the next day, 1 June 2016, because 'although Sigalla had satisfied us that he was the owner of the funds I still wanted a clearance from the investigator who was investigating the La Trobe fraud'. Mr O'Connell added that he 'processed the information' in Detective Howard's 9:50 pm email and then 'waited a period of time' before instructing Ms Cad to credit Mr Sigalla's betting account.

149 Before Ms Cad acted on Mr O'Connell's instruction to credit Mr Sigalla's betting account, she engaged in a Skype conversation with him on that issue. The transcript of that conversation is important, because it reveals that Ms Cad raised doubts as to whether Mr Sigalla was in fact entitled to bet with the stolen funds. Ms Cad first raised her concerns at 11:49 am, asking Mr O'Connell to check the mobile phone number given by Mr Sigalla when opening his account. After a break of about 15 minutes, during which I infer Ms Cad was thinking about the veracity of Mr Sigalla's claims, she said to Mr O'Connell:

hey do we need to get a copy of the deposit they have made

what if it is not them and will be claimed after

The account sigalla was created way back 10 May

150 In response to these queries and concerns, Mr O'Connell resumed the Skype conversation about five minutes later and placated Ms Cad's concerns by stating:

I'll send you the email for your records

I sent you robs email'

Then he [Mr Hill] sent me this on skype.

151 The reference to 'robs email' was to Mr Hill's 9:06 pm email to Mr O'Connell, which forwarded Mr Sigalla's 6:48 pm, 8:50 pm, 8:58 pm and 9:02 pm emails and Mr Kamara's 5:05 pm email. That email chain was forwarded to Ms Cad by Mr O'Connell during their Skype conversation. In evidence, Mr O'Connell identified that email to Ms Cad as the email containing 'robs email' which he had referred to in the Skype conversation.

152 The Skype conversations were produced to the Court after Ms Cad had been excused as a witness. However, Ms Cad referred to the 'robs email' chain as the information which she relied upon as authorisation to credit Mr Sigalla's account as follows:

the e-mail information that was ... forwarded to me by Mr O'Connell, I remember that particular e-mail has two amounts of money that matches the details of the same amount when you check the statement of the ANZ Bank account and it was said in that e-mail it was expected from a customer named Mr Andrew Sigalla and he was able to provide the amount to the last cent that matches the details of the ANZ Bank account description for in this case it is enough for us to validate that that particular amount was deposited by a customer, Mr Andrew Sigalla, because as a sender you are the only one who has the knowledge of the amount that you are trying to send or the amount that you sent to a particular receiver.

Your team, that is you, acted only on the information provided by Mr O'Connell though; you didn't find any information outside of this information before you acted on his instruction?---No...[38]

153 Mr O'Connell's further reference in his Skype conversation with Ms Cad to Mr Hill sending him 'this on skype' was a reference to a screenshot which he forwarded. Mr O'Connell sent Ms Cad a screenshot of a Skype exchange between him and Mr Hill, in which Mr Hill instructed Mr O'Connell to credit the stolen money to Mr Sigalla's betting account. Following receipt of this text exchange, Ms Cad said she would credit the stolen funds as instructed.

154 There was a third deposit referred to in the 6:48 pm email, which had not been received at that time - and was never received into either the Worldwide ANZ account or the Worldwide Westpac account.

155 Mr Sigalla's betting account was credited with the stolen funds by two entries in the Pinnaclebet system, made at 1:51 pm and 1:57 pm respectively, on 1 June 2016. At this time, Mr Hill's and Mr O'Connell's own evidence establishes that they had knowledge of the following facts and circumstances (the 'admitted knowledge'):

(1) They knew Mr Sigalla as, at least, an acquaintance. Mr Hill more so and for longer, as he had an indirect familial association with Mr Sigalla.

(2) Mr Hill knew of Mr Sigalla's reputation as a large gambler on horse racing. He considered him to be a 'big player'. He thought he was a savvy businessman. Mr O'Connell believed Mr Sigalla was a wealthy businessman, who he knew 'to be a high flying guy' who 'spent a lot of money on hookers and parties and drugs and things like that ...'.

(3) From early May 2016, Mr Hill had dealings with Mr Sigalla concerning a proposed capital raising for the Pinnaclebet business. In the course of those dealings, Mr Sigalla told Mr Hill that he was frequently in court, including in a dispute with ASIC. In that context, Mr Sigalla was keen to obtain paid work assisting Worldwide in the proposed capital raising because, in Mr Sigalla's own words, he had: 'Legal fees coming out of [his] ass, and [he needed] to survive'.

(4) Mr O'Connell also had dealings with Mr Sigalla concerning the proposed capital raising, in which Mr Sigalla was seeking immediate payment for his services, rather than waiting for a success-based commission, as he '[couldn't] afford' to do otherwise.

(5) They knew of the La Trobe fraud. That fraud, like the fraud in question, involved a large deposit into the Worldwide ANZ account without specifying any customer's account details, as required by the rules of the Pinnaclebet website. As a result of the La Trobe fraud, Mr Hill had instructed Mr O'Connell to immediately report any further large undesignated deposits to Detective Howard.

(6) Mr O'Connell knew that Mr Sigalla had recently opened a new Pinnaclebet betting account in his own name, with the intention of depositing a large amount into the Worldwide Westpac account on behalf of big players he would introduce to Pinnaclebet. Mr Sigalla had been given the Worldwide Westpac account details and told to deposit funds to that account.

(7) They knew that, in these circumstances, Mr O'Connell did not even consider that the deposits were from Mr Sigalla or a person introduced by him. In accordance with Mr Hill's instruction, Mr O'Connell informed Detective Howard of the deposits and told him he suspected another fraud like the La Trobe fraud. Mr O'Connell then froze the deposits pending investigations by Detective Howard. Mr Hill agreed with Mr O'Connell's initial suspicion, and with him reporting the deposits to Detective Howard.

(8) They knew of the content of the Royal Oak Hotel meeting. Putting aside the differences in their recollection as to what was said during the meeting, they knew that Mr Sigalla was claiming the stolen funds were his to bet with and, as proof, showed them a screenshot on a mobile device depicting the (almost) precise amounts of the two deposits comprising the stolen funds, and a third amount, and referring to the name 'Sino'. Mr O'Connell gave evidence that Mr Sigalla had said that 'Alex [Kamara] owned the money'. Mr Hill gave evidence that Mr Sigalla claimed the funds as his own.

(9) They knew that, at the conclusion of the Royal Oak Hotel meeting, Mr Hill had asked Mr Sigalla to provide email verification of his claims, and that the 31 May emails from Mr Sigalla and Mr Kamara were the only verification put forward in response.

(10) They read and thus knew the contents of the 31 May emails, which disclosed that the two deposits comprising the stolen funds, and a third deposit, had been made at the direction of Alex Kamara, who Mr Sigalla described as his 'associate in London':

(a) In his 5:05 pm email, Mr Kamara merely identified 'CIVIC' as 'the name of the company where the fund is coming from'.

(b) In his 7:43 pm email, Mr Kamara referred to the payments comprising the stolen funds 'being sent by my clients to [Mr Sigalla] as the beneficiary'.[39]

(c) In his 8:50 pm email, Mr Hill was unclear as to whether Mr Sigalla was acting on his own account or as 'nominee and agent for this player' (a reference to Mr Kamara).

(d) Mr Sigalla's 8:58 pm email asked Mr Hill to credit the stolen funds to his account 'for the time being ... until further communication'.

At the very least, there was uncertainty as to whether Mr Sigalla was claiming the stolen funds as his own, in whole or in part, or was acting as a mere nominee or agent for Mr Kamara (and perhaps his 'clients').

(11) Mr Kamara was unknown to them. They knew only that he was Mr Sigalla's 'associate in London'.

(12) They knew that, other than the word 'Sino' appearing on the screenshot shown to them at the Royal Oak Hotel meeting, and the misspelt 'CIVIC' in Mr Kamara's 5:05 pm email, they had no knowledge of Mr Kamara's connection to the depositor company or companies other than what Mr Sigalla told them in vague terms:

Mr Sigalla told us that he had organised his friend to send the funds to us. His friend was a guy called Alex Kamara and apparently he was some sort of high rolling stockbroker or some sort of money guy and he wished to do some betting with the assistance of Andrew.

...

You didn't ask Mr Sigalla who actually owned the money, did you?---Yes, I did.

You did? What did he say?---He said that his associate in London, this guy called Alex, had investments in companies all around the world and that he would send the money from a local company.

His evidence was that Alex owned an investment in a company?---He just told me that the guy was a rich businessman who had companies everywhere or investments everywhere.

He didn't actually tell you who owned the money then?---He told me Alex owned the money. He said Alex had sent the money and he was the owner of the money.

When you say, 'I thought it was from the mining company's payment system', you didn't know until much later that the money was coming from a mining company?---I did. Mr Sigalla told me on the 9th. I remember clearly I said something like, 'It's called Seeno'. I called it 'Seeno' something and he said no, it's Sino Steel and that Alex was some sort of owner or hot shot there.[40]

I asked Andrew Sigalla were the funds his. He said yes. I asked him - because we'd had this previous incident that related very directly to a previous [fraud] - I didn't want to obviously fill him in on the details but I was very careful to ask him those specific questions, 'Were the funds yours?' He said, 'Yes'. 'Were they legally sourced?' He said 'Yes, they are through business contacts. I am doing business with somebody in London' and blah, blah, blah. But he did, to the best of my belief, say the funds would be coming from an Australian company. I took from that that his overseas business contacts had interest in an Australian company.[41]

(13) Mr O'Connell knew that the stolen funds had been deposited in two amounts on 30 May 2016, that Ms Cad had told him at that time that each deposit was then designated 'MTS' on the internet bank statement for the Worldwide ANZ account, and that, by the early morning of 1 June at latest, the names of the depositor companies (the plaintiffs) appeared on the internet bank statement.[42]

(15) Mr O'Connell knew[43] of the contents of the Pinnaclebet reconciliation policy as stated on the website, which relevantly stated:

Electronic Funds Transfer (EFT) and Direct Bank Deposits

You can transfer funds of any amount directly from your bank account to your Pinnaclebet account using the following bank details. Please note that the funds will not be credited to your Pinnaclebet account until they have been verified on Pinnaclebet's bank statement and this may take up to 48 hours ...[44]

The verification involved looking at the internet bank statement for the Worldwide account and verifying the amount and the customer's name as depositor.[45]

(16) Mr O'Connell knew that he had delayed instructing Ms Cad to credit Mr Sigalla's betting account until the late morning of 1 June 2016, by which time he and Ms Cad knew that the stolen funds had been deposited by the plaintiffs, and that when he first asked Ms Cad to credit the stolen funds she had the doubts set out in the Skype conversation between them.

(17) They knew the third deposit referred to in Mr Kamara's 5:05 pm email, and Mr Sigalla's 6:48 pm email, had not been received - even though it had purportedly been made ('already entered the betting account') at the same time as the two deposits comprising the stolen funds.

(18) They each knew that their own subjective belief that Mr Sigalla was entitled to bet with the stolen funds was based only on:

(a) their prior knowledge of and dealings with him;

(d) the (almost) exact correlation between the amounts shown in the screenshot and the amounts deposited by the plaintiffs in the Worldwide ANZ account; and

(e) the 31 May emails (including the advice from Detective Howard in his 9:50 pm email).

(19) They knew that Detective Howard's advice that he would not be further involved, and that his requirement that the stolen funds be frozen had become unnecessary, was based on them ('your office') being 'satisfied that Andrew [Sigalla] is the owner [of the stolen funds]'.

156 For the reasons given below, I find that the admitted knowledge is sufficient to attribute knowledge in the third Baden category to each of Mr Hill and Mr O'Connell, and thus to Worldwide and The Odds Broker, at the time they instructed Ms Cad to credit Mr Sigalla's betting on 1 June 2016. Further, although strictly unnecessary for my conclusions below, I find that Mr Hill had knowledge in that category when he instructed Mr O'Connell to both credit Mr Sigalla's betting account and allow it to be traded.

Findings on admitted knowledge at the time stolen funds credited

157 Worldwide, Mr Hill and Mr O'Connell contend that, at the time the stolen funds were credited to Mr Sigalla's betting account, they had made all reasonable inquiries to satisfy themselves that Mr Sigalla was entitled to bet with the funds. They rely on the following matters:

(1) they acted responsibly by their initial report of the deposits to Detective Howard, their initial freezing of the stolen funds (ie not crediting them to Mr Sigalla's betting account) and by the fact that Mr Hill provided material aspects of the 31 May emails to Detective Howard and received Detective Howard's approval (as 'the cyber-crime expert') that there was nothing preventing them from allowing Mr Sigalla to bet with the funds;

(2) they acted responsibly by having security measures in place under the Pinnaclebet website rules;

(a) was known to them personally and as a 'big player';

(b) had opened a new Pinnaclebet account on 10 May 2016;

(c) had told them to expect a large deposit to the credit of his account of a similar order of magnitude (albeit that Mr O'Connell knew he had been directed to pay such an amount into the Worldwide Westpac account);

(d) had said he would introduce some big players to the Pinnaclebet website;

(e) had called on the day following the deposit of the stolen funds and claimed them;

(f) was able to provide evidence during the Royal Oak Hotel meeting as to the (almost) exact amounts of the two relevant deposits, including by reference to a screenshot on a mobile phone or other mobile device which named 'Sino' as one of the depositors; and

(g) by the 31 May emails, later provided email confirmation as to the amounts and source of the relevant deposits.

158 I do not accept the defendants' submissions. In my opinion, the admitted knowledge constituted circumstances which would have led an honest and reasonable person in their position to have made further inquiries before crediting Mr Sigalla's account with the stolen funds. Had those inquiries been made, the fraud would have been revealed and Mr Sigalla's betting account would not have been credited.

159 It is first necessary to identify the inquiries which honest and reasonable persons in the position of Mr Hill and Mr O'Connell would have made with their admitted knowledge. In my opinion, honest and reasonable persons in such circumstances would have:

(1) checked the internet bank statements for the Worldwide ANZ account and identified the names of the depositors of the stolen funds, namely, the plaintiffs. Mr O'Connell and Ms Cad gave evidence that, prior to Mr Sigalla's betting account being credited, they had seen the plaintiffs' names as depositors on the internet bank statements. Mr Hill did not instruct Mr O'Connell to wait and see the names of the depositors before crediting Mr Sigalla's account or allowing it to be operated. His instructions to Mr O'Connell were based on his admitted knowledge only; and

(2) before crediting Mr Sigalla's betting account, contacted the plaintiffs and informed them that:

(a) the stolen funds had been deposited into the Worldwide ANZ account; and

(b) those funds had been claimed by a Pinnaclebet betting customer who wished to use the funds to gamble on international sporting events,

and asked if the deposits had in fact been made for that purpose (the 'simple inquiry').

160 The making of the simple inquiry would have been easy. It would not necessarily have involved naming Mr Sigalla or Mr Kamara, and thus breaching any customer confidentiality concerns. All that needed to be done was to find the contact details of the plaintiffs by an internet search, telephone, and ask to speak with someone in authority in their accounts department. Had this been done, the fraud would have been discovered immediately, without any need to first name Mr Sigalla or Mr Kamara. Once the fraud had been discovered, there could have been no good reason to withhold their names on client confidentiality grounds.

161 Moreover, prior to the names of the plaintiffs becoming visible on the internet bank statements for the Worldwide ANZ account, Mr Hill could easily have telephoned the ANZ Bank and sought information as to the identity of the depositors. He was still in the country at the time, and could have done so himself or asked Ms Cad, as an authorised account signatory, to make the inquiries on his behalf. Such an approach would have been one taken by an honest and reasonable person in the circumstances confronting Mr Hill.

162 At this time, on their evidence as to what was said and shown to them by Mr Sigalla during the Royal Oak Hotel meeting, they knew that a screenshot of a remittance record or like document referred to a company including the name 'Sino', and that the 31 May email correspondence made no reference to Sino but only to a company named 'CIVIC'. There is no evidence that a company with a name including the word 'CIVIC' was mentioned during the course of that meeting. The 31 May emails did not, as Mr Hill had requested at the conclusion of the Royal Oak Hotel meeting, contain proof of a rational connection between either Mr Sigalla or Mr Kamara and any company with a name including either of those words. Mr Kamara's 5:05 pm email disclosed that his email address did not include either of those names ('kamara@prifan.com').

163 As the facts known to both men stood prior to Mr O'Connell seeing the plaintiffs' names on the Worldwide ANZ internet bank statement, the circumstances clearly called for further inquiry as to the identity of the plaintiffs (which was available from ANZ if requested), the identity of Mr Kamara, the relationship between him and the plaintiffs as depositors, and of his entitlement to use their funds to gamble. This was especially so where the amount of the stolen funds was very large in comparison to the standard size of deposits by betting customers, as revealed by the bank statements in evidence, and the fact that the only recent deposit of a similar size (by La Trobe University) was a known fraud on that depositor. In these circumstances, Mr Hill's and Mr O'Connell's initial beliefs that the deposits of the stolen funds were fraudulent called for special caution. Their beliefs should not have been brushed aside so easily by Mr Sigalla's statements, the screenshot and the 31 May emails.

164 Put simply, the circumstances required Mr Hill and Mr O'Connell to wait until the identity of the depositor or depositors was known, and then make the simple inquiry, before deciding whether or not to credit Mr Sigalla's betting account. Mr O'Connell did the former but not the latter. Mr Hill instructed Mr O'Connell to credit Mr Sigalla's betting account without doing either.

165 I do not accept that Mr Hill's longstanding acquaintance with Mr Sigalla, his indirect familial association with him, his belief that Mr Sigalla was a savvy businessman with a reputation as a large gambler on horseracing, or his dealings with Mr Sigalla concerning the proposed capital raising, justified him in declining to make the simple inquiry referred to above or to cause Mr O'Connell and/or Ms Cad to make that inquiry. Mr O'Connell's position was no different. He had a lesser acquaintance with Mr Sigalla than did Mr Hill, and was intimately involved in the Pinnaclebet business as its general manager. Further, he knew the names of the depositors - ie the plaintiffs, before he instructed Ms Cad to credit Mr Sigalla's betting account.

166 As to their reliance on Detective Howard's so called verification of Mr Sigalla's claims, that reliance was wholly misplaced. Had they or either of them turned their minds to whether Detective Howard had in fact given them any endorsement, validation or comfort by his email, they would have appreciated that, objectively considered, he had not.

167 In reaching this conclusion, I have taken into account only the admitted knowledge of Mr Hill and Mr O'Connell, and have applied Briginshaw principles.

Was the failure to inquire wilful and reckless?

168 In my opinion, Worldwide, Mr Hill and Mr O'Connell acted wilfully and recklessly in failing to make the simple inquiry. In addition to the reasons given above as to their failure to make such inquiries as an honest and reasonable person would have made in the circumstances, they had a commercial motive to want to believe Mr Sigalla's claims. As a result, they accepted as true flimsy information from a man with, at best, a mixed reputation, who gambled large amounts, who was frequently involved in court proceedings, and who was apparently without access to ready funds to pay his legal fees. My reasons follow.

169 First, the defendants' plan was to expand Pinnaclebet's turnover and customer base in order to ready it for sale. Mr O'Connell agreed that a sale of the business was the 'end goal':

The goal of this business was to accrue a lot of customers and then either of those UK places would have come and bought us out. We wanted market share. We wanted to get as many Australians as we could betting through this organisation. We had plans to get maybe 200,000 to 300,000 customers. We had done no marketing and hadn't aggressively done anything. We just launched an app before we had to close the business. We thought it was going to take us into the next sphere.

170 Second, Mr O'Connell and Mr Hill had an agreement whereby they would each receive 50 per cent of the profit of the sale of the business. So they each stood to profit from a sale.

171 Third, the defendants appeared to believe that the business was already worth a substantial sum of money at the relevant time. Mr O'Connell recalled an offer for a share of the business which would have valued the whole of Pinnaclebet at $30 million. Mr Hill recalled that offer as valuing the business at around $20 million. Mr Hill pulled together a short information memorandum 'in ten minutes' as part of the proposed capital raising process. That document, which Mr Hill said resembled one he had given to interested investors, relevantly provided:

Current turnover is A$4.5-$6 million per week.

...

Shares were sold in 2015 to industry participants for $600k each (10%=$1.2m). Those shareholders will contribute skills to PinnacleBet.

5% recently negotiated for $1m but not transacted yet. Potential shareholder is an industry participants that will contribute skills to PinnacleBet.

Opportunity

...

Current PinnacleBet valuation is $20 million.

Projected PinnacleBet valuation at Dec 2017 is $140 million+

...

It is intended that the business will be sold before the end of 2017...

172 Mr Hill testified that the reference to the sale of shares in 2015 related to the purchase of two 5 per cent stakes in a future investment entity by two industry participants for $600,000 each plus 'sweat equity' (meaning a contribution through working with the company). Mr Hill said that their combined investment of $1.2 million was 10 per cent of a 'discounted valuation' of the business of $12 million.

173 Fourth, it was going to take a lot of capital to grow the business to the projected valuation of '$140 million+'. Mr Hill said that their plan for an eventual sale of the business was going to require 'extravagant funding'. Mr Hill and Mr O'Connell saw Mr Sigalla as someone who could connect them to capital raising opportunities.

174 Fifth, Mr Hill and Mr O'Connell saw Mr Sigalla as someone who they thought could bring his 'big punting mates' to the Pinnaclebet business to grow turnover. Mr O'Connell recalled:

Did [Mr Sigalla] suggest ways that you could grow your turnover?---Yes. He said the best ways to do it would be to find the high value customers. I said I know just about every high value customer in this country and we deal with most of them. I said, 'I am happy to accept recommendations or introductions from people that you know.' He said that he had had extensive business all around the world and that he knew some of the world's biggest gamblers and that they would be very interested in using our site with the fact that they could bet and win and get paid and all the rest of it.[46]

175 The prospect of Mr Sigalla bringing large betting customers to Pinnaclebet was discussed in a number of emails and at various meetings, including the 10 May 2016 meeting discussed above.

176 Mr Hill agreed in cross-examination that he afforded preferential treatment to Mr Sigalla because of this prospect:

Your e-mail here on 3 June [which evidenced Mr Hill dealing directly with Mr Sigalla in relation to withdrawals from his betting account] is a slight departure from your usual hands-off practice of dealing with customers. You would agree with that?---Yes, that's correct.

The reason that you were providing more service to Mr Sigalla was because of the volume of business that you expected him to bring and to introduce to the business?---Yeah, that would be correct.[47]

177 To Mr O'Connell's knowledge, Mr Sigalla believed that Mr Hill was treating him differently because he was useful to the business. For example, when Mr Sigalla met with Mr O'Connell around 7 June 2016 to discuss withdrawing funds, Mr O'Connell told Mr Sigalla that there were daily limits on withdrawals. Mr O'Connell recalled Mr Sigalla telling him 'that he would be speaking to...Mr Hill', and 'the inference given was that I would be overruled by [Mr Hill] because [Mr Hill] saw the importance of what [Mr Sigalla] was doing in bringing big customers to the organisation'.[48]

178 Sixth, the injection of the stolen funds represented a contribution to Pinnaclebet's bottom line. In line with the commission and arbitrage arrangements set out above, Mr O'Connell thought that Mr Sigalla's trade generated more than $10,642.50 in revenue for the business. However, both Mr Hill and Mr O'Connell recognised that large injections of funds represented a risk to the business in two ways. First, a concentration of big-spending gamblers meant that the business was reliant on a small number of players who could leave at any time. Second, Pinnaclebet's trading arrangements meant that the business was reliant on trading organisations not defaulting on a bet, which had happened a couple of times in the past. Mr Hill said that the second risk meant there it was 'ridiculous' to say there was any benefit to Pinnaclebet in taking Mr Sigalla's money.

179 Although he recognised the risks attaching to such an injection of funds, Mr O'Connell accepted that:

(1) the 'larger the turnover the more valuable...the business', although he noted the business 'needed to get smaller customers as well on a retail type offering';

(2) 'of course we don't hold bets in our interest, [so] we didn't mind if the bets were very large because it made us commission';

(3) he was 'excited about the prospect' of Mr Sigalla getting on board and bringing the funds; and

(4) he 'really wanted to believe' Mr Sigalla when he told him that he was entitled to bring the money along and gamble with it.

180 In my opinion, the six matters above caused Mr Hill and Mr O'Connell to make only the superficial inquiries they admit to, rather than the inquiries an honest and reasonable person would make in the circumstances, in particular the simple inquiry of the plaintiffs as set out above. The inquiries they made were so manifestly inadequate in all the circumstances that something must have caused them to take the risk and credit Mr Sigalla's betting account on the basis of the flimsiest of information - assertions by Mr Sigalla during the Royal Oak Hotel meeting, the screenshot and the 31 May emails. As set out above, that information raised more questions than it answered. Further, the size of the deposits, the known fraud on La Trobe University just a few weeks earlier, and their initial beliefs that the deposits of the stolen funds were fraudulent, called for special caution before acting on the information put forward by Mr Sigalla.

181 The failure to make the requisite inquiries signifies both wilfulness and recklessness. In my opinion, those conditions of mind were motivated by the desire to keep Mr Sigalla on side in the hope that he would assist them to grow the Pinnaclebet business, by increasing turnover from big players introduced by him and in obtaining the necessary capital to grow the business by expanding the customer base generally. They believed that the successful achievement of these objectives would yield a significantly higher sale price for the Pinnaclebet business, and that each would share in the resulting profit on sale.

182 In reaching my conclusions based on the admitted knowledge, I have considered all the facts and circumstances falling within that description, and also the six matters I have relied on for finding a wilful and reckless failure to make the requisite inquiries. Of course, I have given greater weight to some factors than others. Taking them all in combination, however, I feel an actual persuasion, as required by the Briginshaw standard, that my conclusions are more probable than not.

Further factors bolstering findings as to knowledge

183 For the reasons given above, I have determined that Mr O'Connell's and Mr Hill's admitted knowledge is sufficient to conclude that they, and thus Worldwide, had sufficient knowledge and motive to justify a finding that Mr Hill had knowledge under the third Baden category at the time he instructed Mr O'Connell to credit the stolen funds to Mr Sigalla's betting account, and Mr O'Connell had knowledge in that category when he directed Ms Cad to implement that instruction. The following matters bolster, but are not necessary for, my conclusion.

184 First, Mr O'Connell and Mr Hill gave unsatisfactory evidence in many respects. At a general level, each of them was both argumentative and evasive in cross-examination. Some specific criticisms of their evidence appear above, and below, in considering relevant matters.

185 It was contended on behalf of the plaintiffs that Mr O'Connell had a tendency to self-aggrandisement, hyperbole and exaggeration. Examples were given - 'I have done more in [the gambling] business to prevent fraud than any other person in the history of wagering'; 'I have got the best memory of anyone in this room'. I agree with this contention.

186 The plaintiffs also submitted that Mr O'Connell adapted his evidence to suit what he saw as being in his and the other defendants' interests as the case progressed. For example, in examination in chief, he gave the following unqualified evidence: 'No bookmaker in the world will release customer information or data unless they were forced to. The customer is the most valuable part of what we do'. Later, when it suited him to state that he knew of Mr Sigalla as a high stakes gambler by reputation, he gave evidence about other bookmakers sharing information about 'many customers', including extensive information about Mr Sigalla. When he was confronted about the difference between those two accounts, he suggested (incorrectly) that the cross-examiner had failed to recount a relevant part of his earlier testimony, and added an implausible qualification to his earlier evidence, to the effect that bookmakers are happy to talk about customers once they have ceased to be customers. Again, I accept the plaintiffs' contentions in this regard.

187 On the other hand, Mr O'Connell gave much evidence which I accept as truthful and which was not challenged in cross-examination. I will not reject any of his evidence unless it is inconsistent with established facts or implausible.

188 Mr Hill also gave unsatisfactory or false evidence on some credit issues. The plaintiffs relied in particular on his failure to disclose during an interlocutory hearing, when required to disclose all of the defendants' assets on oath, that he and The Odds Broker had credit accounts with bookmakers for pre-funding of bets by Pinnaclebet customers. They relied also on Mr Hill's false statement on oath to Riordan J during an interlocutory hearing that accounts had been produced for The Odds Broker and that he could produce them. Again, I accept this criticism of Mr Hill's credibility. However, as with Mr O'Connell, there are many aspects of Mr Hill's evidence which I do accept, much of which was not the subject of cross-examination.

189 For the avoidance of doubt, I reject the plaintiffs' simplistic submission that, because there are some aspects of Mr O'Connell's and Mr Hill's evidence which the Court should not accept, the Court should disregard their evidence except insofar as it constitutes admissions or is corroborated by contemporaneous written material. The examples of their false or unreliable evidence do, however, impact on their evidence of conversations with Mr Sigalla, particularly the conversation at the Royal Oak Hotel. In this regard, the fact that Mr Sigalla was not called as a witness means that there is only evidence as to one side of a critical conversation upon which much of the defendants' defences on knowledge issues relies.

190 Second, as I have said, Mr Hill's endeavours to understate the full nature of his relationship with Mr Sigalla reflect poorly on his credit. Taking his evidence as a whole, I find that he deliberately set out to mislead the court as to the nature and extent of his relationship with Mr Sigalla, and only disclosed relevant evidence when a denial could easily have been shown to be objectively false - for example, his familial relationship with Mr Sigalla and his domestic partner's longstanding friendship with Melissa Caplice (Mr Sigalla's wife and his cousin).

191 Third, as appears above, taking the evidence as a whole, I find that Mr Hill's evidence that he did not know:

(1) anything about the subject matter of Mr Sigalla's legal disputes with ASIC;

(2) until recently that TZ had brought a related civil action against Mr Sigalla for embezzlement, and also joined Mr Sigalla's cousins (Melissa and Seamus Caplice) as defendants;

(3) any reason why his cousin and Mr Sigalla separated,

192 The fact that Mr Hill had this knowledge about Mr Sigalla, which cast a shadow over Mr Sigalla's honesty and reliability, bolsters my finding that Mr Hill acted willfully and recklessly in accepting Mr Sigalla's assertions as to his entitlement to bet with the stolen funds without first making the simple inquiry.

193 Fourth, the plaintiffs contend that Mr Hill deliberately withheld relevant evidence from Detective Howard, in order to obtain his release from his requirement that the stolen funds be 'frozen'.

194 As I have noted above, at 9:02 pm on 31 May 2016 Mr Hill sent an email to Detective Howard in which he said he had been contacted by 'an industry player' who identified himself as 'the owner/nominee for the funds'. Mr Hill also stated that he believed the deposit was 'not related to the previous [La Trobe University fraud]', and concluded 'Copy of his [Mr Sigalla's] email conversation and my reply below'.

195 Although Mr Hill described the email conversation which followed as a 'copy', it was not, in fact, a full copy. The email chain excluded the names and email addresses of all the participants in the email exchanges - that is, the names and email addresses of Messrs Sigalla, Kamara and Dougherty (the 'identification information'). The only names that Detective Howard knew from the email sent to him by Mr Hill were the first names 'Andrew' and 'Alex'.

196 Mr Hill said in cross-examination that '[Detective Howard] got verbatim everything ... anything I sent to Michael Howard was what Andrew Sigalla sent to me'. He said that he thought there was a 'much bigger version' of the email chain than the version in evidence, which he agreed excluded the identification information. No 'bigger version' is in evidence. Mr Hill denied that he had deliberately omitted the identification information, but agreed that the information would have been 'very helpful' information for Detective Howard in his investigation.

197 Conversely, during the La Trobe University fraud, Mr Hill did not exclude any of the information relating to Tom Simpson's identity. On 26 May 2016 at 7:07 pm, Mr Hill forwarded to Detective Howard Mr Simpson's name, registered address, phone number, email address and IP address. Mr Hill included the following request in his email to Detective Howard:

In the interests of confidentiality, I request that this information be used solely to aid the fraud investigation and not be disclosed to other parties. Much appreciated.

198 In my opinion, Mr Hill could not satisfactorily explain why he excluded the identification information. The defendants contend that the following information provided in the cut-and pasted-email to Detective Howard provided a sufficient basis for further investigation by him:

(b) The fact that funds had been arranged by an 'associate in London';

(c) The amounts deposited into the Pinnaclebet accounts;

(d) The fact that Sigalla and the 'associate in London' had engaged in correspondence with respect to the deposits;

(e) The fact that there were supposed to have been three deposits, but only two were received; and

(f) The fact that the money would be used for gambling.

199 While it may have been obvious to Detective Howard that the emails excluded important information (e.g. the dates and times of relevant correspondence were not included), Detective Howard had no way of knowing, for example, that a reference to the name of the payer of the funds ('CIVIC') had also been excluded. Critically, in my opinion, the exclusion of surnames rendered nugatory the value of the names 'Andrew' and 'Alex' to Detective Howard.

200 In my view, there is sufficient evidence for the Court to feel an 'actual persuasion', in accordance with the principles in Briginshaw, as to the allegation that Mr Hill deliberately misled Detective Howard. Taking the evidence as a whole, I find that Mr Hill sought to protect Mr Sigalla from enquiries by Detective Howard. I infer Mr Hill knew that a simple internet search or other enquiry of Mr Sigalla's name would reveal the criminal charges against Mr Sigalla and thus cause Detective Howard to maintain his request that the stolen funds not be credited to Mr Sigalla's betting account ('remain frozen') until he had made further enquiries as to the identity of the payees of the stolen funds and contact them.

201 Fifth, there is another factor which bolsters my conclusions. The defendants did not call Mr Sigalla to give evidence.

202 Under the rule in Jones v Dunkel,[49] the unexplained failure of a party to call a material witness or to lead certain evidence may (not must) give rise to an inference that that evidence would not have assisted that party's case. The relevant principles were conveniently summarised by Owen J in Bell Group Ltd (in liq) v Westpac Banking Corp (No 9).[50] I have drawn on that summary in my summary below of relevant matters for this case:

(1) Where a witness is not a party, the inference can only be drawn where it would be natural for the party to call the witness, in the sense that the witness would be expected to be available to that party, or might be regarded as being 'in the camp' of the party.[51]

(2) Such an inference is not automatically available. As a general rule it will only be made where it can be said that the party failed to called a witness because it feared to do so.[52]

(3) Accordingly, an adverse inference will not be drawn where the failure to call a witness can be explained by, inter alia, illness, unavailability or loss of memory.[53]

(4) The hostility of a witness towards the party expected call to him or her, or the fact that a party may not know what evidence the witness would give,[54] may also be an adequate explanation for a failure to call.[55]

(5) The onus is on the party who failed to call the witness to establish their unavailability, and this must be done on the basis of evidence.[56]

(6) The significance of the inference depends on the closeness of the relationship between the absent witness and the party who failed to call him or her.[57]

(7) The rule allows an inference to be drawn more readily from other evidence, but 'does not permit an inference that the untendered evidence would in fact have been damaging to the party not tendering it'.[58]

203 An adverse inference should be drawn against the defendants for their failure to call Mr Sigalla. He was 'in their camp', not the plaintiffs'. It would have been natural for the defendants to call Mr Sigalla because:

(1) their defences on knowledge issues depend on what he told them, and the screenshot he showed them, at the Royal Oak Hotel meeting;

(2) he arranged for the stolen funds to be paid into the Worldwide ANZ account;

(3) at his request, the stolen funds were credited to his betting account, bets were placed and withdrawals were made to his bank account;

(4) Mr Hill and Mr O'Connell had material dealings with him in 2016, and Mr Hill has remained in contact with him since the fraud was discovered;

(5) Mr Hill and Mr O'Connell both believed he was an innocent stooge for Mr Kamara and/or others and was not personally involved in the fraud;

(6) there was no evidence that Mr Sigalla was unavailable to attend, and no explanation for the failure to call him. For example, there was no suggestion that he was hostile to the defendants - to the contrary, the correspondence between him and Mr Hill suggests that he adopted a conciliatory approach towards the defendants in the aftermath of the fraud; and

(7) the plaintiffs do not know Mr Sigalla and have had no dealings with him.

204 Sixth, based on admitted facts and the above matters bolstering my conclusion, I reject Mr O'Connell's and Mr Hill's evidence that the screenshot they were shown at the Royal Oak Hotel meeting included a reference to 'Sino' or that Mr O'Connell discussed the correct pronunciation of that name with Mr Sigalla during the meeting. In my opinion, if there had been such reference and discussion it would naturally have been mentioned in Mr O'Connell's evidence in chief, and not been volunteered for the first time in cross-examination. If this aspect of the meeting had occurred, I would expect it to have been opened and led in evidence in chief. Taking the facts as a whole, I find it is more probable that the screenshot shown during the meeting was that screenshot later sent by Mr Sigalla in the course of the 31 May emails. That screenshot contains only figures, and no 'names corresponding with the numbers' as Mr Hill said in evidence. If that be wrong, then the failure to mention 'Sino' in the 31 May emails from Mr Sigalla and Mr Kamara, the identification of a company called 'CIVIC' instead, and the absence of any depositor names in the screenshot forwarded in those emails, ought to have caused Mr Hill and Mr O'Connell to ask Mr Sigalla to forward a copy of the screenshot they were shown in the meeting, and to explain why the name of the depositor described by Mr Kamara ('CIVIC') was different from that discussed at the meeting. The failure to make these inquiries bolsters my conclusion.

205 Seventh, the plaintiffs made the serious allegation that Mr Hill and Mr O'Connell had deliberately destroyed relevant evidence by shutting down the computer servers containing the records of the Pinnaclebet business (the 'Pinnaclebet computer systems'). This had the effect that all of the electronic business records of the Pinnaclebet business were lost on 21 June 2016 - just 11 days after the plaintiffs obtained a freezing order over the Worldwide ANZ account and served that order on Mr Hill. Worldwide then ceased accepting bets and placed a 'closed' message on the Pinnaclebet website.

206 When the Pinnaclebet computer systems were shut down, Ms Cad and Mr O'Connell decided that some specific information should be retained. Otherwise, all of the information relating to the conduct of the Pinnaclebet business over three years was lost. Relevantly, even though the freezing order and other documents in the proceeding had been served and read by Mr O'Connell, all of the business records relating to Mr Sigalla's betting account were destroyed. Thus, the defendants were unable to produce the business records proving the bets placed on Mr Sigalla's betting account, or the bet backs matching those bets in accordance with its ordinary course of business. Instead, the defendants rely upon a spreadsheet prepared by Ms Cad setting out that information (the 'Sigalla betting spreadsheet'). The Sigalla betting spreadsheet was prepared by Ms Cad prior to the Pinnaclebet computer systems being shut down. The evidence establishes that it was prepared by at least 17 June 2016, when a copy of it was provided to the plaintiffs' solicitors, in compliance with a court order made that day.

207 In these circumstances, two issues arise for determination:

(1) Should the defendants be allowed to rely on the Sigalla betting spreadsheet as evidence of the bets placed on Mr Sigalla's betting account, including as to the bet backs on those bets?

(2) Even if so, does the shutting down of the Pinnaclebet computer systems nevertheless reflect badly on the credibility of Mr O'Connell and/or Mr Hill?

208 For the following reasons, the defendants should be allowed to rely on the Sigalla betting spreadsheet.

209 The Sigalla betting spreadsheet contains 13 columns of information, as follows:

(1) an identification ('Id') number for each transaction on Mr Sigalla's betting account;

(2) the 'Creation Time' of the transaction. Ms Cad said that the Pinnaclebet system was programmed to record Australian Eastern Standard Times, and she used those times in the spreadsheet;

(3) a 'status' column which records deposits to and withdrawals from the account, and the result of each bet as either a win ('W') or a loss ('L');

(5) the kind of bet placed ('Market Type'). The spreadsheet records bets placed on a 'Handicap' basis (allowing for a win or loss margin) and bets placed on a win only basis;

(7) the amount collected on winning bets ('Collected Amount');

(10) the current balance of the account after each transaction ('Ending Balance');

(11) a description of the sporting event which was the subject of each bet;

(12) details of the bet ('Selection'). For example, in a 'Handicap' bet, the name of the player or team and the margin selected, expressed as a win or loss margin. Where the bet was placed for a win only, the name of the player or team appears in this column; and

(13) the 'Odds' column, which records the odds given by the provider of the bet.

210 Mr O'Connell gave evidence, which I accept, that columns (11), (12) and (13) were derived from information supplied by the bookmakers with whom the relevant bet backs were placed.

211 The plaintiffs challenge the authenticity and accuracy of the Sigalla betting spreadsheet. They challenge the explanations given by Mr Hill and Mr O'Connell for shutting down the Pinnaclebet computer systems and contend that business records were deliberately destroyed to withhold relevant evidence in this case. They rely upon s 89B of the Evidence (Miscellaneous Provisions) Act 1958 to seek an order that the defendants not be permitted to rely upon the Sigalla betting spreadsheet to prove the making of bets on Mr Sigalla's betting account and the corresponding back to back bets, which Mr O'Connell and Ms Cad gave evidence were made in the ordinary course of Pinnaclebet's business.

212 Section 89B relevantly provides:

89B Court may make ruling or order

(1) If, in a civil proceeding, it appears to the court that -

(a) a document is unavailable; and

(b) no reproduction of the document is available in place of the original document; and

(c) the unavailability of the document is likely to cause unfairness to a party to the proceeding -

the court, on its own motion or on the application of a party, may make any ruling or order that the court considers necessary to ensure fairness to all parties to the proceeding, having regard to the matters set out in section 89C.

(2) Without limiting subsection (1), a ruling or order may be -

(a) that an adverse inference will be drawn from the unavailability of the document;

(b) that a fact in issue between the parties be presumed to be true in the absence of evidence to the contrary;

(c) that certain evidence not be adduced;

(d) that all or part of a defence or statement of claim be struck out;

(e) that the evidential burden of proof be reversed in relation to a fact in issue.

213 I do not accept the plaintiffs' submissions in this regard. In the first place, the plaintiffs' contentions depart from their pleaded case. In paragraph 7 of their third further amended statement of claim the plaintiffs alleged that Worldwide credited the stolen funds to Mr Sigalla's betting account and allowed him to 'make wagers on that account and withdraw funds from that account'. The particulars of this allegation refer to the Sigalla betting spreadsheet. By paragraph 7 of their defence, the defendants admitted the plaintiffs' allegations in this regard. Specifically, they admitted the making of the wagers and the withdrawals of $550,000 by Mr Sigalla from his betting account. The 'otherwise deny' part of paragraph 7 of the defence can be discounted as mere caution.

214 In these circumstances, the plaintiffs ought not to be allowed to challenge the authenticity and veracity of the Sigalla betting spreadsheet. It would be unfair to allow them to prosecute such a serious allegation without pleading or opening it.

215 Furthermore, the implication in the plaintiffs' contentions in this regard is that no bets were in fact placed on Mr Sigalla's betting account and the plaintiffs, Mr Sigalla and others were all involved in the fraud. No such case was pleaded or put.

216 In any event, I accept Ms Cad's evidence that the Sigalla betting spreadsheet was prepared by her from the information recorded on the Pinnaclebet computer systems prior to that information being lost when the Pinnaclebet computer systems were shut down. My reasons for accepting Ms Cad's evidence are as follows:

(1) The evidence as to the Pinnaclebet business model was not challenged - in particular, the evidence that the Pinnaclebet computer system was configured so as to refuse any bet unless the bet back was first accepted.

(2) It was not put to Ms Cad that the Sigalla betting spreadsheet was an inaccurate concoction. Indeed, her evidence that she prepared the spreadsheet from the business records contained in the Pinnaclebet computer system was not challenged at all.

(3) Ms Cad presented as a credible witness and her evidence on this issue was inherently plausible. It was consistent with the Pinnaclebet business model, which was not challenged.

(4) It would have been commercially unwise for Worldwide to accept the bets on Mr Sigalla's betting account without corresponding bet backs. Such a course would have exposed it to very significant risk and been totally contrary to the business model which was embedded into the 'logic of the website'.

(5) The only plausible explanation for departing from the ordinary Pinnaclebet business model of covering its position with bet backs would be if Worldwide (through Mr O'Connell and/or Mr Hill) was involved in the fraud. No such allegation has been made by the plaintiffs.

217 I turn to consider whether the shutting down of the Pinnaclebet computer systems nevertheless reflects badly on Mr Hill's and/or Mr O'Connell's credibility. Specifically, are the reasons they give for the shutdown implausible in light of the facts that: (1) the shutdown resulted in closure of the Pinnaclebet business; and (2) their own evidence that they believed the Pinnaclebet business to be worth about $20 million? Although the truth or otherwise of their reasons would not be determinative of the issues in dispute, the issue raises important credit issues and much time was spent on it in final submissions. I will accordingly deal with it.

218 On 21 June 2016, Mr O'Connell, after discussions with Mr Hill, instructed that the Pinnaclebet business and computer systems be shut down, along with its website and servers. Previously, at an ex parte hearing on 10 June 2016, the Court made an order freezing the Worldwide ANZ account. There was at that time no evidence before the Court that this was the general bank account through which the Pinnaclebet business was conducted, as described above. The only evidence was that the stolen funds were paid into that account.

219 The freezing order contained the usual liberty to apply to the court to vary or set aside the order and, by court direction, the letter serving the order drew attention to that aspect of the order. Worldwide made no such application; for example to vary the freezing order so as to allow the Pinnaclebet business to continue. Of course, any such application would have needed to be supported by evidence as to the state of the Worldwide ANZ account and as to the use which had already been made of the stolen funds. In other words, the defendants would at that time have needed to commit themselves to what they had done with the stolen funds, and formulate their case based on change of position by reason of the bet backs against wagering on Mr Sigalla's betting account.

220 Mr O'Connell could not recall specifically when he found out about the freezing order. He agreed that it was probably the same day the order was made or, at the latest, the following day as: 'the payments team would have gone to access the bank and it wouldn't have worked and they would have gone to tell [him] straightaway'. Mr O'Connell was in Bali at the time the freezing order was made. He stayed there until at least 12 June before returning to Australia early to deal with this proceeding.

221 Mr Hill was in Vietnam at the time the freezing order was made. The plaintiffs' solicitors emailed a copy of the freezing order to him at 7:11 pm that night. Mr Hill could not recall whether he read the email that same night, but conceded that he would have received it by the time he sent an email to Mr Sigalla from the same email account on 11 June at 6:23 pm. He believed that he 'may have been informed [of the freezing order] by [Mr] O'Connell' and that he 'may have had a conversation with [Ms] Enright very quickly'. Mr Hill said it was 'very likely' that he would have discussed the freezing order with Mr O'Connell that weekend.

222 On 17 June, Mr O'Connell attended court on the next return date for the freezing order. On that occasion, the Court made orders extending the freezing order and requiring Pinnaclebet to make discovery, including as to the circumstances surrounding the payment of the funds into the Worldwide ANZ account, the owner of the relevant betting account (which was then unclear) and the transactions on that account. Later that day, a copy of the Sigalla betting spreadsheet was provided to the plaintiffs' solicitors.[59]

223 On 21 June 2016, the same day Mr O'Connell gave directions for the Pinnaclebet computer systems to be shut down, Detective Tighe of the Western Australia Police, who was investigating the fraud, sent an email to Mr O'Connell with the Subject line 'Order to Produce' which read:

Hi Nick,

Please find attached the Order to Produce regarding the disclosure of the details relating to the agents bank account.

Regards

224 Attached to the email was a formal request from Detective Tighe for the production of:

'[A]ll records/information relating to the owner of the account in which the fraudulent funds were transferred and is now holding $550,000 as discussed including:

Name of account holder

Address of account holder

Contact numbers of account holder

Email address of account holder

How long this person has been a client/agent as discussed.

225 I infer that Detective Tighe was making this request in order to ascertain the identity of Mr Sigalla. So much is clear from Detective Tighe's query in relation to 'how long this person has been a client/agent', and the fact that he already knew Mr O'Connell's name and his email and business addresses.

226 Mr O'Connell replied to Detective Tighe's request a few hours later on the same day, 21 June. He said in his reply email that his lawyer, Ms Enright, was 'handling all of this and you really need to contact her'.

227 Mr O'Connell said that Detective Tighe had told him he was going to send a document of some sort, but Detective Tighe had not said precisely what kind of document. On further questioning, Mr O'Connell acknowledged that, before he received the formal request, he knew he was 'going to get something from Detective Senior Constable Tighe requiring [him] to produce information'. Mr O'Connell said he could not recall whether he received the request before the shutdown of the Pinnaclebet computer systems.

228 Mr Hill and Mr O'Connell both testified that the freezing order made the continuing operation of the Pinnaclebet business impossible. Mr Hill said that he discussed the shutdown with Mr O'Connell at the time, and that the priority was to provide 'sanctuary for the players' funds'. Mr Hill also said that the '[s]afety of players' funds [was] paramount' and that was 'all [he] was interested in'.

229 Mr O'Connell testified that the decision to close Pinnaclebet's website and servers 'wasn't made lightly':

It was a disaster for us because the payment providers where the funds were sent, the money from the customers would be going into that account but we wouldn't be able to access that account, nor pay them winnings and things like that. It made the operation of the business impossible.

...

... As much as it was upsetting that the business was now in serious trouble, I was more worried about the reputation.

230 In examination-in-chief, when asked why Worldwide could not simply have changed its bank account and payment details on the Pinnaclebet website to ensure customers' funds deposited after the freezing order were protected - rather than shutting down the business altogether - Mr O'Connell said as follows:

(a) For direct deposits, which only made up one per cent of deposits, it was too difficult to change the company's account details for the purposes of direct debits as '[c]ustomers had us saved that used us regularly in their banks and things and this would have been a tricky process'.

(b) For POLI deposits, which made up 70 per cent of deposits, he had tried to change the company's POLI details but 'they said that Mr Hill had to do that'. Mr O'Connell said that he contacted Mr Hill about doing that and encouraged him to come home to 'sort out the matter', but Mr Hill said that he wasn't able to leave at that time.

(c) There would not have been any use setting up different bank accounts to allow the business to operate after the freezing order as '[there was] no guarantee [the plaintiffs] weren't going to lock the next account or the account after that, the account after that'.

231 On that last point, Mr Hill also recalled the defendants having 'a very palpable and realistic fear that we were going to have subsequent accounts frozen'. He also thought changing the bank account details for deposits would not have worked because he was in Vietnam and would have needed to be in Australia.

232 In cross-examination, Mr O'Connell was asked why he did not enquire with ANZ as to whether the Worldwide ANZ account would be closed to deposits as well as withdrawals. He said that he did not have authority to speak with ANZ and that he could not ask Mr Hill who, again, 'was away ... Mr Hill was uncontactable for a lot of the time while there were problems with the freeze order'. When asked whether he asked Ms Cad to take any of these steps, Mr O'Connell said that she had tried 'but they couldn't do it without Mr Hill'. When taken to documents which indicated that Ms Cad had been an authorised signatory on the Worldwide ANZ account from 20 October 2014, Mr O'Connell maintained that he believed she was not entitled to access the account:

I don't believe she could. She could make phone calls. She couldn't obviously go into the branch and she couldn't telephone them. She was in Manila. There's no way she would have been able to change the account details...I know Ms Cad made many enquiries to the ANZ and she couldn't get the appropriate people and they refused to speak to her on many occasions.

233 Ms Cad had finished giving her evidence by the time this evidence was given by Mr O'Connell, and was therefore unable to confirm its veracity.

234 Mr O'Connell also testified that once Mr Hill was back in the country, it was too late to remedy the damage that had been done:

...The business had suffered huge damage.

What damage do you say it had suffered?---We weren't able to pay out our customers. We weren't able to offer the things we wanted to offer.

You said you could pay them out?---Which we did, yes.

Except for the rats and mice and that's no reason - - -?---When you say it's no reason, I couldn't accept new funds or promote the business or get new customers.

Once Mr Hill was back in the country there was nothing stopping you changing accounts and accepting new funds?---When Mr Hill was back in the country the website was closed. The website had been shut down and 85 or 90 per cent of the customers had been paid out. I don't know how you turn that around, Mr Maiden.

The point is there was no need to shut it down while he was out of the country?---There was. I had no choice. I am baffled that you don't understand that. Completely shocked.

You had enough money to pay out all of the customers?---Yes.

You could have changed the account details just by having Mr Hill contact the bank, if not while he was away then when he got back. You have given no other reason, other than you couldn't offer the things you wanted to offer, as to why you had the shut the business?---... People cannot bet without funds in the accounts. The operation that we ran required funds in accounts to be bet, that people could bet with into those accounts. If you lock off the money, where the money comes in and it doesn't flow through to the providers there's no way we could do business. The money had to move around and I had to pay those providers.

235 As well as identifying reputational issues and concern about payments to customers as leading to the shutdown of Pinnaclebet's business, Mr O'Connell also said that he was concerned about the costs involved in maintaining the business including the servers:

So the servers on the website, I don't know the exact number but there was maybe 45 and I think the cost of that was somewhere around US$11,000 per month which was about AU$15,000. I just couldn't justify the running of that.

236 Before shutting down the Pinnaclebet computer systems, Mr O'Connell and Ms Cad discussed the information that needed to be retained. They decided to retain information including each customer's name, date of birth, address, mobile, and email address, as well as the available balance on his/her account, any pending bets and whether the deposit to the account was made via credit card. Mr O'Connell said in evidence that this information needed to be retained so that customers could be paid back. Ms Cad testified that she was also instructed by Mr O'Connell to retain the source code for the system, so that the Pinnaclebet website and smartphone app (which was in development) could be rebuilt in the future. Mr O'Connell said that attempts were subsequently made to reconstruct the servers and retrieve the data from them, but Worldwide's IT team could not achieve that.

237 Mr O'Connell said that he did not know that the decision to shut down the servers would led to such a large loss of data, which he said amounted to 'three years' worth of data that's just gone'. Conversely, Ms Cad clearly understood that all the data would be lost.

238 Mr Hill also denied knowing that shutting down the Pinnaclebet computer systems would lead to data loss. Mr Hill stated in evidence that '[t]he decision to shut down the servers was purely based on protecting funds of customers that were going to deposit new funds...it was not made to my awareness that shutting down the servers would have any impact on being able to restore records'.[60]

239 For the following reasons, I find that Mr Hill's and Mr O'Connell's explanations for the shutting down of the Pinnaclebet computer systems and closing the Pinnaclebet business are implausible:

(1) Shutting down the Pinnaclebet computer systems and closing the business could only damage their reputations in the gambling industry, and likely adversely affect The Odds Broker business as well. There were simple steps that could have been taken to protect the Pinnaclebet business and their reputations. Their reasons for not taking them have not been satisfactorily or credibly explained.

(2) I do not accept that Mr O'Connell and Mr Hill did not know that shutting down the Pinnaclebet computer systems was going to lead to a loss of data. Ms Cad knew that the data was stored on the same server and that data loss was a consequence of the shutdown. I infer that Mr O'Connell would also have known this, or that he would have been told by Ms Cad that such an outcome was likely in the course of instructing her to shut down the website and servers. This inference is supported by the fact that active steps were taken to retain certain customer details and the source code for Pinnaclebet's intellectual property. This demonstrates that there was an awareness that data would be lost and important data should be preserved.

(3) It is implausible that they would not take steps to try and carry on the business given their claim that the business had a present value of $20 million. Mr O'Connell and Mr Hill both gave evidence that they had discussions about the effect of the freezing order, despite Mr Hill being in Vietnam (and despite the reliance upon Mr Hill's unavailability in Vietnam as an excuse for the difficulty in changing bank account details). Given the claimed value of the business, I consider that Mr Hill and Mr O'Connell would have taken whatever steps reasonably available to them to preserve the operation of the business if it were indeed the case that safeguarding customer funds and their reputations was the primary goal of shutting down the Pinnaclebet computer systems and business. Given what was at stake, and Mr Hill's availability at other times during this period according to the defendants' own evidence, I find that Mr Hill could have worked with Mr O'Connell and Ms Cad to safeguard customer funds while allowing the business to continue.

(4) It was open to Mr Hill and Mr O'Connell to approach the Court and apply for a variation of the freezing order. Although I accept that a certain degree of chaos in the defendants' camp was caused by the freezing order, the fact that Mr Hill was overseas, and the fact that the defendants' external legal representation was not settled, the fact remains that Mr Hill and Mr O'Connell had lawyers either in their employ or briefed at all pertinent times. They were represented by counsel at the first return of the freezing order on 17 June 2016, and Ms Enright was also working for them as in-house counsel during this period. Further, I directed that the plaintiffs make reference to the fact that the freezing order could be varied on application, and that liberty to apply had been granted for this purpose, in the covering letter which was served with it. In these circumstances I do not accept that Mr Hill and Mr O'Connell did not know that they could apply for a variation to the freezing order. I infer that a conscious decision was made to shut the Pinnaclebet website down rather than follow such a course.

240 The true purpose or purposes of the decision to shut down Pinnaclebet's computer systems and cease its business remain a matter of speculation.

241 Eighth, the plaintiffs contend that the evidence given by Mr O'Connell and Mr Hill to the effect that Mr Sigalla, or those for whom he was acting, personally made the bets on his betting account, rather than those bets being placed by Worldwide's Pinnaclebet trading team in Manila under discretion, should be rejected. I accept that the documentary evidence supports a finding that the trading team placed the bets on Mr Sigalla's behalf, and so another issue adversely affecting Mr Hill's and Mr O'Connell's credibility is revealed.

242 At 3:49 pm on 2 June 2016, Mr Hill wrote to Mr Sigalla (copying in Mr Dougherty and Mr Kamara):

Re the betting account funds. Do you intend to bet with them soon, or do you want our trading team to do this on your behalf? As you are aware, whilst there is no guarantee of success, they did well on US basketball and NFL in 2015. This content is good also, as your customers can get on for larger size transactions. I will need your written instruction on what direction you want to take here (also if there are any sports that you aren't interested in - as we sometimes get one off good value opps in less traded sports and events)[61]

Rob

Please go ahead and start trading on the basketball tonight[62]

Nick - Andrew Sigalla has asked that we manage the trading for his customer. If there is basketball tonight, you can start. I'll get a more definitive trading arrangement with him in due course.

Rob[63]

245 At 5:40 pm, Mr Hill wrote to Mr Sigalla (copying in Mr Dougherty and Mr Kamara):

Andrew - French Open is on tonight also. We have good models for that and liquidity should be good. Let me know if that suits please.

Robert

Tennis is OK too

Please just email me what we are trading on

The others get too confused over the minutiae[64]

Your account will be traded tonight Andrew.

Please be aware that whilst it is in use (as they are manual trades) - you will not be able to log in. One user will lock the account. This means that you will be unable to place bets yourself if there is a session open. Will meet tomorrow and discuss whether that suits, or if you require more than one account.

Regards

Rob Hill[65]

248 The next day, at 6:29 pm, Mr Sigalla replied all to say:

Thanks Robert

I just got off the phone with Alex .

He has told me that the missing deposit has been found. It was sent to the wrong account

I have told him that the betting is in progress and that I will see how we are travelling on Tuesday.

I will advise you when the next transfers of 4m and 7m arrive to bet with.

Regards

Andrew[66]

249 After the fraud was discovered, Mr Sigalla wrote to Mr Hill at 4:54 pm on 15 June:

Robert

I have the response

According to him he was completely shocked as to what has happened

He claims to be a middle man

On another front, and more concerning is that I have been told your traders actually lost 1.5 m of these monies

Can you confirm if that is correct ???

...

Andrew

250 Mr Hill and Mr O'Connell both gave different explanations as to this correspondence. Mr Hill denied that the correspondence demonstrated that the trading team had placed bets for Mr Sigalla (and his associates) in its discretion. He said that the emails simply demonstrated that he was informing Mr Sigalla that he needed to use the trading team to formally place the bets that Mr Sigalla (or his associates) wanted to make. Mr Hill said that it was 'obvious that more than one were going to use the account'. Mr Hill said that there were 'no subsequent e-mails suggesting anything in terms of us having any knowledge of how he's faring on his betting or whether he's winning or losing or quantums of bets or anything'. However, Mr Sigalla's email to Mr Hill saying that he had told Mr Kamara that 'betting is in progress and ... I will see how we are travelling on Tuesday' suggests that he was indeed waiting to hear from the defendants as to how the betting was going. That tells against Mr Hill's testimony. So does the language of the emails - Mr Sigalla's directions 'Please go ahead and start trading' and 'Please just email me what we are trading on/ The others get too confused over the minutiae', followed by Mr Hill's use of the passive 'Your account will be traded tonight Andrew', all indicate that bets were placed on Mr Sigalla's behalf by the trading team.

251 Mr O'Connell said that no traders had standing instructions to act on Mr Sigalla's account. He said in cross-examination that Mr Sigalla 'obviously put the bets on or with his people', and that 'apparently [Mr Dougherty and Mr Kamara] were the guys that were going to do betting on the account too'. However, on re-examination he stated that Mr Sigalla must have placed the bets as 'you obviously had to log in, put in your user name and password to access your account and only Mr Sigalla could have done that'.

252 Mr O'Connell gave the implausible evidence that he thought that Mr Sigalla's reference to 'your traders' related to Mr Sigalla's own associates Mr Kamara and Mr Dougherty. That does not make sense, particularly given Mr Sigalla emails Mr Hill to inform him that he has told Mr Kamara that 'betting is in progress'. It is illogical that Mr Kamara would need to be informed of that if he were one of the 'traders' referred to by Mr Sigalla.

253 Before leaving the broad topic of factors which bolster my conclusions on knowledge, it is convenient to consider a submission made by the plaintiffs which I reject. The plaintiffs contended that the defendants had been unable to provide any satisfactory explanation as to why they could not obtain the business records of the Manila bookmakers who accepted the bet backs and put those documents in evidence. In my view, Mr O'Connell did provide a plausible (albeit uncorroborated and remarkable) explanation for the inability to obtain the business records of the Manilla bookmakers. The evidence was given confidentially and I will not refer to it in these reasons. Moreover, I have already accepted, on the basis of the evidence before me, that the Pinnaclebet business model did involve bet backs and that those bet backs are reflected in the Sigalla betting spreadsheet which is in evidence.

Alternative findings as to time of sufficient knowledge

254 If I am wrong in my finding that the defendants had knowledge of the fraud in the third Baden category at the time Mr Sigalla's betting account was credited on 1 June 2016, and thus before any bets were accepted on that account, it is necessary to consider the state of their knowledge in the period between crediting Mr Sigalla's betting account and their admitted knowledge of the fraud at 1:13 pm on 7 June.

255 The defendants' change of position defence is that Mr Sigalla's bets were accepted after they had been 'bet back' by Worldwide's Manila-based 'trading team' with a range of bookmakers, in accordance with the business model described above. They contend that all the bets had been placed before they had any knowledge of the fraud, and thus, by Worldwide funding the bet backs for amounts exceeding the stolen funds, the stolen funds became Worldwide's to use as it saw fit. As Mr O'Connell explained:

You knew that it wasn't Pinnaclebet's to use either? ---That's incorrect, Mr Maiden. Once Mr Sigalla had placed the bets, that bet had been placed with the wagering operators and as that bet went through, that became Mr Sigalla's or Mr Kamara's funds in that organisation and the other fund became - as they were spent became the owner of Mr Hill. Mr Hill's pre-fund was replaced by Mr Sigalla's bets.

The money itself hadn't been paid to the betting providers?---What do you mean 'the money itself'? Of course it had.

The money that the Citic Group had paid into the Pinnaclebet account?---Definitely. When Mr Sigalla placed a bet that bet becomes - if Mr Sigalla bets $55,000, which I think his first bet was, from memory, the $55,000 as it gets placed with the wagering organisation is now - if the account was $1 million, it's now $945,000 and $55,000 of Mr Hill's funds has now been reduced out of that account. The receipt that sits against that $55,000 is Mr Sigalla's wager.[67]

(1) I find that Mr Hill and Mr O'Connell, and thus Worldwide and The Odds Broker, had knowledge of the fraud in the third Baden category at the time Mr O'Connell instructed Ms Cad to credit the stolen funds to Mr Sigalla's betting account. That instruction was first given during Mr O'Connell's Skype session with Ms Cad at 11:47 am on 1 June 2016. Although I find that Mr Hill had that knowledge earlier, when he forwarded Detective Howard's 9:50 pm email to Mr O'Connell at 10:25 pm on 31 May 2016, that finding is unnecessary given no bets were placed using the stolen funds until after Mr Sigalla's betting account was credited.

(2) I accept that the Sigalla betting spreadsheet is an accurate record of the bets placed on Mr Sigalla's betting account - whether by him personally, by Mr Kamara or those for whom he may have been acting, by the Pinnaclebet trading team, or a combination of those methods - and that those bets were bet back with bookmakers trading in Manila.

257 If I am wrong as to (1), it is necessary to consider the defendants' knowledge at the time each bet was accepted. Were there any matters occurring after Mr Sigalla's betting account was credited which ought to have caused Mr Hill or Mr O'Connell to make further inquiries, such as the simple inquiry, before accepting any, or any further, bets on his account?

258 Prior to any bets being placed on Mr Sigalla's betting account, Mr Sigalla sent a text message to Mr O'Connell at 9:10 am on 2 June asking to meet him at midday. Mr O'Connell said he could not meet. In response, Mr Sigalla sent a text stating: 'No problem. All I wanted to say was tomorrow I need $500k for my clients so please organise!!' In response to that, Mr O'Connell suggested meeting at 3:00 pm that day, and the two men then met at 'Danny's Café' in Bondi Junction. Mr O'Connell's evidence in chief concerning this meeting was, in my opinion, mistaken as it confused this conversation with a later conversation with Mr Sigalla on the morning of 7 June 2016, referred to below. In any event, Mr Sigalla did not receive the requested $500,000. I infer this was because he had not met the requirements of the turnover rule. According to the Sigalla betting spreadsheet, it was not until 9:17 pm on 6 June that Mr Sigalla was paid $450,000 from his betting account.

259 In my opinion, Mr Sigalla's initial request for a $500,000 withdrawal ought to have caused Mr O'Connell to be concerned that the stolen funds were indeed stolen. No bets had then been placed or resulted. Mr Sigalla was an experienced large gambler who likely knew that the requested withdrawal would breach the turnover rule, which, as Mr Hill later told Mr Sigalla to inform his overseas 'customers', are 'stringent' rules operating in Australia. If the circumstances known to Mr O'Connell as at the time Mr Sigalla's betting account was credited were not, as I have found, sufficient to attribute him with knowledge in the third Baden category, failing to make the simple inquiry following Mr Sigalla's initial withdrawal request was sufficient to attribute him with such knowledge at that time.

260 The Sigalla betting spreadsheet records that betting commenced on Mr Sigalla's account at 9:13 pm on 2 June 2016. A total of 18 bets were placed on two tennis matches at the French Open between 9:13 pm and 9:17 pm - eight bets on one quarterfinal match, and 10 bets on a second quarterfinal match. Mr O'Connell explained in evidence that it was not unusual for multiple bets to be placed on sporting events, a practice called 'bet feeding'. This practice was required because of pre-set betting limits by bookmakers. The eight bets placed on the first quarterfinal ranged between $40,000 and $55,000 and totalled $400,000. The 10 bets placed on the second quarterfinal ranged between $48,000 and $62,000 and totalled $536,000. All of the bets on the French Open quarterfinals lost, thus reducing the credit balance in Mr Sigalla's betting account to $1,211,689.40.

261 Next, the Sigalla betting spreadsheet records seven bets placed on American baseball games commencing at 3:21 am on 3 June 2016. The total amount bet was $229,000. Four of the bets won, and Mr Sigalla's betting account balance remained relatively stable, at $1,195,387.82 after collection of winnings on these bets.

262 Next, commencing at 3:29 am on 3 June 2016, the Sigalla betting spreadsheet records six bets placed on an American basketball game totalling $760,000. Five of these bets were placed at 3:29 am and the sixth was placed at 11:37 am. All of the bets won, thus increasing the credit balance in Mr Sigalla's betting account to $1,920,479.40.

263 By this time, the Sigalla betting spreadsheet demonstrates that Mr Sigalla had turned over, or bet, $1,925,000 of the stolen funds. In this context, Mr Sigalla sent an email to Mr Hill at 12:13 pm on 3 June 2016, requesting 'a payment today for $100,000 to my account for Alex'. Mr Hill passed this request on to Mr O'Connell, who in turn organised for Ms Cad to credit Mr Sigalla's bank account and debit his betting account. Once the payment had been made, Mr Hill emailed Mr Sigalla and asked him to make future withdrawals and deposits from his betting account 'on the Pinnaclebet website'. Mr Hill continued: '[i]n the instances of larger quantum deposits or withdrawals you wish to make, I advise you to also email your request to me so that I can get them expedited.'

264 Prior to and following this withdrawal, Mr Sigalla asked Mr Hill on a number of occasions whether the third deposit referred to in the 6:48 pm email had been received, so that he could bet that money. The third deposit was never received.

265 The $450,000 withdrawal was organised by Mr O'Connell and was paid to Mr Sigalla at 5:45 pm on 6 June 2016. The withdrawal reduced the credit balance in the Sigalla betting account to $1,370,749.40. Shortly before that withdrawal, Mr Hill emailed Mr Sigalla at 5:15 pm on 6 June. The email informed Mr Sigalla that Mr Hill would be travelling to Vietnam for two weeks on 8 June, and provided Mr Sigalla with information to assist him in the 'recruit' of 'new customers' for the Pinnaclebet business. Mr Hill also reminded Mr Sigalla of the turnover rule for the benefit of Mr Sigalla's clients:

Please remind [any new customers] that ... funds need to transact at least once before they can request a withdrawal (rules in Australia are very stringent) eg deposit $1 million requires bet sales of $1 million before a request for withdrawal can be facilitated.

266 I infer that this reminder was prompted by Mr Sigalla's initial text request to Mr O'Connell to withdraw $500,000 from his betting account, before any bets had been placed, thus (should it be necessary) elevating Mr Hill's knowledge, like Mr O'Connell's, to the third Baden category when he knew of Mr Sigalla's initial request. I infer that request was so unusual that Mr O'Connell likely told Mr Hill about it soon after it was made and thus before betting on Mr Sigalla's betting account commenced about 12 hours later. Mr Hill said in cross-examination that it was 'uncommon' and 'unheard of' that a customer would deposit money one day and try to withdraw it the next day, especially an experienced player. He said that if he had known that Mr Sigalla had 'tried to withdraw without transacting - I would have looked more into it'. A few moments earlier in cross-examination, however, Mr Hill said that he 'would find it very hard to imagine that Nick O'Connell wouldn't have contacted me [about the initial request] but no, I don't remember the details of whether he did or he didn't'.

267 Later that day, Mr Sigalla approached Mr O'Connell by text message, asking to meet him the following morning. The two men met at Danny's Café at 8:45 am the next morning, 7 June 2016. Mr O'Connell's evidence concerning this meeting is important and I will set out significant portions of it:

Mr Sigalla was in a bit of a frantic frame of mind. He wanted to withdraw his money from the account and I was telling him that there was limits in place and that we couldn't do so. ... I think the maximum was 450 in a day - sorry, 500 in a day. ... He said he wanted 1.8 or whatever it was he was trying to withdraw and I said I couldn't facilitate that for him and he said, 'If you want to get the bigger customers you had better get Mr Hill to the bank today to organise this now'. I said, 'It's not going to happen. It's not the way we do business and it's not the way that things are going to happen' and he was pretty angry about that.

How did that meeting finish up?---It finished up with me telling him that he would get paid $500,000 or maybe a little bit less if there was another bill or things that needed to be paid that day and he actually said that he would be speaking to Robert, Mr Hill, and that he wanted to bet that the whole 1.8 would be sent that day.

He wanted to bet?---With me. Basically what he was saying was that he was going to go to the owner of the business and ... organise this payment with Rob. ... I think the inference given was that I would be overruled by Rob because Rob saw the importance of what Andrew was doing in bringing big customers to the organisation.[68]

268 I find that Mr Sigalla's withdrawal request was likely within the turnover rule as varied according to Mr O'Connell and Ms Cad - $1.925 million had been bet and only $550,000 of the $1.92 million resulting balance of his betting account had been withdrawn. Mr O'Connell was vague about how much Mr Sigalla was seeking to withdraw ('his money'; '1.8 or whatever he was trying to withdraw'). So the unusual or alarming facts were the 'frantic' nature of Mr Sigalla's request and Mr Sigalla's annoyance at the limit imposed by Mr O'Connell (coupled with the threat to elevate the request to Mr Hill). In my opinion, standing alone there would be nothing unusual or suspicious about a gambler wanting urgent access to his money where he has a present entitlement to it. But this urgent request did not stand alone. If Mr O'Connell did not already have knowledge in the third Baden category, Mr Sigalla's urgent request to withdraw such a large sum ought to have excited Mr O'Connell's suspicion and caused him to then make the simple inquiry. If he had done so, there would have been time to freeze Mr Sigalla's betting account and thus 'save' the $1.3 million he bet on that account soon afterwards. By failing to do so, he brought his knowledge into the third Baden category (if he did not already have that knowledge).

269 Mr O'Connell left for the airport at the conclusion of the meeting to fly to Bali, Indonesia. On his arrival, he learned from his mobile phone that ANZ had reported the fraud to Mr Hill. He had actual knowledge of the fraud from that time.

270 Following this meeting, nine bets totalling $1.3 million were placed on Mr Sigalla's betting account on a single American basketball game. The bets were placed between 9:59 am and 10:02 am. In the result, all the bets lost, thus reducing the balance of Mr Sigalla's account to $70,479.40. This amount has been returned to the plaintiffs, from Ms McGowan's funds, as the Worldwide ANZ account remains frozen.

271 In reaching my alternative findings as to time of sufficient knowledge, I have considered the evidence as a whole up to each point in time, and my credibility findings. Of course, some of the matters on which I have relied for my conclusions provide stronger support for them than others. Taking them all in combination, however, I feel an 'actual persuasion', as required by the Briginshaw standard, that each of my conclusions is more probable than not.

272 For the reasons given above, I find that the defendants had knowledge of the fraud in the third Baden category at the time Mr O'Connell instructed Ms Cad to credit Mr Sigalla's betting account with the amount of the stolen funds (11:47 am on 1 June 2016), and thus before any bets were placed. Should that conclusion be wrong, the defendants had that level of knowledge after Mr Sigalla's account was credited but before any bets were placed or, if not by that time, prior to the final losing bets being placed on the morning of 7 June 2016.

273 I turn to consider the various claims and defences.

Must Worldwide make restitution of the stolen funds? Must the other defendants make restitution of any traceable proceeds of the stolen funds received by them?

274 It is convenient to deal first with the plaintiffs' common law restitutionary claims based on payment of the stolen funds to Worldwide by mistake, or money had and received:

(1) against Worldwide for the unpaid balance of the stolen funds ($2,077,210);

275 In Australian Financial Services Leasing Pty Ltd v Hills Industries Ltd, French CJ stated that:

When money is paid under a mistake of fact, the person paying the money may recover it from the recipient in a common law action for money had and received. Recovery depends upon whether it would be inequitable for the recipient to retain the benefit. Retention may not be inequitable if the recipient has changed its position on the faith of the receipt and thereby suffered a detriment.[69]

276 In a common law action based on money paid by mistake, it is not necessary for the plaintiff to allege or prove that the retention of the money received by the defendant would be inequitable. That is a matter for defence, on which the defendant bears the onus. [70] One such defence is change of position.

277 The judgments in AFSL v Hills considered the circumstances in which a 'change of position' defence may be invoked, as the defendants seek to do in this case. The joint judgment in AFSL v Hills contains the following statement in discussing that defence:

It will be observed that these conclusions are not reached by first attempting to state comprehensively what is encompassed by the notion of a change of position, or the circumstances in which a defence described in that way is available to meet a claim for recovery of money paid under mistake. As has been explained, to apply reasoning of that kind would be sharply at odds with the established doctrine and unchallenged decisions of this court in this area.

Attempts to describe the defence comprehensively, or to chart its metes and bounds, are apt to mislead by distracting attention from the content of the principle to the manner of its expression.[71]

278 In a separate judgment, Gageler J considered the defence is capable of some delineation, and proposed two conditions for the proof of the defence:

The defence of change of position is established where a defendant proves the existence of two conditions. The first condition is that the defendant has acted (that is, done something the defendant would not otherwise have done) or refrained from acting (that is, not done something the defendant would otherwise have done) in good faith on the assumption that the defendant was entitled to deal with the payment which the defendant received. The defendant need not for the purpose of meeting this condition have acted on knowledge derived from the payer. Whether the defendant needs also to have acted reasonably is a question which does not now arise for determination. The second condition is that, by reason of having so acted or refrained from acting, the defendant would be placed in a worse position if ordered to make restitution of the payment than if the defendant had not received the payment at all. The detriment constituted by that difference in position need not, in every case, be financial or pecuniary. If financial or pecuniary, it need not, in every case, be established with precision. It can be an opportunity forgone. It must, in every case, be shown by the defendant to be substantial.[72]

279 In Southage Pty Ltd v Vescovi,[73] the Court of Appeal stated that Gageler J's formulation 'is consistent with the defence [of change of position] and the principles on which it is based as set out by the majority' in AFSL v Hills.[74]

280 For the purposes of this case, the requirement that the recipient defendant must act 'in good faith' when acting on the faith of the receipt (ie 'the assumption that the defendant was entitled to deal with the payment') is critical. Such a requirement was previously accepted in the joint reasons in David Securities Pty Ltd v Commonwealth Bank of Australia.[75] It will not be inequitable to require a recipient of money paid by mistake to repay it to the plaintiff where the recipient's change of position defence is based on a change of position with sufficient knowledge of the mistake. In this case, knowledge of the fraud in the third Baden category is sufficient. A defendant relying on a change of position defence who, prior to the change of position, wilfully and recklessly fails to make such inquiries as an honest and reasonable person would make in all the circumstances, does not act in good faith on the assumption that he, she or it is entitled to deal with the mistaken payment.[76] I note that the High Court in Farah Constructions accepted that such third Baden category knowledge was a species of 'actual knowledge, as understood both at common law and in equity.'[77] It is not necessary to decide in this case whether knowledge in the fourth or fifth Baden categories would prevent a defendant from relying on the change of position defence.

281 The defendants rely upon the change of position acts set out above as the foundation for their change of position defence.[78]

282 The plaintiffs contend that the defendants cannot avail themselves of the defence because they had sufficient knowledge of the fraud at the time each bet was accepted. I accept that contention.

283 I accept that the change of position defence may have been open if Worldwide had accepted the bets on Mr Sigalla's account before it had sufficient knowledge of the fraud. However, for the reasons given above, all of the defendants had sufficient knowledge of the fraud prior to any bet being accepted on Mr Sigalla's betting account. Accordingly, in accepting those bets, Worldwide did not act in good faith and cannot rely upon the change of position defence.

284 I conclude that Worldwide is liable to the plaintiffs for money had and received in the amount of $2,077,210.

285 I turn to consider the claims against The Odds Broker and Mr Hill for money had and received.

286 The Odds Broker and Mr Hill plead that they were not direct recipients of the stolen funds. But direct receipt is unnecessary; indirect receipt by a volunteer of traceable proceeds of the money paid by mistake is enough.[79]

287 In Fistar v Riverwood Legion & Community Club Ltd,[80] the recipient defendant was the victim of fraud. She gave the fraudster $598,853 for the purposes of investment at extremely high interest rates. When the defendant needed the money to purchase a property, the fraudster purchased a bank cheque for $481,189 made payable to the vendor of the property and gave the bank cheque to the defendant or her solicitors to enable her to settle the property purchase. The bank cheque was purchased with funds stolen from the plaintiff. The primary judge found that the plaintiff had a common law personal action against the defendant for money had and received to the extent of the $481,189. The defendant's appeal was successful because she did not receive the bank cheque as a volunteer but in part payment of a debt owed to her by the fraudster arising from the original investment transaction. She was a bona fide purchaser for valuable consideration.

288 Although the case was decided on the above basis, the issues on appeal made it necessary for the Court to consider other issues. First, the defendant contended that only direct recipients of stolen money were liable for money had and received, and third party recipients could not be liable. That submission was rejected by Leeming JA in the following terms:

The submission that only a direct recipient of trust property is liable is also bad in law. Suppose a thief steals a painting and gives it to his mother, who in turn, not liking it, donates it to a gallery. The owner can sue the gallery in detinue.

Likewise, I do not understand it ever to have been held that claims based upon equitable title, or upon the knowing receipt of trust funds, are confined to the direct recipients of such funds. The principles governing tracing in equity do not stop after the property or its traceable proceeds have passed through one person's ownership. It cannot be the case that a claim can be defeated merely by, say, the direct recipient purchasing a bank cheque and delivering it to another person who has the same knowledge that the funds have been obtained in breach of trust.[81]

289 I will deal first with the claim against The Odds Broker.

290 The $800,000 was paid to The Odds Broker from the Worldwide ANZ account about three hours after Mr Sigalla's betting account was established. Tracing issues are considered in more detail below. For present purposes, it is sufficient to say that, because the stolen funds were paid into the Worldwide ANZ account, they were mixed with the credit balances of Pinnaclebet's betting customers at that time. As discussed below, if those credit balances have not been paid in full, an issue arises as to the competing claims of the plaintiffs and those betting customers on the money in that account. All that can be said now is that the $800,000 paid by Worldwide to The Odds Broker was substantially comprised of traceable proceeds of the stolen funds.

291 There is no evidence that The Odds Broker provided any consideration for the payment or changed its position on the faith of the receipt. For the reasons given, it did not act in good faith. Accordingly, The Odds Broker is liable to the plaintiffs for the traceable proceeds of the stolen funds comprised in the $800,000 as money had and received.

292 I turn to consider the claim against Mr Hill for $800,000 on this basis. The tracing exercise is not straightforward. Mr O'Connell said that 'the $800,000 was sitting there' in The Odds Broker account and 'wasn't going to be used' for betting by Mr Sigalla on racing. On that basis, he used that $800,000 to comply with Mr Hill's instruction to find the necessary funds to complete the purchase of the Bondi Junction property. However, as with the Worldwide ANZ account, The Odds Broker bank account was a mixed fund, containing funds deposited by its betting customers to the credit of their betting accounts. In these circumstances, the traceable amount of the stolen funds comprised in the $800,000 paid by The Odds Broker to Mr Hill is considered below when considering tracing issues. I note, however, that:

(1) $800,000 was paid by The Odds Broker to Mr Hill's personal accounts in two tranches, $500,000 on 2 June 2016 and $300,000 on 3 June 2016;

(2) Mr O'Connell arranged all the necessary payments; and

(3) The defendants accept that, even applying their (disputed) tracing method, $731,349.45 of the $800,000 is traceable to the Bondi Junction property.

293 There is no evidence that Mr Hill received the $800,000 (or its traceable proceeds) as a bona fide purchaser for value without notice, or that he changed his position on the faith of its receipt. For the reasons given, he did not act in good faith because he had the requisite degree of knowledge. Accordingly, he is liable to the plaintiffs for the traceable proceeds of the stolen funds comprised in the $800,000 paid to him by The Odds Broker as money had and received.

294 I conclude that the plaintiffs are entitled to the following judgments based on their common law claims for money had and received:

(2) against The Odds Broker, for the traceable proceeds of the stolen funds comprised in the $800,000 received by it;

(3) against Mr Hill, for the traceable proceeds of the stolen funds comprised in the $800,000 received by him.

Did Worldwide hold the stolen funds on trust for the plaintiffs at the time of receipt or at any time thereafter?

295 The above conclusions concerning the plaintiffs' restitutionary claims overlap in many respects with other claims based on breach of trust or knowing participation in a breach of trust. Before considering these claims, it is first necessary to identify the nature of the trust alleged by the plaintiffs and the time at which it arose.

296 As mentioned above, there is an anterior pleading issue which must be considered.

297 The plaintiffs allege in paragraph 6 of the statement of claim that the stolen funds were 'received by Worldwide in breach of a trust that arose upon and as a result of the misappropriation [of those funds]'. This allegation does not specifically identify the relevant trust, the trustee of that trust or the nature of the breach. In the context of the issues in the proceeding, I initially understood the allegation as a rolled-up plea relating to the trust imposed on the fraudsters, as thieves, and a subsequent trust arising when Worldwide received the stolen funds as a volunteer, of the kinds described by O'Connor J in Black v S Freedman & Co,[82] where he stated:

Where money has been stolen, it is trust money in the hands of the thief, and he cannot divest it of that character. If he pays it over to another person, then it may be followed into that other person's hands. If, of course, that other person shows that it has come to him bona fide for valuable consideration, and without notice, it then may lose its character as trust money and cannot be recovered. But if it is handed over merely as a gift, it does not matter whether there is notice or not.[83]

298 This understanding is inconsistent with some amendments to the statement of claim made on the first day of trial. As discussed above, by newly added paragraphs 9A-9G, the plaintiffs alleged that Worldwide was the trustee 'of the trust described in paragraph 6 above', that it breached that trust by using $345,000 of the traceable proceeds of the stolen funds to pay its own creditors, that this was a fraudulent and dishonest design, and that Mr Hill and Mr O'Connell knowingly assisted Worldwide to implement that fraudulent and dishonest design.

299 In these circumstances, the defendants contended that the trust alleged by the plaintiffs was limited to a trust which arose at the time Worldwide received the stolen funds and that Worldwide was the trustee of that trust.

300 The defendants adopted the position throughout the trial that the plaintiffs' trust allegations were wrong in law but that, given the seriousness of the allegations, the plaintiffs should be held to their pleaded case. For example, in their written outline of opening submissions, the defendants' counsel stated:

The plaintiffs are bound by their pleaded case and the particulars which have been given. Further, the Court should take into account the gravity of the allegation that the defendants received and dealt with the funds with knowledge that they were stolen (s 140 Evidence Act 2008 (Vic); Morley v ASIC [2010] NSWCA 331; (2010) 81 ACSR 285 at 745-746 ...; Briginshaw v Briginshaw (1938) 609 CLR 336, 361).[84]

301 In their written outline of opening submissions and in opening oral submissions, counsel for the defendants submitted that this trust allegation was not in accordance with settled law. Counsel stated orally:

The first proposition is that when a thief takes money from somebody else, in the hands of the thief that is trust money and that is established through a range of decisions but commonly Black v S Freedman & Co is the leading case in the High Court on that point and that is commonly referred to as the Black v S Freedman & Co trust.

The subsequent recipients of funds that have been stolen do not become subject to the trust, unless they have knowledge of either the trust or the conduct which gave rise to the breach of trust. There is a dispute here about that point because the plaintiffs' pleaded case is that this money was trust money in the hands of Pinnaclebet upon receipt and without knowledge, by the fact of receipt alone. [W]e say that's not the law.

...

In our respectful submission, equity acts upon conscience and conscience requires knowledge and so the trust that's sought to be imposed here arises not upon receipt but upon knowledge.[85]

302 Submissions to this effect were repeated in written closing submissions. Counsel contended that the receipt of the stolen moneys on 30 May 2016 could not have then made Worldwide a trustee for the plaintiffs, because Worldwide then had no knowledge of the fraud:

The equitable obligation arises only when the knowledge is acquired. The trust attaches only to the funds in the hands of the recipient at that time ... The burden of proof on the question of knowledge lies with the plaintiffs.

The plaintiffs do not plead that a trust arose at any time after receipt of the funds. Any knowledge which arose after 30 to 31 May 2016 cannot be relied on to establish the breach of trust claim.[86]

303 Submissions to this effect were repeated in oral closing submissions.

304 The defendants' counsel accepted that, in determining knowledge for this purpose, any of the first four Baden categories was sufficient.[87]

305 In their written outline of opening submissions, the plaintiffs contended that the misappropriation constituted theft from the plaintiffs and, on that basis alone, 'when the funds came into the hands of Worldwide, they had the character of trust funds'.[88] As authority for that submission, the plaintiffs cited Black v Freedman, presumably relying on the statement of O'Connor J quoted above,[89] and Levy v Watt[90] (referred to below).

306 In Black v Freedman, Black stole money over a period of time from Freedman. He paid £465 of the stolen money into his bank account. Soon after, he drew a cheque on that bank account for £460, cashed the cheque and paid the cash into his wife's account. After that payment, he continued to steal money from Freedman, and paid stolen money directly into his wife's bank account. Later, £250 was withdrawn from his wife's bank account and used to purchase £250 worth of circular notes in her name.

307 In all the circumstances of the case, the High Court had no difficulty inferring that the wife was in possession of identifiable stolen funds, including the circular notes which had been purchased from stolen money. The issue in the case was whether Freedman could claim the traceable stolen funds held by the wife. The High Court held that it could be recovered from her.

308 Griffiths CJ considered that the stolen money was initially held by Mr Black as a fiduciary, or on trust, for Freedman.[91] His Honour held that the question of recoverability of the traceable proceeds of the stolen money in the wife's hands depended on whether or not she received the money in good faith and for valuable consideration:

Of course it is not sufficient if the money is taken by the other party [the wife] bona fide for valuable consideration. There the money cannot be recovered back. But it has been laid down in cases long ago that if the alienee is a volunteer the estate may be followed into his hands whether he had notice of the trust or not.[92]

309 In the absence of evidence from either Mr Black or his wife, Griffiths CJ inferred that Mrs Black was a volunteer. Accordingly, the stolen funds in her hands were recoverable from her by Freedman.[93] The reference to in her hands is important. Where an innocent third party recipient disposes of part of the stolen funds before discovering the theft, it is only the remaining amount at the time sufficient knowledge is gained which is recoverable. Griffiths CJ stated that principle in this way:

A man may at a certain stage be innocent, but that, if he knows that he has got the advantage of a fraud to which he was no party and says he will keep it, then he becomes himself a party to the fraud and is liable to the jurisdiction of the Court of Equity.[94]

311 O'Connor J delivered a separate judgment. His Honour succinctly stated the principle in the terms quoted above, including the phrase 'may be followed into that other person's hands.'[95] That statement does not directly address the requirement for sufficient knowledge of the theft before a third party who receives stolen money as a volunteer will be liable to account as a trustee; but does so implicitly.

312 O'Connor J held that Freedman had adduced prima facie evidence that Mrs Black was a volunteer and, in the absence of evidence to rebut that prima facie case, held that 'she was a volunteer, and that [the stolen] money retains its character as trust money and she cannot be allowed to keep it.'[96]

313 In Levy v Watt, Santamaria JA (Warren CJ and Tate JA agreeing) accepted that Black v Freedman has been treated as a settled law that a thief holds stolen property on trust for the victim.[97] This was the statement referred to by the plaintiffs to support their submission.

314 In Heperu Pty Ltd & Ors v Belle,[98] Allsop P referred to the 'well-known principle' arising from Black v Freedman concerning volunteer recipients of stolen funds, in the following terms:[99]

The well-known principle is that a person entirely innocent of a fraud who comes to know that he or she has received and still retains the proceeds of, or taken advantage of, a fraud to which he or she was not party, cannot knowingly seek to retain those proceeds or that advantage, without, in effect, becoming a party to that fraud and liable accordingly.[100]

315 Later, Allsop P stated that the innocent recipient's liability is limited to the amount of the stolen funds (or their traceable proceeds) remaining in the hands of the innocent recipient at the time sufficient knowledge of the theft is obtained.[101]

316 In summary, it is clear that a third party who receives stolen money as a volunteer is only obliged to account to the beneficial owner of the stolen property on Black v Freedman principles to the extent the recipient holds the stolen property, or its traceable proceeds, at the time the recipient obtains sufficient knowledge of the theft. Accordingly, I accept the defendants' contention that the assumption underlying paragraph 6 of the statement of claim, read on its own, is not correct. It assumes Worldwide had sufficient knowledge of the fraud when it received the stolen funds on 30 May 2016. That has not been proved.

317 In these circumstances, the question arises as to whether the plaintiffs should be allowed to pursue a case based on the allegation that Worldwide became a trustee of so much of the stolen funds as were still in its hands when, after receipt, it obtained sufficient knowledge of the fraud. In my opinion, they should. Although counsel for the defendants stated on more than one occasion that the defendants held the plaintiffs to their pleaded case, the Court directed a list of issues be prepared, and the parties agreed a 'Joint List Of Issues' before written or oral closing submissions. The first issue for determination was agreed to be:

Did the defendants have knowledge to the relevant degree that the funds paid by the plaintiffs into the Worldwide ANZ Account (Relevant Funds) were stolen funds (or knowledge of such other facts concerning the funds as was sufficient to establish potential liability to the plaintiffs) at the time the payments were received or at any time prior to 1:13 pm on 7 June 2016?[102]

318 Agreed issue 3 was in the following terms, as reflected by the heading above:

Did Worldwide hold the Relevant Funds on trust for the plaintiffs at the time of receipt or at any time thereafter?[103]

319 Further, paragraph 8 of the statement of claim alleged knowledge of the fraud by the defendants 'in receiving and dealing' with the stolen funds.

320 The agreed issues and paragraph 8 of the statement of claim, when combined with the defendants' defences based on receipt of the stolen funds as a bona fide purchaser for value without notice or change of position acting on the faith of receipt of those funds, establish that the factual enquiry at trial included determination by the Court as to when (if at all) the defendants first obtained sufficient knowledge of the fraud before the admitted actual knowledge at 1:13 pm on 7 June 2016. The defences raised by the defendants made it inescapable that the Court was required to determine those issues. There can be no unfairness to the defendants if, based on those findings, the Court determines the question of when Worldwide first held the stolen funds on trust for the plaintiffs. Any misunderstanding of the legal position by the plaintiffs, or mere clumsiness in the statement of claim (perhaps introduced by the late amendments) should not prevent the Court from applying the law to the facts which have necessarily been decided by reason of the totality of the issues in the case.

321 The defendants' own submissions establish that they understand the correct legal position, and there can be no question that they have had a full opportunity to adduce all relevant evidence as to the time at which they first obtained sufficient knowledge of the fraud. In these circumstances, it would be artificial to shut the plaintiffs out on a pleading issue based on a mistaken view of the law, or ambiguity in the statement of claim, leaving them to apply for leave to make an alternative argument on appeal.

322 This conclusion is consistent with s 50A of the Civil Procedure Act 2010, which is in the following terms:

50A Use of statement of issues

(1) The court may use a statement of issues in a proceeding in any manner the court considers appropriate to further the overarching purpose in relation to the following -

(a) pre-trial procedures;

(b) the conduct of the proceeding at trial.

(2) Without limiting subsection (1), a statement of issues may be used for the purpose of discovery of documents.

(3) A statement of issues does not displace the function of any pleadings in the proceeding.[104]

323 The function of pleadings was stated by Mason CJ and Gaudron J in Banque Commerciale SA (En Liqn) v Akhil Holdings Ltd as being:

to state with sufficient clarity the case that must be met ... In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision.[105]

324 Provided there is an opportunity of the kind described, so that there is procedural fairness, there is in my opinion no displacement of that function by deciding the case according to the pleadings when read as a whole, as supplemented by a joint list of issues. This is so notwithstanding the statement in the footnote to the list of issues that it was 'not intended to replace or depart from the pleadings'. In the circumstances of this trial, the joint list supplemented the pleadings, by describing the factual and legal issues which were alive at trial, and it did not displace their function. The justice of the case should prevail.

325 In these circumstances, I am satisfied that, when the defendants acquired sufficient knowledge of the fraud on 1 June 2016, Worldwide became liable in equity to account to the plaintiffs for the stolen funds, all of which were still in its hands. From that time, Worldwide was a trustee of those funds for the plaintiffs under either a constructive or resulting trust.[106]

Did The Odds Broker or Mr Hill hold any traceable proceeds of the stolen funds on trust for the plaintiffs?

326 On the above findings of fact, The Odds Broker knowingly received the traceable proceeds of the stolen funds comprised in the $800,000 with sufficient knowledge of the fraud. The Odds Broker thus became liable to account to the plaintiffs for that amount as a constructive trustee. The Odds Broker breached that trust by paying the $800,000 (or its traceable proceeds) to Mr Hill.

327 The same reasoning applies to Mr Hill. The traceable proceeds of the stolen funds comprised in the $800,000 received by Mr Hill from The Odds Broker were received by him with knowledge of the fraud. As appears below, in considering the defence based on indefeasibility of title to the Bondi Junction property, Mr Hill gave evidence that, when he received $800,000 from The Odds Broker he did not know any part of it was sourced from the stolen funds. For the reasons given below, if that evidence is accepted it does not alter the position; because Mr O'Connell knew all the relevant facts and acted as Mr Hill's agent in arranging to transfer $800,000 to his account to enable the purchase of the Bondi Junction property. His knowledge as to the source of the funds, and their use towards completing the purchase of the Bondi Junction property, is attributable to Mr Hill. So Mr Hill knowingly received the traceable proceeds of the stolen funds comprised in the $800,000 paid to him and thus became liable to account to the plaintiffs as a constructive trustee for that amount. He breached that trust when Mr O'Connell, as his agent, used the traceable proceeds to purchase the Bondi Junction property.

328 I turn to consider whether Mr Hill and/or Mr O'Connell knowingly assisted any breach of trust.

Did Mr Hill and/or Mr O'Connell knowingly assist in any breach of trust?

329 The plaintiffs submit that the defendants are liable under what are conventionally referred to as the first and second limbs of Barnes v Addy - respectively, knowing receipt and knowing assistance.[107]

330 To be liable under the first limb - knowing receipt - it must be established that the defendants received trust property with the requisite degree of knowledge that the property received was the proceeds of a breach of trust or fiduciary duty.

331 To be liable under the second limb - knowing assistance - it must be established that:

(1) the defendant assisted a trustee or fiduciary in a breach of trust or fiduciary obligation;

(2) the breach is characterised by the Court as a 'dishonest and fraudulent design'; and

(3) the assistance was given with the requisite degree of knowledge of that dishonest and fraudulent design.[108]

332 Consistent with authority,[109] the parties are agreed that Baden categories (1) to (4) - but not category (5) - are sufficient to answer the requirement of knowledge under the first and second limbs of Barnes v Addy.[110] Category (5) is a form of constructive notice, rather than knowledge, and is therefore insufficient.[111]

333 The defendants contend that, in order to fall within the second or third Baden category of knowledge, a plaintiff making a claim for knowing assistance must prove that the defendant acted wilfully and recklessly. They contend that this involves a 'calculated abstention from inquiry',[112] in circumstances where the defendant's knowledge:

(1) amounts to more than a mere suspicion of fraud; and

(2) constitutes, at least, knowledge of facts which 'would communicate to a reasonable person a general understanding that there was a fraud, breach of trust or breach of fiduciary duty'.[113]

334 The quoted passage in criterion (2) is taken from a statement of Bryson JA in Yeshiva Properties No 1 Pty Ltd v Marshall.[114] That statement comments on remarks made by Stephen J in Consul Development Pty Ltd v DPC Estates Pty Ltd.[115] The remarks in Consul pre-dated Baden and are therefore not expressed to apply to a particular category (or categories) of knowledge on the Baden scale. Nevertheless, the High Court has held that the scheme of knowledge set out in Baden is commensurate with the comments of Stephen J in Consul.[116]

335 I accept that the type of knowledge spoken of by Stephen J (and Bryson JA in Yeshiva Properties) aligns with the second and third Baden categories. However, the requirement of 'calculated abstention from inquiry' appears to be apposite only to the third Baden category, and not the second, which does not speak of any failure of action, but rather a defendant's simple refusal to acknowledge the effect of obvious known facts.

336 As to the content of the requisite knowledge, the defendants rely upon the statements of Peter Gibson J in Baden that the plaintiff must prove that the defendant had knowledge of four things:

(1) 'that there was a trust', although it is not necessary that the defendant 'should know all the details of the trust';[117]

(2) 'that a design having the character of being fraudulent and dishonest was being perpetrated' (described by Peter Gibson J as being 'crucial' knowledge);[118]

(3) 'that his act assisted in the implementation of such design';[119] and

(4) 'the relevant knowledge must be of facts and not of mere claims or allegations'.[120]

337 In my opinion, the first, second and fourth of these propositions are encompassed by the formulation of the Federal Court in Yeshiva Properties.[121] There, Bryson JA commented on the following statement of Stephen J (with whom Barwick CJ agreed)[122] in Consul, rejecting constructive notice as sufficient knowledge for accessory liability:

If a defendant knows of facts which themselves would, to a reasonable man, tell of fraud or breach of trust the case may well be different, as it clearly will be if the defendant has consciously refrained from enquiry for fear lest he learn of fraud.[123]

338 In Yeshiva Properties, Bryson JA (with whom Mason P and Beazley JA agreed) commented on the judgment of Stephen J as follows:

In the application of Stephen J's test it is not necessary that the fraudulent scheme or purpose of the fiduciary or trustee should be fully known, or should be understood in any detail at all; the test is complied with if the known facts would communicate to a reasonable person a general understanding that there was a fraud, breach of trust or breach of fiduciary duty.[124]

339 This is consistent with the statement of Peter Gibson J in Baden, where his Honour held that it would place 'an impossibly high requirement in most cases' to require the plaintiff to prove that the defendant knew all of the details of the trust, the fraudulent and dishonest design and the relevant facts.[125]

340 The third element of knowledge stated by Peter Gibson J is that a defendant must know that his or her act assisted in the implementation of the fraudulent and dishonest design. In this case, the relevant act was to authorise Ms Cad to credit the stolen funds to Mr Sigalla's betting account, thus authorising him to bet with those funds. The third element will be satisfied in this case if the defendants had sufficient knowledge to satisfy any of the first four Baden categories at that time. This is because the only relevant question confronting Mr Hill and Mr O'Connell was whether Mr Sigalla was entitled to bet with the stolen funds. In other words, the only question for judgment by Mr Hill and Mr O'Connell before accepting Mr Sigalla's claims, crediting his betting account and thus allowing bets to be placed on that account, was whether or not the funds were in fact stolen. If, as I have found, they had third Baden category knowledge, they knew that authorising Mr Sigalla to bet with those funds would assist him (as agent of the fraudsters) to implement the fraud.

(1) Worldwide became liable to account to the plaintiffs as a constructive trustee for the whole of the stolen funds when, with sufficient knowledge of the fraud, Mr Hill and Mr O'Connell instructed Ms Cad to credit the stolen funds to Mr Sigalla's betting account at 11:47 am on 1 June 2016.

(2) The Odds Broker became liable to account to the plaintiffs as a constructive trustee when, with sufficient knowledge of the fraud, it received the traceable proceeds of the stolen funds comprised in the $800,000 on 1 June 2016.

(3) Mr Hill became liable to account to the plaintiffs as a constructive trustee when, with sufficient knowledge of the fraud, he received the traceable proceeds of the stolen funds comprised in the $800,000 paid to him by The Odds Broker.

342 Each of these trust obligations arose under Black v Freedman principles (collectively 'the Black v Freedman trusts'). As summarised above, the plaintiffs allege that the defendants' conduct gave rise to a liability to pay equitable compensation to the plaintiffs for any loss suffered by them as a result of the stolen funds, or their traceable proceeds, being dealt with by the defendants with the requisite degree of knowledge of the fraud.[126] Further, the plaintiffs claimed a charge over the traceable proceeds of the stolen funds remaining in the Worldwide ANZ account and those used to complete the purchase of the Bondi Junction property.

343 The plaintiffs' claims in this regard, while pleaded with varying degrees of specificity, were clearly based on breaches of the Black v Freedman trusts. There is no other sensible way to understand these allegations in the statement of claim.

344 Taking the pleadings as a whole, the plaintiffs have pleaded breaches of the Black v Freedman trusts, or knowing assistance of those breaches, as a result of the following conduct:

(1) Worldwide's actions, assisted by Mr Hill and/or Mr O'Connell with the requisite degree of knowledge, in:

(a) crediting Mr Sigalla's betting account;[127]

(b) allowing Mr Sigalla to place bets on his betting account;[128]

(c) allowing Mr Sigalla to withdraw $550,000 from his betting account;[129]

(d) paying the $800,000 to The Odds Broker;[130] and

(e) paying the $1 million to the Worldwide Westpac account.[131]

(2) Worldwide's actions, assisted by Mr Hill and/or Mr O'Connell with actual knowledge of the fraud, in using the traceable balance of the $1 million ($345,000) to pay its creditors.[132]

(3) The Odds Broker's actions, assisted by Mr O'Connell and/or Mr Hill with the requisite degree of knowledge, in paying $800,000 to Mr Hill;[133]

(4) Mr Hill's actions, assisted by Mr O'Connell with actual knowledge of the fraud, in paying $800,000 towards the purchase of the Bondi Junction property.[134]

345 I find that Mr Hill and Mr O'Connell knowingly assisted Worldwide and The Odds Broker to breach their respective trust obligations by the following conduct.

346 First, by instructing Ms Cad to credit Mr Sigalla's betting account with the stolen funds. By this conduct, they authorised Mr Sigalla to bet with the stolen funds. That conduct caused the bets to be placed and the money to be lost. It assisted Worldwide to breach its Black v Freedman trust obligations.

347 As a result, the plaintiffs have lost all but $70,479.40 of the stolen funds. The question arises as to whether Mr Hill and Mr O'Connell are liable for equitable compensation for the balance ($2,077,210).

348 The form of liability of a person who knowingly receives trust money was discussed by Finn J in Grimaldi v Chameleon Mining (No 2) in the following terms:

[It] has long been recognised as the essential characteristic of the Barnes v Addy liabilities: [that] they expose the persons to whom they apply to personal, to in personam, liabilities. In knowing receipt cases, the recipient can be required to pay compensation for loss arising from the misapplication of the trust property, or to account for gains made from it. These liabilities do not depend upon the third party retaining any part of the property received (or its traceable proceeds) in his or her hands although, if such property is retained, it must be accounted for specifically. But in the usual case, as Lewison J observed in Ultraframe (UK) Ltd v Fielding, the personal remedy 'is needed precisely where the recipient has not retained the property'.[135]

349 In my opinion, this passage applies to liability for knowing assistance, where the assister will often not obtain, let alone retain, any of the relevant trust property.

350 In Warman International Ltd v Dwyer, the High Court emphasised equity's flexibility in determining the appropriate relief on the facts of individual cases:

It is necessary to keep steadily in mind the cardinal principle of equity that the remedy must be fashioned to fit the nature of the case and the particular facts.[136]

351 In my opinion, this is a case where an entitlement to equitable compensation for the whole of the plaintiffs' losses has been established. However, the fact that Mr Hill and Mr O'Connell still hold that portion of the stolen funds which is traceable into the Bondi Junction property will also be relevant to the form of the Court's judgment, as discussed below.

352 Second, Mr O'Connell knowingly assisted Worldwide to breach its trust by paying the traceable proceeds of the stolen funds comprised in the $800,000 to The Odds Broker; and knowingly assisted The Odds Broker to breach its trust by paying the traceable proceeds of the stolen funds comprised in the $800,000 paid to Mr Hill. Mr O'Connell arranged for each of the payments with knowledge of the fraud.

353 Given his liability for knowing receipt, it is unnecessary to consider whether Mr Hill is also liable for knowing assistance. Further, as appears below, Mr Hill and Mr O'Connell are also liable on a proprietary basis in respect of the traceable proceeds of the stolen funds used to purchase their equal shares in the Bondi Junction property.

354 Third, Mr O'Connell knowingly assisted Worldwide to pay away the traceable proceeds of the stolen funds comprised in the $345,000. That amount was paid from the $1 million paid to the Worldwide Westpac account from the mixed funds in the Worldwide ANZ account. The parties did not make submissions as to the amount of the $1 million which comprised traceable proceeds of the stolen funds. Mr O'Connell candidly admitted he:

(1) organised to pay this amount to Total Access Payments to hide it from the plaintiffs, and moved portions of it 'back and forth' to the Worldwide Westpac account to enable it to pay its creditors, including betting customers;

(2) engaged in those transactions to avoid the possibility that the plaintiffs would obtain a freezing order over the Worldwide Westpac account; and

355 Mr O'Connell's only defence to that claim was that, Worldwide having changed its position on the faith of receipt of the stolen funds, the $345,000 (or the traceable proceeds of the stolen funds comprised in that amount) was Worldwide's to do with as it saw fit. For the reasons given above in rejecting the change of position defence, that position is untenable.

356 Mr Hill said he had no knowledge of Mr O'Connell's actions in this regard. They were done within his general authority to operate the bank accounts: his 'carte blanche ... to move funds around [when] reasonably required for settlement'. I do not accept Mr Hill's evidence. It is highly improbable that he and Mr O'Connell did not discuss the freezing order and what to do in response. He acknowledged in cross-examination that he discussed the response with Mr O'Connell, but not 'at length', and said his discussions in that regard were mainly with Ms Enright for legal advice.

357 While I accept that Mr Hill would likely have sought legal advice, the practical aspects of the response were more likely discussed with Mr O'Connell. After all, these events were not in the ordinary course of business. Legal proceedings had been commenced and freezing orders threatening the continued existence of the Pinnaclebet business, and affecting Mr Hill's and Mr O'Connell's reputations, had been made. The time for Mr Hill's hands-off approach to the Pinnaclebet business operations had passed.

358 I find that Mr Hill authorised Mr O'Connell to utilise the Total Access Payments account to hide the $345,000 from the plaintiffs for the purpose of enabling payments to Worldwide's creditors, particularly Pinnaclebet betting customers. On this basis, I find Mr Hill knowingly assisted Worldwide to breach its Black v Freedman trust obligations by paying away the traceable proceeds of the stolen funds in the $345,000.

(1) Mr Hill and Mr O'Connell knowingly assisted Worldwide to breach its trust obligations in respect of the whole of the stolen funds and, as a result, each is liable to the plaintiffs for equitable compensation for the unpaid balance of that amount ($2,077,210).

(2) Mr Hill and Mr O'Connell are also liable for knowing assistance in respect of the traceable proceeds of the stolen funds comprised in the payments totalling $345,000.

(3) Mr O'Connell is liable for knowingly assisting Worldwide and The Odds Broker to breach their respective trust obligations in respect of the traceable proceeds of the stolen funds comprised in the $800,000.

(4) Mr O'Connell is also liable for the traceable proceeds of the stolen funds comprised in the $800,000 for knowingly assisting Mr Hill to breach his Black v Freedman trust obligations, by using those proceeds to purchase the Bondi Junction property.

These liabilities overlap with each other and other grounds of liability.

360 The plaintiffs also make proprietary claims for:

(1) the traceable proceeds of the stolen funds remaining in the Worldwide ANZ account; and

(2) the traceable proceeds of the stolen funds which were used by Mr Hill to purchase the Bondi Junction property for himself and Mr O'Connell.

Are the stolen funds traceable into the Bondi Junction property?

362 For the reasons given above, I find that the Bondi Junction property was purchased with a bank cheque sourced from the traceable proceeds of the stolen funds comprised in the $800,000. In these circumstances, the plaintiffs' claim that they are entitled to a proprietary remedy against the property in the form of a charge or equitable lien to secure those traceable proceeds.

363 This claim was put in final submissions as arising from the principles stated in Foskett v McKeown,[137] where it was stated that the beneficial owner of misappropriated property can recover it or its traceable proceeds from the person holding the asset, subject only to the defence that the holder is a bona fide purchaser for value without notice.[138] That defence is not available in this case, because The Odds Broker, Mr Hill and Mr O'Connell were volunteers and, in any event, had sufficient knowledge of the fraud at the time the traceable proceeds of the stolen funds comprised in the $800,000 were paid from the Worldwide ANZ account to The Odds Broker, later paid to Mr Hill, and then used to purchase the relevant bank cheque.

364 Further, as appears above, the plaintiffs' claims against the Bondi Junction property are also established on the basis that Mr Hill funded the purchase of the Bondi Junction property in breach of his Black v Freedman obligations, with Mr O'Connell's knowing assistance.

365 In legal terms, the Foskett v McKeown[139] principle can be applied to the facts in this case in the following way. The plaintiffs' property was constituted by their respective choses in action against their bank for money, including the stolen funds. When their bank mistakenly paid the amount of the stolen funds to Worldwide, the plaintiffs' property was extinguished and Worldwide obtained a chose in action against its bank, ANZ, which became the traceable substitute for the plaintiffs' former property.[140] In turn, further traceable substitutes for lesser amounts were created by the subsequent movement of traceable proceeds of the stolen funds into the bank accounts of The Odds Broker and Mr Hill and, subsequently, the relevant bank cheque and the Bondi Junction property.

366 In these circumstances, the following 'basic rule' stated by Lord Millett in Foskett v McKeown applies:

Where a trustee wrongfully uses trust money to provide part of the cost of acquiring an asset, the beneficiary is entitled at his option either to claim a proportionate share of the asset or to enforce a lien upon it to secure his personal claim against the trustee for the amount of the misapplied money. It does not matter whether the trustee mixed the trust money with his own in a single fund before using it to acquire the asset, or made separate payments (whether simultaneously or sequentially) out of the differently owned funds to acquire a single asset.[141]

367 In accordance with that principle, the plaintiffs have claimed a charge on the Bondi Junction property to secure their personal claims against Mr Hill and Mr O'Connell for the traceable proceeds of the stolen funds which were used to purchase the property. Tracing issues are considered below. Subject to the defendants' defence based on indefeasibility by reason of s 42 of the Real Property Act 1900 (NSW) ('the Act'), those claims should succeed. That defence is dealt with below.

368 The plaintiffs contend that the same process can be applied to the balance presently standing to the credit of the Worldwide ANZ account. This issue is considered below.

369 I turn to consider whether the plaintiffs' claims against the Bondi Junction property are defeated by s 42 of the Act.

Are the plaintiffs' claims against the Bondi Junction property defeated by s 42 of the Real Property Act 1900 (NSW)?

370 The defendants plead that Messrs Hill and O'Connell's title to the Bondi Junction property is indefeasible by operation of s 42 of the Act, such that the plaintiffs are not entitled to any relief with respect to that property.

371 Section 42(1) of the Act relevantly provides:

Notwithstanding the existence in any other person of any estate or interest which but for this Act might be held to be paramount or to have priority, the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall, except in case of fraud, hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded except...[142]

372 The exceptions which are then enumerated are not relevant to this case.

373 'Fraud' in s 42(1) means 'actual fraud, moral turpitude',[143] or 'dishonesty of some sort'.[144] The plaintiffs contend that Mr Hill and Mr O'Connell obtained their equal titles to the Bondi Junction property as a result of actual fraud or moral turpitude because they became registered proprietors with sufficient knowledge of the following facts:

(1) the $800,000 paid to Mr Hill's bank accounts from The Odds Broker's bank account included traceable proceeds of the stolen funds; and

(2) the bank cheque used to complete the purchase of the Bondi Junction property was purchased from those traceable proceeds.

374 The defendants contend that no fraud or moral turpitude was involved because:

(1) Mr Hill and Mr O'Connell did not know of the fraud at the time the stolen funds were received by Worldwide. This is no answer because, for the reasons given above, Mr Hill and Mr O'Connell had sufficient knowledge of the fraud before Mr Sigalla's betting account was credited and before the $800,000 was paid from the Worldwide ANZ account to The Odds Broker.

(2) By the time they obtained actual knowledge of the fraud at 1:13 pm on 7 June 2016, the stolen funds had been 'expended as a consequence of the betting activity of Mr Sigalla, and the balance remaining in his betting account was not used to purchase the Bondi Junction property'. This cannot assist Mr Hill and Mr O'Connell because, by reason of their knowledge of the fraud, none of the change of position acts took place in good faith.

(3) Mr Hill was unaware that the bank cheque was purchased with the traceable proceeds of the stolen funds. This defence is considered below.

375 I will first consider Mr O'Connell's individual position. I am satisfied that Mr O'Connell's actions causing his registration as an equal proprietor of the Bondi Junction property were dishonest. First, he wilfully and recklessly failed to make such enquiries as an honest and reasonable person would make before instructing Ms Cad to credit the stolen funds to Mr Sigalla's betting account on 1 June 2016; thus allowing the stolen funds to be used to place bets on that account. That conduct fell within the third Baden category and is a species of actual knowledge.[145] In Macquarie Bank Ltd v Sixty Fourth Throne Pty Ltd,[146] Tadgell JA categorised conduct of that kind as fraudulent.[147]

376 Second, as appears below, earlier on 1 June Mr Hill had asked Mr O'Connell to find the necessary funds to complete the purchase of the Bondi Junction property, if possible from Mr Hill's betting account. Within hours of Mr Sigalla's betting account being credited, Mr O'Connell arranged to transfer $800,000 of the stolen funds from the Worldwide ANZ account to The Odds Broker's bank account and, later, transferred that sum to Mr Hill's bank accounts. As appears above, Mr O'Connell gave evidence that he transferred the $800,000 to The Odds Broker to fund betting by Mr Sigalla on Australian racing events. The significance of Mr O'Connell's evidence in this regard is that he acknowledged the $800,000 was directly referrable to and formed part of the stolen funds. Mr O'Connell gave evidence that, when Mr Sigalla did not wish to bet with The Odds Broker, he used the $800,000 'sitting there on the racing account that wasn't going to be used' to effectuate Mr Hill's instruction to find the money to complete the purchase of the Bondi Junction property. That was a direct acknowledgment that the $800,000 transferred from The Odds Broker's bank account to Mr Hill's personal bank account represented, in Mr O'Connell's mind at least, traceable proceeds of the stolen funds.

377 In light of Mr O'Connell's evidence, I reject Mr Hill's evidence in paragraphs 24-25 of his 11 July 2016 affidavit that:

On 1 June 2016 Worldwide transferred $800,000.00 to the [Odds Broker's] ANZ Account to settle wagers that had been placed by Worldwide through the [Odds Broker's] platform.

[The] Odds Broker used the $800,000.00 received by [it] on 1 June 2016 to pay customers and other gambling organisations to settle bets.

378 Third, on 7 June 2016, before completion of the purchase, Mr O'Connell obtained actual knowledge of the fraud. He nevertheless proceeded to use the traceable proceeds of the $800,000 in Mr Hill's accounts to purchase the relevant bank cheque and complete the purchase. For the reasons given above, it is no answer for him to rely on the conduct put forward in support of the change of position defence to justify that conduct, as that defence fails because the change of position acts were not done in good faith. Although Mr O'Connell may not have appreciated that his actions were dishonest, they were. As stated by the High Court in Farah Constructions:

As a matter of ordinary understanding, and as reflected in the criminal law in Australia, a person may have acted dishonestly, judged by the standards of ordinary, decent people, without appreciating that the act in question was dishonest by those standards.[148]

379 I turn to consider Mr Hill's position. I am satisfied that his registration as an equal proprietor of the Bondi Junction property was procured by fraud for which he is responsible.

380 Mr Hill gave evidence that, prior to the settlement of the purchase of the Bondi Junction property, he did not know that the money in his personal bank account which was used to purchase the bank cheque was sourced from the stolen funds. He relied upon his email to Mr O'Connell sent at 8:52 am on 1 June 2016, in which he told Mr O'Connell that the balance required to settle the purchase would be about $794,000 and that settlement was imminent, and asked Mr O'Connell: 'Can I get money withdrawn from some of my betting accounts'.

381 Read in context, this email should be understood as Mr Hill asking Mr O'Connell whether it was possible to get the required money from his betting accounts and, if so, instructing him to get the money from one or more of those accounts. Mr Hill gave evidence that:

I do recall verbally prior to this particular e-mail saying, 'Nick, I'm going to have to do settlement in a few weeks time'. I had already actioned some finance for the property in case our pre-fund levels were getting lower than we would like but I pretty much said, 'Have a look and see how we are placed'. If I can pull it out of pre-fund that's great.[149]

382 I do not accept Mr Hill's evidence that he had arranged finance to cover the situation where his pre-funds were insufficient to fund completion of the purchase. This evidence was not led in chief and there is no other evidence, written or oral, to support it.

383 Mr Hill explained that Mr O'Connell and Ms Cad had 'carte blanche to move funds around between the betting accounts ... and also the bank accounts as required'. The reference to 'betting accounts' was a reference to his, Worldwide's or The Odds Broker's wagering accounts with other organisations used for betbacks, and his reference to 'bank accounts' was a reference to those of Worldwide, The Odds Broker and his own personal bank accounts. Mr Hill described the credit balances in betting accounts as 'basically our surplus funds that I call my pre-fund which are external to customer deposits'. He said that it was not until on or about 8 June 2016, while he was in Vietnam on business, that Mr O'Connell told him that he had moved sufficient money into his personal bank account to enable settlement of the property purchase to proceed. He said that he reminded Mr O'Connell of the need for the money:

because the settlement was getting very close and he said, 'It's already done'. So I didn't enquire as to how he did it.

384 Conscious of the Briginshaw standard applying to a finding of fraud, I do not feel an actual persuasion that this evidence was false. It was not put to Mr O'Connell that it was, and the plaintiffs' fraud pleading in paragraph 24(a) of their reply depends upon actual knowledge by Mr Hill that the amount used to purchase the bank cheque was traceable to the stolen funds. Mr Hill's evidence is directly contrary to that.

385 The plaintiffs contend that, even if that be the case, Mr Hill authorised Mr O'Connell to act as his agent in obtaining the moneys required for settlement of the purchase, and that Mr O'Connell's knowing use of the stolen funds to fund the purchase should be imputed or 'brought home' to Mr Hill as principal. Reliance was placed upon the decision of the High Court in Cassegrain v Cassegrain.[150]

386 In Cassegrain, Mr Cassegrain fraudulently obtained money from a family company and used the money to purchase land in the names of himself and his wife as joint tenants. Mrs Cassegrain was a volunteer but had no knowledge of her husband's fraud. Some years later, Mr Cassegrain transferred his half interest in the land to his wife for a consideration of $1. The company brought proceedings against Mrs Cassegrain to recover the property, on the grounds that she obtained her sole proprietorship through her husband's fraud as a volunteer or, alternatively, that Mr Cassegrain was her agent for the purpose of procuring her registration as proprietor of the land.

387 The primary judge dismissed the company's claims. The appeal was allowed by majority (Basten JA dissenting). The Court of Appeal declared that Mrs Cassegrain held the land on trust for the company absolutely and ordered her to execute a transfer of the land to the company. Basten JA (in dissent) held that the company should succeed for a one-half interest in the land only. On appeal to the High Court, the majority described Basten JA's decision in the following terms:

By contrast, Basten JA held that it should not be inferred that Claude acted as Felicity's agent for the purposes of the transaction which led to their registration as joint tenants. But his Honour held that Claude obtained his title as joint tenant through fraud and that, because Felicity was not a transferee of Claude's interest bona fide for valuable consideration, GC&Co was entitled to an order that she transfer a half share in the Dairy Farm to it.[151]

388 The High Court agreed with Basten JA.[152]

389 The majority judgment in the High Court reasoned as follows:

(1) The title of a registered proprietor may be invalidated on the ground of fraud 'brought home' to the registered proprietor or to his agents.[153]

(2) Whether fraud by an agent will be brought home to the registered proprietor depends upon the 'scope of authority and whether the agent's knowledge of the fraud is to be imputed to the principal [registered proprietor]'.[154] This involves consideration of why the fraudster's knowledge should be imputed to the registered proprietor.[155]

(3) It is not sufficient to impute the agent's fraud to the registered proprietor where the registered proprietor is 'no more than the passive recipient of an interest in land'.[156]

(4) In order to bring fraud home to the registered proprietor, it is necessary to show that the agent's fraud was within the scope of the agent's authority given by the registered proprietor.[157]

390 As there was no authority in the case, Mrs Cassegrain's initial half interest as a registered joint tenant could not be impeached by her husband's fraud.[158]

391 In this case, Mr Hill gave a broad general authority to Mr O'Connell to move funds around between the relevant accounts. It was his expectation that the money required to complete the purchase of the Bondi Junction property would be moved into his personal account from one of the accounts which Mr O'Connell was authorised to operate. The question is whether that general authority included using the stolen funds if that was the only available source at the time to enable completion of the purchase. In my opinion, Mr O'Connell's authority was sufficiently broad to encompass such a course of action. Although by his 1 June email, Mr Hill asked Mr O'Connell to source the necessary funds from 'some of [his] betting accounts' if he could, he agreed that 'there was always the chance' that the funds would be obtained from a bank account containing the funds of betting customers, and he was not surprised when, after the fact, he learned that Mr O'Connell had used the stolen funds to complete the purchase of the Bondi Junction property.

392 Given that Mr Hill had the same knowledge of the fraud as Mr O'Connell at relevant times, and thus acted dishonestly in instructing Mr O'Connell to arrange for Mr Sigalla's betting account to be credited with the stolen funds, I am satisfied on the evidence that Mr O'Connell's broad authority encompassed him acting fraudulently by using the stolen funds to complete the purchase if that was necessary.

393 I am also satisfied that, based on the in personam exception to indefeasibility, s 42 of the Act does not prevent the Court declaring that the plaintiffs have a lien or charge over the Bondi Junction property to secure payment of the traceable proceeds of the stolen funds used to complete the purchase by Mr Hill and Mr O'Connell. My reasons follow.

394 The indefeasibility of title established by s 42 of the Act is, in addition to the fraud exception, subject to an in personam exception.[159] In Farah Constructions, the exception was generally described as existing 'in relation to certain legal or equitable causes of action against the registered proprietor'.[160] This language echoes the requirement that the in personam exception depends on the establishment of a known legal or equitable cause of action.[161] For the reasons given above, the plaintiffs' claim for an equitable lien or charge arises from it establishing the known legal causes of action based on:

(2) Mr Hill's breach of his Black v Freedman trust obligations; and

(3) knowing assistance in that breach by Mr O'Connell.

395 In Bahr v Nicolay (No 2), Wilson and Toohey JJ said of the in personam exception:

... in accepting the general principle of indefeasibility of title, the Privy Council in Frazer v Walker[163] made it clear that 'this principle in no way denies the right of a plaintiff to bring against a registered proprietor a claim in personam, founded in law or in equity, for such relief as a court acting in personam may grant'.

Sir Garfield Barwick, who was a member of the Privy Council in Frazer v Walker, commented in Breskvar v Wall:

Proceedings may of course be brought against the registered proprietor by the persons and for the causes described in the quoted sections of the Act or by persons setting up matters depending upon the acts of the registered proprietor himself. These may have as their terminal point orders binding the registered proprietor to divest himself wholly or partly of the estate or interest vested in him by registration and endorsement of the certificate of title.[164]

This vulnerability on the part of the registered proprietor is not inconsistent with the concept of indefeasibility. The certificate of title is conclusive. If amended by order of a court it is, as Barwick CJ pointed out, 'conclusive of the new particulars it contains'.[165]

...

... the indefeasibility provisions of the Act may not be circumvented. But, equally, they do not protect a registered proprietor from the consequences of his own actions where those actions give rise to a personal equity in another. Such an equity may arise from conduct of the registered proprietor after registration.[166] And we agree with Mahoney JA in Logue v Shoolhaven Shire Council[167] that it may arise from conduct of the registered proprietor before registration.[168]

396 To similar effect are the statements of Brennan J, who after quoting the same passages from Frazer v Walker and Breskvar v Wall said:

Orders of that kind do not infringe the indefeasibility provisions of the Act. Those provisions are designed to protect a transferee from defects in the title of the transferor, not to free him from interests with which he has burdened his own title.[169]

397 In this case, the conduct of Mr Hill and Mr O'Connell, before registration of their interests as proprietors of the Bondi Junction property, has burdened their interests. The plaintiffs' claims for an equitable charge fall within the in personam exception and are in my opinion an appropriate remedy.

Are the stolen funds traceable into the Worldwide ANZ account?

398 As appears above, the Worldwide ANZ account remains frozen by court order. Notwithstanding the freezing order, however, other Pinnaclebet betting customers continued to deposit funds into their betting accounts until the Pinnaclebet computer systems and website were shut down in the circumstances described above. This created a situation in which the remaining amount of the stolen funds in the Worldwide ANZ account became mixed with the credit balances of Pinnaclebet betting customers other than Mr Sigalla.

399 The current balance of the Worldwide ANZ account has grown to $516,367.12 ('the fund'). The plaintiffs seek to trace the proceeds of the stolen funds into that balance. In submissions, counsel for the plaintiffs produced a chart which he contended identified traceable proceeds of $301,569.21. The defendants contend the traceable proceeds are only $135,511.92. For the reasons given below, however, the contest will only be relevant should there still be unsatisfied claims on the fund by other beneficiaries (not including Worldwide). As appears below, Mr Hill and Mr O'Connell both gave evidence that, by the time of the trial, nearly all of Worldwide's creditors had been paid in full; with only $20,000 to $30,000 remaining undistributed from the Worldwide ANZ account to betting customers with beneficial claims on the fund at that time.

400 It is first necessary to consider the context in which the tracing exercise is being performed. The parties approached the task on the assumption that equitable remedies apply. On any of the alleged causes of action, they were correct to do so.[170] Equity allows tracing from a mixed fund. It is accordingly unnecessary to consider whether the common law allows tracing from a mixed fund.[171]

401 The defendants contend that the relevant tracing principles are those set out by McLure J (as she then was) in Re Global Finance Group Pty Ltd (in liq); Ex Parte Read and Herbert.[172] On this basis, they contend that the rule in Clayton's case ('first in first out') should be applied. They rely upon the statement by McLure J in the following passage:[173]

1. Where there is a mixture by the trustee of the trustee's own funds with funds from more than one trust, the rules which establish the beneficiaries' claims as against the trustee's funds are first applied and thereafter the claims of the beneficiaries of the trust funds inter se come into play.
2. Where a trustee mixes funds of different trusts and the amount in the mixed fund is inadequate to meet the beneficiaries' entitlements in full, the loss is usually allocated by applying one of three solutions or approaches. Those approaches are:

(i) in accordance with the rule in Clayton's Case, being 'first in first out';

(ii) pursuant to the 'North American' model whereby a withdrawal from the mixed fund is allocated in the same proportions as the different beneficiaries bear to each other at the moment before the withdrawal is made. That is, each debit to the fund is attributed to all existing claimants at the relevant time on a pro rata basis;

(iii) pari passu in accordance with a person's contributions or claims to the mixed fund.

1. The objectively determined intention of the claimants at the outset of the relevant scheme can determine the appropriate method of distributing a mixed fund which is inadequate to meet all valid claims.[174]
2. The rule in Clayton's Case provides with respect to, inter alia, a current account containing mixed funds, that in the absence of a contrary intention, expressed or implied, a court will presume the intention of the parties to be that drawings out of the trust fund are to be allocated between the depositors on the basis that withdrawals were made in the same order in which deposits were made, that is, according to the 'first in first out' rule.[175]

402 As the emphasised words in paragraph 106 show, there is a difference of approach between cases where the relevant fund is 'inadequate to meet all valid claims' by the mixed beneficiaries and where there is not. In this case, given that the plaintiffs' claims exceed the amount of the fund, there will be relevant inadequacy if there are still any competing beneficiaries of the fund. As appears below, the continued existence of any competing beneficiaries is in doubt.

403 In Re Global Finance, McClure J noted that the rule in Clayton's case has been strongly criticised in Australia and the pari passu method has often been preferred in cases where the mixed fund is inadequate to meet the claims of all beneficiaries.[176] McLure J also noted the existence of two variants of the pari passu rule, namely, the 'lowest intermediate balance rule' and the 'pari passu ex post facto' solution, as discussed in Canadian and United Kingdom cases.[177]

404 It is clear from Re Global Finance and other cases that there is no rule as to the appropriate method of tracing in a given case. Each case will depend on its own facts.

405 The defendants contend that, notwithstanding criticisms of it, the rule in Clayton's case is the appropriate method of tracing in this case because:

(1) The balance of the Worldwide ANZ account at the time the stolen funds were deposited ($249,298.01) included the sum of $141,315.16 as the credit balance of the so-called 'Simpson betting account', which balance was held on trust on behalf of La Trobe University. They rely upon the evidence of Mr Hill that this amount was 'still' held on behalf of La Trobe University in the Worldwide ANZ account. On this basis, the tracing spreadsheet put forward by counsel for the defendants started with a deduction of the amount held for La Trobe University as a commencing balance. For the reasons given below, I doubt that submission.

(3) There were subsequent deposits into the Worldwide ANZ account of $219,420.90 up to 7 June 2016 and a further $135,642 after that time until closure of the Pinnaclebet website. The defendants contend that these amounts are 'not funds of the plaintiffs' and they could have no proprietary claim to them. I do not accept that this is necessarily so. If Mr O'Connell's evidence, quoted below, is correct the Pinnaclebet customers who made those payments have nearly all been repaid, and thus no longer have a claim on the fund.

(4) The traceable proceeds of the stolen funds comprised in the $800,000 is pursued by the plaintiffs in their tracing claim against the Bondi Junction property.

(5) 'Given the volume of transactions in and out of the [Worldwide ANZ account] it is not practicable to trace on any basis other than that provided by Clayton's case, that is, first in, first out'.[178] This submission is apparently based on the complexity of applying the North American model. The pari passu method would not appear to create those complexities.

406 As I have said, the defendants' factual submission concerning the amount owing to La Trobe University, and starting point for their tracing schedule based on Clayton's case, is doubtful. If Worldwide, or any other defendant or related person, still holds the balance of the relevant betting account for La Trobe University, it does not, on my analysis of the entries on the bank statements up to 24 May 2016, appear to hold that sum in the Worldwide ANZ account:

(1) The balance of the Worldwide ANZ Account was $47,341.68 when the La Trobe Funds were paid in on 16 May.

(2) After the La Trobe funds were paid in, the balance of the account was $2,568,290.06.

(3) Between 16 May and 24 May, a number of deposits and withdrawals were made, the ultimate effect of which was to reduce the balance of the Worldwide ANZ Account to $8,292.85.

(4) As this amount is significantly less than the $47,341.68 which was in the account when the La Trobe funds were deposited, it is clear that the La Trobe funds had been dissipated at this time.

(5) There is no evidence in the subsequent bank statements which I can interpret as supporting a finding that winnings on the so-called 'Simpson betting account' were paid into the Worldwide ANZ account after that time. The Court did not receive submissions or evidence explaining all of these subsequent statements.

407 In oral submissions, and by their tracing schedule, the plaintiffs relied upon the 'lowest intermediate balance rule', as a variant of the pari passu rule.[179]

408 The plaintiffs contend that the rule in Clayton's case has been 'thoroughly discredited as a means for tracing in cases where beneficiaries' monies have been mixed with those of a wrongdoer'.[180] They contend that, in such cases, a beneficiary 'is entitled to trace through the mixed fund in a flexible manner, without regard to the order of withdrawals and deposits'.[181] On this basis, they contend that the defendants bear the onus of proving that any part of the funds standing to the credit of the Worldwide ANZ account is legitimately their property. If they cannot do so, the plaintiffs contend that they are beneficially entitled to the whole of the credit balance;[182] and to the extent that the defendants can prove a legitimate entitlement to part of the credit balance, the plaintiffs remain beneficially entitled to the balance.[183]

409 I accept that these submissions would be correct if the only relevant mixture was of the plaintiffs' funds (ie the stolen funds) with those of the defendants (ie the 'wrongdoers' or defaulting trustees). But the plaintiffs' submission does not grapple with the fact that the Worldwide ANZ account did not only mix the stolen funds with those of Worldwide and the other defendants. The stolen funds were in fact, at least for a time, mixed with the funds of Pinnaclebet customers. Until payment of their respective entitlements, each customer had a beneficial claim on the fund for any credit balance in their betting account.

410 In Heperu,[184] Allsop P considered a case involving mixture of the relevant trust money held for a single group of related claimants (Dr Landa and his companies) with that of the defaulting trustee.[185] There were no other claimants on the fund. In those circumstances, Allsop P referred to Re Oatway; Hertslet v Oatway, where Joyce J said:

[W]hen any of the money drawn out has been invested, and the investment remains in the name or under the control of the trustee, the rest of the balance having been afterwards dissipated by him, he cannot maintain that the investment which remains represents his own money alone, and that what has been spent and can no longer be traced and recovered was the money belonging to the trust. In other words, when the private money of the trustee and that which he held in a fiduciary capacity have been mixed in the same banking account, from which various payments have from time to time been made, then, in order to determine to whom any remaining balance or any investment that may have been paid for out of the account ought to be deemed to belong, the trustee must be debited with all the sums that have been withdrawn and applied to his own use so as to be no longer recoverable, and the trust money in like manner be debited with any sums taken out and duly invested in the names of the proper trustees. The order of priority in which the various withdrawals and investments may have been respectively made is wholly immaterial. I have been referring, of course, to cases where there is only one fiduciary owner or set of cestuis que trust claiming whatever may be left as against the trustee.[186]

411 That is not this case; although it may become such a case, as discussed below.

412 In the course of Allsop P's reasons he referred with approval to 'the scholarly judgment of Campbell JA ... in discussing the rules of tracing in Re Sutherland: French Caledonia Travel Service Pty Ltd (in liq)'.[187] That case deals with the appropriate tracing method to be applied in the context of a case such as the present, where the relevant trust funds have been mixed with those of other beneficiaries with claims against the trustee and the fund at issue.

413 In Re Sutherland,[188] Campbell J (as he then was) considered a liquidator's application for directions in circumstances where the mixed fund was inadequate to satisfy all equitable claims. His Honour reviewed the tracing authorities in detail and, relevantly, stated as follows.

414 First, that the rule in Clayton's case was an inappropriate method for tracing in such a case:

The principles upon which tracing operates, and the proper scope of application of the rule in Clayton's Case, both favour the rule in Clayton's Case not being used to allocate losses suffered by beneficiaries whose funds are mixed. This conclusion is arrived at as a matter of principle, regardless of whether or not there is sufficient information to enable an allocation of withdrawals to deposits, in accordance with Clayton's Case, to be made in any particular case.[189]

415 Second, there is no general rule that the pari passu tracing method is always appropriate in such circumstances:

Having concluded that the liquidator should not apply Clayton's Case does not of itself lead to a conclusion about what manner of distribution the liquidator should adopt. To say that he should adopt a 'pari passu distribution' glosses over some questions of principle, and of evidence.[190]

416 Third, before deciding the appropriate tracing method in such cases, it is first necessary to determine whether the claims by all beneficiaries against the relevant fund are equal:

The maxim 'equality is equity' does not require that the available funds be divided between all people who can establish that, at one time, they had a claim on a bank account in which property held on trust for several people have been mixed. It can readily enough be accepted that if several people have an equal right to be paid from a particular fund, and the fund proves insufficient, their claims will abate rateably. This happens in relation to general legacies, and with the proportionate abatement of provable debts which creditors sustain in a bankruptcy or winding up. Rateable abatement does not automatically apply whenever there is a mixed fund because there is a preliminary question, the answer to which cannot be assumed, of whether all the claimants on the fund, in the form the fund takes at the time of trial, have claims which are equal.

There are two senses of 'have claims which are equal' which apply here. The first concerns whether, in relation to the amount of money of a beneficiary which has gone into a mixed fund, and for which that beneficiary has in one sense a claim, the beneficiary has a charge over whatever property remains from that fund for the whole of the amount of his money which went in. If it can be demonstrated that some beneficiaries have a charge over those assets for the whole amount of their money which went into the fund, while others have a charge over those assets for only part of their money which went into the fund, their claims are not equal ...

The other sense in which claims might be unequal arises once the amount of the various charges of beneficiaries on the fund has been established. Then a question arises of whether in accordance with the equitable principles concerning priorities, or indeed whether by reference to any personal equities whatever which exist between the various claimants, there is any reason to treat any of the claimants as postponed to any of the others.[191]

417 I note that this principle shuts the defendants out from any claim against the fund. Given the inadequacy of the fund in this case, there can be no claim by the defendants to participate in it. For example, they cannot make a claim on the fund based on the fact that one or more of them paid out Pinnaclebet customers from their own funds. Any such claims by the defendants or their privies could not be equal, given their breaches of trust or participation in breaches by others.

418 Fourth, a relevant factor in deciding the appropriate tracing method is the extent to which any beneficial claimant on the fund has a proprietary claim in rem against another asset or fund:

The appropriate way of dividing available assets between beneficiaries whose money has been mixed in an account might also depend upon what other remedies in rem the various beneficiaries have. If there is a situation where the money of A and B is mixed in an account, some of it is withdrawn and used to purchase an asset, and then the money of C is placed in the account, and both the asset, and the account, are available at the time of trial, a liquidator might be directed to administer the fund in accordance with principles of marshalling, so that A and B satisfied themselves from the asset (which only they could trace into) to the extent that they could, leaving C to claim a higher percentage of his claim from the account balance than A and B are permitted to claim from the account balance. In Re Global Finance Group Pty Ltd, McLure J held that, on the facts of the case before her, a division of available monies pari passu between all claimants was inappropriate.[192]

419 I note that the reference to a proprietary claim by one beneficiary in rem, with the consequent need to apply marshalling principles, may have application in this case to the plaintiffs' claims against the Bondi Junction property. Those claims will likely be unavailable to any other beneficiaries claiming on the fund.

420 Fifth, in considering the beneficial claims against the relevant fund, it may be relevant to consider the time of payments into the fund by a beneficiary, and the level of the fund's assets after that time:

Sometimes, however, there might be facts which show that claimants fall into particular classes, such that the amount of the charge which one class has on the assets which remain is likely to be a smaller proportion of the amount of their money which went in than is the case with another class. If, for instance, there was a time when a trust account was completely depleted, beneficiaries whose money went into that trust account before the day of depletion could not have any equitable right at all to the sum which stands in the account at the date of trial. If the account in which the mixing occurred at any time reached a particularly low level, it may be that those people whose money was paid into the account before that low level was reached ought be accorded a smaller dividend on the amount of their claim than people whose money was paid in after that low level was reached. In carrying out such calculations, estimation and inference can be appropriate if precise evidence is not available.[193]

421 I note that this statement is relevant to any claim by La Trobe University against the fund, as discussed above.

422 Sixth, as to the appropriateness of applying the 'lowest intermediate balance rule':

(1) it is a question of degree, to be assessed on the facts of each case, whether the 'lowest intermediate balance rule' is an appropriate method to apply or is too complex;

(2) where a relevant trust fund is wrongly depleted by the trustee, the whole of the fund at that time is affected, 'not any particular beneficiary's contributions'; and

(3) accordingly, the making of further payments into the account containing the relevant fund after the wrongful depletion of the fund by the trustee, is no barrier to the method applying to the fund as it stood before the wrongful depletion; as the further payments are not affected by the depletion:

In Law Society of Upper Canada v Toronto-Dominion Bank, the Ontario Court of Appeal held that beneficiaries whose money had been mixed in an account, and wrongly depleted, should share whatever balance remained in the account pro rata to their contributions, without regard to the 'lowest intermediate balance rule'. One reason for this conclusion was pragmatic - that performing the calculations required to identify the proportions in which the fund was held following each deposit or withdrawal would be extremely complicated in principle, and often not achievable in fact. The second was that the fund was a blended fund, and when it was wrongly depleted it was the fund as a whole which was wrongly depleted, not any particular beneficiary's contributions.

I do not accept that either of these reasons leads to a conclusion that, always and regardless of the facts of the individual case, the lowest intermediate balance rule has no part to play in deciding how a mixed fund of several beneficiaries should be distributed in specie. As to the first reason, whether performing the calculations to carry out a full tracing exercise is complicated, or achievable, will depend upon the particular case being considered. Further, it is not as though the only available alternatives are full analysis of every transaction in the account, and dividing between all claimants equally. As to the second reason, while it is true that, when a depletion occurs from a fund, it is the fund as a whole, as it exists at that time, which is depleted, accretions to the fund after that time are, self evidently, not affected by that depletion.[194]

423 As appears below, the evidence before the Court is unsatisfactory and incomplete, such that the Court cannot be confident that it will choose the most appropriate tracing method or conduct a reliable tracing exercise on the facts as they now stand. Armed with full information, the Court will be in a position to determine which is the most appropriate tracing method to adopt in the circumstances of this case. I turn to consider the extent of the missing information.

424 The following issues need to be the subject of evidence and submissions. Is there still any amount owing by Worldwide to Pinnaclebet betting customers? If so, how much and what documents support the current position? Mr O'Connell gave evidence that the Pinnaclebet betting customers' accounts had been paid in full with the exception of only $20,000 to $30,000, and that there were, at the time of the trial, some bets by Pinnaclebet customers which had not 'resulted':

I think the customers we paid out on that week [ie the week Worldwide shut down the Pinnaclebet computer systems and website]. We looked at their account balances and it was about $1.3 million or $1.4 million and there was another, I think, maybe $600,000 or $800,000 that was rolling around that hadn't been resulted. So I am not sure of the exact amount. We have still got payments to make now. I think we still owe customers $20,000 to $30,000. We are happy to pay it. They haven't given their ID and some of them are just stragglers. We have contacted them. Some of them have got bets on the NRL for who is going to win the competition and it still hasn't finished yet. Some of them haven't resulted.[195]

425 Mr O'Connell also gave evidence that Worldwide (he and Mr Hill) wanted to pay Worldwide all the betting customer entitlements for reputational reasons, in circumstances including where The Odds Broker was continuing to trade. It appears likely that they have all been repaid by now, but this should be readily verifiable by admissible evidence.

426 Moreover, to the extent that there were outstanding bets at the date the Pinnaclebet website was shut down, the evidence does not indicate what has transpired in respect of those bets. Have they resulted and, if so, has this led to credits to the Worldwide ANZ account? Or were the winnings paid directly to the customers from or through the wagering accounts or other means? In this respect, Mr O'Connell gave evidence that there were still some outstanding debts in respect of the National Rugby League Premiership for the 2016 season. Presumably, the results of those bets are now known. The Court does not know where the proceeds of any winning bets have been paid.

427 Inference, or forensic examination of bank statements by the Court, should not be necessary where proof of what in fact happened is within the defendants' knowledge and possession. Ms Cad gave evidence that, prior to the Pinnaclebet website being closed down, she ensured that Worldwide retained information including customers' names, dates of birth, addresses, the available balance on each customer's account, details of any pending bets on those accounts which had not yet resulted, and whether the customer had deposited funds to the credit of his or her account via credit card. Mr O'Connell said that this information needed to be retained so that customers could be paid their entitlements. Although this information has been retained, it is not before the Court.

428 Is the credit balance of the so-called Simpson betting account held in the Worldwide ANZ account? If so, how is that fact to be established? As appears above, the evidence points in favour of the La Trobe University debt not forming part of the fund. Again, hard evidence supported by documents is required; not evidence of Mr Hill's belief. Given the role of another innocent party, La Trobe University, the defendant should be given a further opportunity to establish their contention in this respect. If necessary, I will hear from the parties following these reasons as to whether it is appropriate to give notice to La Trobe University so it can make submissions on the issue.

429 The fact that this missing information is not available prevents the Court from conducting a reliable tracing exercise. All of the missing information which will enable a reliable tracing exercise to be completed is in the hands of the defendants. In these circumstances, the Court cannot now determine the appropriate tracing method to apply or now undertake the tracing exercise. Instead, the defendants will be ordered to produce the missing information, including all supporting documentation, and further submissions made as to tracing issues. If all other claimants on the fund have been paid, and there is a separate account containing the money owing to La Trobe University, it is possible that no tracing exercise of any kind will be necessary. For the reasons given, the plaintiffs will likely be entitled to all of the fund in such circumstances.

430 If tracing remains necessary in order to formulate the relief to be granted to the plaintiffs, it may be necessary for the Court to appoint an appropriately qualified special referee to conduct the tracing exercise and report to the Court if the parties cannot agree on the result of the Court's determination of the appropriate method. This approach is consistent with the comments of Allsop P in Heperu where, after referring to the submissions and evidence of the parties concerning a difficult tracing exercise, his Honour stated:

The submissions of the appellants and the evidence did not conveniently undertake these tasks. Detailed schedules were handed up at trial and on appeal identifying the entry of money into the various mortgage accounts from the Westpac account. However, there was no assistance given to enable one to be confident of the precise amount[s] ... This task is no doubt a tedious one. It is not one that it is appropriate for the Court to undertake unaided, in circumstances where the parties can undertake it.[196]

What amount of the stolen funds was used to purchase the Bondi Junction property?

431 The plaintiffs contend that the traceable amount of the stolen funds used to purchase the Bondi Junction property is $763,000. This contention appeared to involve the following steps:

(1) No account is required for the mixing of the stolen funds in the Worldwide ANZ account or The Odds Broker's bank account, as there is no evidence any of those beneficiaries remain unpaid.

(2) On this basis, the traceable proceeds of the $800,000 in Mr Hill's hands should not be discounted.

(3) $763,000 of the $800,000 can be seen from the bank statements to have been paid towards payment for the bank cheque used to complete the purchase of the property.

432 If these contentions are accepted, the attached diagram and above tables demonstrate that the correct amount would be $796,000, not $763,000.

433 The defendants contend that the traceable proceeds of the stolen funds comprised in the $800,000 which were used to fund the purchase of the bank cheque were $731,349.45. This calculation involved accepting (perhaps incorrectly) that all of the $800,000 paid to The Odds Broker was traceable proceeds of the stolen funds and applying the Clayton's case first-in-first-out tracing method to take account of the entitlements of other beneficiaries to The Odds Broker bank account at the time the $800,000 was paid to it. For the reasons given above, and in the absence of evidence that any of those other beneficiaries remain unpaid, I reject the defendants' contention.

434 Although I infer it is likely that any beneficiaries of The Odds Broker bank account at the relevant time have been paid in full, I will adopt the same approach as I have with the tracing exercises involving the Worldwide ANZ account. The proceeding will be adjourned to allow further evidence and submissions as to the amount of the traceable proceeds used to purchase the Bondi Junction property.

435 I turn to consider the plaintiffs' claims for an account of profits.

Must Worldwide account to the plaintiffs for any profit that it made on the use of the stolen funds?

A trustee is accountable to the trust for profits derived by reason of either or both the opportunity and knowledge acquired by virtue of his or her position as trustee.[197] On the defendants' evidence, Worldwide earned profits of $8,000 to $9,000 on the Citic Funds wagered. If the Court were to find that the wagers occurred, the plaintiffs would be entitled to an account of all such profits.[198]

437 No contrary submission was made. I have found the wagers on Mr Sigalla's betting account were made.

439 I turn to consider whether the stolen funds can be recovered under s 2.6.3 of the Gambling Regulation Act 2003.

Can the stolen funds be recovered under s 2.6.3 of the Gambling Regulation Act 2003?

440 Section 2.6.3 of the Gambling Regulation Act 2003 provides as follows:

If money is stolen or embezzled and paid to a person as or on account of a wager or bet, the person from whom it was stolen or embezzled may recover it, or a sum not exceeding its amount, in a court of competent jurisdiction from the person to whom it was paid.[199]

441 Section 2.6.3 creates a strict liability regime for bookmakers and others engaged in the gambling industry who receive stolen or embezzled funds for the emphasised purpose. In my opinion, the payment and receipt must relate to a wagering or betting transaction which takes place in Victoria or is governed by the laws of Victoria. My reasons follow.

442 First, s 2.6.3 was not intended to have extraterritorial operation. The plaintiffs' arguments effectively conceded as much, although they contend that the relevant 'matter or thing' giving rise to the operation of the section took place in Victoria. The basis of this submission, considered below, is s 48(b) of the Interpretation of Legislation Act 1984 which relevantly provides that:

In an Act or subordinate instrument, unless the contrary intention appears ...

(b) a reference to a locality, jurisdiction or other matter or thing shall be construed as a reference to such locality, jurisdiction or other matter or thing in and of Victoria.[200]

443 A review of the Act as a whole establishes that it is directed at regulating gambling in Victoria, including by the placing of a wagers or bets in a variety of circumstances, with the exception of 'interactive gaming' which is governed by Chapter 7 of the Act. Section 7.1.6 provides that Chapter 7 applies both within and outside Victoria and, to the extent it applies outside Victoria, it applies 'to the full extent of the extra-territorial legislative power of Parliament'.[201] There is no similar provision extending the operation of other chapters of the Act outside Victoria. Section 2.6.3 is contained in Chapter 2.

444 Second, the following elements must be established in order for the section to operate:

(1) Money must be stolen or embezzled. In my opinion, it matters not whether that occurred in or outside Victoria. It is simply a pre-condition to the section operating at all.

(2) The stolen money must be paid to a person for the specified purpose: 'as or on account of a wager or bet'. The purpose of the payment is the critical matter or thing.

445 The plaintiffs' contend that the critical matter or thing is the place of payment of the stolen money. For the reasons given above, I do not accept that contention.

446 Moreover, even if the critical matter is the place of payment, I do not accept the plaintiffs' contrived contention that the stolen funds were paid in Victoria. The stolen funds were paid from the plaintiffs' bank accounts maintained at a branch in Western Australia and received by Worldwide into the Worldwide ANZ account maintained in New South Wales. The plaintiffs contend that, because the ANZ Bank has its registered office in Victoria, the stolen funds were paid to Worldwide in Victoria. The basis of this argument is said to be that, upon receipt of the stolen funds by ANZ for the credit of the Worldwide ANZ account, ANZ became indebted to Worldwide for the amount of the stolen funds and that debt was situated in Victoria because the registered office of the ANZ Bank is in Victoria.

447 This artificial contention is rejected. Where stolen money is paid to a person's bank account, the section is clearly intended to refer to payment to the account holder as 'the person' and not to the bank. The bank does not receive the payment for the specified purpose, namely 'as or on account of a wager or bet' placed in Victoria. The existence of that purpose is determined by the proper characterisation of the payment in the context of the relationship and dealings between the payer of the stolen money and the recipient account holder.

448 The claim under s 2.6.3 of the Gambling Regulation Act 2003 fails.

449 My reasoning is consistent with the decision of the Queensland Full Court in Horgan v Sieber.[202] In that case, the relevant offence under Queensland legislation governing racing and betting prohibited a person from possessing 'any instrument of betting'. Instruments of betting included documents or writings kept or used for any purpose connected with betting on horse racing. The defendant was charged with possession of instruments of betting found in his possession in Queensland but relating 'only [to] betting transactions which had occurred in New South Wales, after which the "instruments" were brought into Queensland'.[203]

450 The Full Court held that the legislation was directed against unlawful betting in Queensland only, and because the betting transactions occurred in New South Wales the charge should be dismissed.[204] Although this case concerned the Queensland legislation at issue, it is consistent with my interpretation of s 2.6.3 as requiring for its operation that the stolen money be paid for the purpose of a betting transaction in Victoria, irrespective of where the relevant event on which the bet is or may be placed is to occur.[205]

Did Worldwide receive and hold the stolen funds as a bona fide purchaser for value without notice?

451 For the reasons given above in rejecting the defences based on change of position, this question does not arise for determination.

452 The plaintiffs have established an entitlement to relief on various common law and equitable causes of action. In Fistar v Riverwood, Leeming JA considered that relief based on both equitable and common law causes of action is available in circumstances such as the present, because 'there are many overlapping claims against recipients of stolen property'.[206] Leeming JA stated that recipients of trust property may be liable for co-existing causes of action based on knowing receipt of trust property, knowing assistance in a breach of trust or fiduciary obligation, or on a proprietary basis in accordance with Black v Freedman principles.[207] To this catalogue of available causes of action, I would add Foskett v McKeown principles and the simple case of money had and received. Accordingly, it was open to the plaintiffs to prosecute overlapping or concurrent claims and seek to have judgment entered on the proven claims which yield a result most advantageous to them.[208]

453 The plaintiffs have established an entitlement to relief on the following grounds.

454 First, for $2,077,210 against Worldwide on the basis of:

(1) the common law claim for money had and received;

(2) the proprietary claim under Foskett v McKeown principles; and

(3) breach of its Black v Freedman trust obligations.

455 Second, against Mr Hill and Mr O'Connell for $2,077,210 for knowingly assisting Worldwide to breach its Black v Freedman trust obligations.

456 Third, against The Odds Broker, for the traceable proceeds of the stolen funds comprised in the $800,000 paid to it by Worldwide on the basis of:

457 Fourth, against Mr Hill for the traceable proceeds of the stolen funds comprised in the $800,000 paid to him by The Odds Broker on the basis of:

458 Fifth, against Mr O'Connell for knowingly assisting Worldwide, The Odds Broker and Mr Hill to breach their respective Black v Freedman trusts by disposing of the traceable proceeds of the stolen funds comprised in the $800,000.

459 Sixth, against Mr Hill and Mr O'Connell for the traceable proceeds of the stolen funds comprised in the $345,000, for knowingly assisting Worldwide to breach its Black v Freedman trust obligations.

460 Seventh, against Worldwide for proprietary relief in the form of an equitable charge over the Worldwide ANZ account to secure the traceable proceeds of the stolen funds remaining in that account.

461 Eighth, against Mr Hill and Mr O'Connell for proprietary relief in the form of an equitable charge over the Bondi Junction property to secure the traceable proceeds of the stolen funds used to purchase that property.

462 Ninth, against Worldwide for $8,500 as an account of profits made from its breach of trust.

463 Each of these findings involve rejection of the change of position and bona fide purchaser for value without notice defences, on the ground that the defendants did not act in good faith at relevant times because of their knowledge of the fraud in the third Baden category. The indefeasibility defence fails for the reasons given.

464 The proceeding will be adjourned to allow further evidence and submissions before determining tracing issues.

465 I will hear the parties as to the form of the Court's judgment and as to further evidence and submissions concerning tracing issues.

CAPE PRESTON PORT COMPANY PTY LTD (ACN 147 842 153)

WORLDWIDE WAGERING PTY LTD (a company incorporated in Norfolk Island with a registered number 01/12)

[1] There was initial confusion about which company conducted the Pinnaclebet business and was the Worldwide ANZ account holder. In these circumstances, two Australian companies owned and controlled by Mr Hill, Pinnaclebet Pty Ltd and another company, also named Worldwide Wagering Pty Ltd, were joined as the first and second defendants. When it later became clear that Worldwide was the correct defendant, all allegations against these defendants were withdrawn and a notice of discontinuance against them was filed. It is unnecessary to refer to them again. I will refer to Worldwide, The Odds Broker, Mr Hill and Mr O'Connell as, collectively, 'the defendants'.

[4] Although the agency was not pleaded, the case was run on that basis and supported by the evidence.

[5] Betfair Pty Ltd v Racing New South Wales [2010] FCAFC 133; (2010) 189 FCR 356, 375 [55]; CFMEU v BHP Coal Pty Ltd [2015] FCAFC 25; (2015) 320 ALR 61, 73 [65]; Bass v TCN Channel Nine Pty Ltd (2006) NSWCA 343, [44].

[6] [1993] 1 WLR 509, 575-6 [250] ('Baden'); Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89, 163-4 [171]-[178] ('Farah Constructions').

[7] Farah Constructions (2007) 230 CLR 89, 162 [170].

[8] Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336, 361 ('Briginshaw').

[9] Chong v CC Containers Pty Ltd & Ors [2015] VSCA 137 [41]-[54].

[10] [1992] HCA 66; (1992) 67 ALJR 170, 170-1 (citations omitted).

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

[17] The transcript reads: 'I do believe I may have heard on the grapevine an aside from Andrew Sigalla that there was some ASIC action against him but what it was to do with I'm not sure.' (emphasis added). The word 'an' makes no sense in the context of the answer as a whole. I infer that Mr Hill likely mumbled 'ah', 'umm' or some other speech disfluency while he searched for the right words. Alternatively, the word is a mere transcription error. Both Mr O'Connell and Mr Hill spoke extremely quickly and placed considerable pressure on the transcriber.

[18] Defence [9(d)]; defendants' written closing submissions [15].

[25] Detective Howard gave evidence that this email was sent 'a couple hours after' his initial phone call from Mr O'Connell reporting the fraud. If that be right, the time of the conversation noted in Detective Howard's running diary (1:35 am) would appear to be incorrect. Nothing turns on this factual issue.

[26] Bolded text is original emphasis. Italicised text is emphasis added.

[37] Numbers [1] to [7] added to aid comprehension of Mr Hill's reasons.

[42] This is consistent with the evidence of the ANZ bank employee. Indeed, on his evidence, the internet banking records for the Worldwide ANZ account would have shown the names of the plaintiffs as the two depositors by 2:00 am on 31 May 2016.

[43] Mr Hill said that he was not familiar with the Pinnaclebet systems but believed they were 'fairly rigorous in terms of KYC, identifying the customer.'

[45] Both Mr O'Connell and Ms Cad gave evidence to this effect.

[50] [2008] WASC 239; (2008) 70 ACSR 1, 170-173, [999]-[1022]. These paragraphs do not appear in the authorised report of the case: see (2008) 39 WAR 1, 139.

[51] Payne v Parker [1976] 1 NSWLR 191.

[52] Fabre v Arenales (1992) 27 NSWLR 437; Hewett v Medical Board of Western Australia [2004] WASCA 170.

[53] Hewett v Medical Board of Western Australia [2004] WASCA 170.

[54] Fabre v Arenales (1992) 27 NSWLR 437, 450.

[55] Smith v Samuels (1976) 12 SASR 573.

[56] Smith v Samuels (1976) 12 SASR 573; Cubillo v Commonwealth (No 2) [2000] FCA 1084; (2000) 103 FCR 1.

[57] J D Heydon, Cross on Evidence, (LexisNexis Australia, 10th ed, 2014) 38 [1215]; Hospitality Group Pty Ltd v Australian Rugby Union Ltd [2001] FCA 1040; (2001) 110 FCR 157, 176 [64].

[58] J D Heydon, Cross on Evidence, (LexisNexis Australia, 10th ed, 2014) 38 [1215]; Brandi v Mingot (1976) 12 ALR 551, 559-60.

[59] Affidavit of Melissa Crittenden, 23 June 2016, Ex. AMC-12; particulars under paragraph 7 of Third Further Amended Statement of Claim.

[69] [2014] HCA 14; (2014) 253 CLR 560, 568 [1] ('AFSL v Hills').

[70] Ibid 593 [66]-[67]; David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353, 379.

[71] AFSL v Hills [2014] HCA 14; (2014) 253 CLR 560, 602-3 [97]-[98] (Hayne, Crennan, Kiefel, Bell and Keane JJ).

[72] Ibid 625-6 [157] (emphasis added).

[73] [2015] VSCA 117; (2015) 321 ALR 383.

[75] [1992] HCA 48; (1992) 175 CLR 353, 379-80.

[76] Macquarie Bank Ltd v Sixty Fourth Throne Pty Ltd [1998] 3 VR 133, 143-4.

[77] (2007) 230 CLR 89, 163 [174] citing Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch 437, 454 with approval.

[78] See [23(2)] above.

[79] Fistar v Riverwood Legion & Community Club Ltd [2016] NSWCA 81; (2016) 91 NSWLR 732, 746 [62]-[64] (Leeming JA, Bathurst CJ and Sackville AJA agreeing).

[80] [2016] NSWCA 81; (2016) 91 NSWLR 732.

[81] Ibid 746 [62]-[63] (italicised emphasis in original; underlining added for further emphasis).

[82] [1910] HCA 58; (1910) 12 CLR 105.

[84] Outline of defendants' opening submissions [53].

[85] Emphasis added. See also defendants' outline of opening submissions [49].

[86] Defendants' written closing submissions [59]-[60]. Emphasis added.

[87] Defendants' written opening submissions [49].

[88] Plaintiffs' outline of opening submissions [32].

[89] [1910] HCA 58; (1910) 12 CLR 105, 110.

[90] (2014) 308 ALR 748, 766 [65].

[91] Black v Freedman [1910] HCA 58; (1910) 12 CLR 105, 108-9.

[97] (2014) 308 ALR 748, 766 [65].

[98] [2009] NSWCA 252; (2009) 76 NSWLR 230 (Allsop P, Campbell JA and Handley AJA agreeing) ('Heperu').

[99] Ibid [2009] NSWCA 252; (2009) 76 NSWLR 230, 253 [92] (emphasis added) (citation in original).

[100] Black v Freedman [1910] HCA 58; (1910) 12 CLR 105, 109 (Griffith CJ), 110 (Barton J), 110-111 (O'Connor J).

[101] Heperu [2009] NSWCA 252; (2009) 76 NSWLR 230, 264-8 [145]-[163].

[105] (1990) 169 CLR 279, 286.

[106] Heperu [2009] NSWCA 252; (2009) 76 NSWLR 230, 265-6 [154]-[155]; Sze Tu v Lowe [2014] NSWCA 462; (2014) 89 NSWLR 317, 345-8 [141]-[162].

[107] (1874) LR 9 Ch App 244.

[108] Farah Constructions (2007) 230 CLR 89, 159 [160], [179]-[184].

[109] Farah Constructions (2007) 230 CLR 89, 163-4 [177]; Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296, 362 [262]; Mathieson Nominees v Aero Developments [2016] VSC 131 [166] (Vickery J).

[110] (1874) LR 9 Ch App 244.

[111] Farah Constructions (2007) 230 CLR 89, 163-4 [177].

[112] Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296, 361 [261]. The language of a 'calculated abstention from enquiry' was also used prior to Baden by Stephen J in Consul Development Pty Ltd v DPC Estates Pty Ltd [1975] HCA 8; (1975) 132 CLR 373, 408.

[113] Yeshiva Properties No 1 Pty Ltd v Marshall [2005] NSWCA 23; (2005) 219 ALR 112, 118 [22] (Bryson JA, Mason P and Beazley JA agreeing).

[114] [2005] NSWCA 23; (2005) 219 ALR 112 ('Yeshiva Properties').

[115] [1975] HCA 8; (1975) 132 CLR 373 ('Consul').

[116] Farah Constructions (2007) 230 CLR 89, 163 [175]-[176].

[117] Baden [1993] 1 WLR 509, 575 [248].

[121] [2005] NSWCA 23; (2005) 219 ALR 112.

[122] Consul [1975] HCA 8; (1975) 132 CLR 373, 376.

[124] Yeshiva Properties [2005] NSWCA 23; (2005) 219 ALR 112, 118 [22].

[125] Baden [1993] 1 WLR 509, 575 [248].

[126] Statement of claim, [6]-[9G], [10(f)], prayer for relief A and B.

[135] Grimaldi v Chameleon Mining (No 2) [2012] FCAFC 6; (2012) 200 FCR 296, 359 [253] (citations omitted).

[136] [1995] HCA 18; (1995) 182 CLR 544, 559.

[137] [2000] UKHL 29; [2001] 1 AC 102.

[138] Ibid 129 (Millett LJ), 108-9 (Lord Browne-Wilkinson), 115 (Lord Hoffman).

[139] [2000] UKHL 29; [2001] 1 AC 102.

[141] Ibid 131 (emphasis in original).

[143] Farah Constructions (2007) 230 CLR 89, 169 [192].

[144] Bahr v Nicolay (No 2) [1988] HCA 16; (1988) 164 CLR 604, 614.

[145] Farah Constructions (2007) 230 CLR 89, 163 [174].

[146] [1998] 3 VR 133.

[148] (2007) 230 CLR 89, 162 [173] (citation omitted).

[150] [2015] HCA 2; (2015) 254 CLR 425.

[151] Ibid 437 [35] (citations omitted).