John Ljubomir Atanaskovic and the persons named in Schedule A trading as Atanaskovic Hartnell v Birketu Pty Ltd

1. [1]

   Lawyers are expected to behave honestly and ethically. They are expected to keep their word. These expectations apply as much to a lawyer who is an employee of a law firm as to a partner.

2. [2]

   Costs agreements between solicitors and their clients are subject to control by the Court in the exercise of its inherent powers: McNamara Business and Property Law v Kasmeridis (2007) 97 SASR 129; Athanasiou v Ward Keller (6) Pty Ltd (1998) 8 NTLR 23 (Athanasiou); Law Society of New South Wales v Foreman (1994) 34 NSWLR 408 (Foreman).

3. [3]

   The Court will not permit a solicitor to enforce an agreement with a client which requires the client to pay to the solicitor for services rendered an amount which represents an overcharge beyond the bounds of professional propriety: Foreman at 422. Such an amount would, of course, be excessive as being unfair and unreasonable.

4. [4]

   A solicitor is in a fiduciary position vis-à-vis the client and has obligations to the client both in respect of the making of a costs agreement and in the carrying of it out: Foreman at 435; Moss v Moss (No 2) (1900) 21 LR (NSW) Eq 253 at 258; Chan v Zacharia (1984) 154 CLR 178 at 198; United Dominions Corporation Limited v Brian Pty Ltd (1985) 157 CLR 1 at 11-12.

5. [5]

   The Court, as a superior court, has jurisdiction to ascertain by taxation, moderation or fixation, the costs, charges and disbursements of a solicitor from the client: Athanasiou at 28; Baalman (JS & JH) v Dare Reed (1984) 52 ACTR 3 at 17.

6. [6]

   Brody Jack Clarke (Clarke) was a solicitor of this Court. He is a fraudster and a thief. He is in prison.

7. [7]

   Clarke started working for the Sydney city law firm Atanaskovic Hartnell (AH) in December 2013. My impression was that he was treated by some as the young “hot shot”.

8. [8]

   Mr John Ljubomir Atanaskovic (Atanaskovic or JLA), is one of AH’s principals.

9. [9]

   AH has a London office where each year Atanaskovic spends some months.

10. [10]

    Birketu Pty Ltd (Birketu) is Mr Bruce Gordon’s private investment vehicle and holding company. WIN Corporation Pty Ltd (WIN), which has interests in the television industry, is controlled by him.

11. [11]

    Bruce Gordon and his companies (the Gordon interests) were important clients of AH. Atanaskovic started doing legal work for Bruce Gordon in the mid-1980s and maintained a professional relationship with him over the years. The Gordon interests regularly retained AH.

12. [12]

    Mr Andrew Gordon (Bruce Gordon’s son) is Executive Chairman of WIN, and a director of Birketu.

13. [13]

    Mr Andrew Lancaster (Lancaster) is the Chief Executive Officer of WIN. He was appointed Chief Executive Officer of Birketu in about February 2018.

14. [14]

    Until late 2018, Mr Daniel Collis (Collis) was WIN’s Chief Financial Officer. Birketu did not have a chief financial officer. Collis performed that function for it. Collis also assisted Bruce Gordon with his personal financial affairs.

15. [15]

    From the start of his employment at AH, Clarke did work for the Gordon interests.

16. [16]

    Over the period 16 June 2016 to 1 September 2017, Clarke perpetrated a number of callous frauds.

17. [17]

    Clarke induced Birketu and WIN to make a number of payments totalling more than $1 million, on behalf of Bruce Gordon, to Clarke’s own bank account, Westpac Bank account number 554-779 Leura Branch BSB 732-828 (Westpac Account), by telling them, falsely, that the Westpac Account was AH’s trust account (the disbursement frauds).

18. [18]

    Twice Clarke duped Deutsche Bank Aktiengesellschaft (Deutsche) into paying him money (totalling over $7 million) held by Deutsche to Birketu’s account (the Deutsche frauds). To achieve this, Clarke committed forgery.

19. [19]

    Clarke’s villainy was exposed on 28 September 2017.

20. [20]

    Birketu, then represented by AH, commenced proceedings and obtained urgent orders freezing Clarke’s assets.

21. [21]

    Two actions in the Court were heard together, evidence in one being evidence in the other.

22. [22]

    In the first action (the fraud case), Birketu, WIN, and Bruce Gordon sued AH and Deutsche. They also sued Clarke, but he did not make an appearance to defend himself and they did not move against him for judgment.

23. [23]

    Bruce Gordon sued AH for damages equivalent to what was paid into the Westpac Account and not recovered, claiming that AH was vicariously liable for Clarke’s actions. AH disputed that Clarke acted within the course and scope of his employment with AH.

24. [24]

    Birketu sued Deutsche to restore to its account the amounts which Deutsche debited as a consequence of Clarke’s conduct, claiming that Deutsche had no mandate to affect its account. Deutsche raised only one defence to this claim, namely, that Clarke had ostensible authority from Birketu to conduct the dealings with Deutsche that led it to debit Birketu’s account. Birketu contended that if Clarke had (which it denied) ostensible authority, AH was vicariously liable to it for Clarke’s actions. Deutsche said that if Clarke did not have ostensible authority, it was entitled to recover whatever it had to pay Birketu, from AH, because AH was vicariously liable to it for Clarke’s actions. AH’s position was that Clarke did not have Birketu’s ostensible authority. AH disputed that Clarke acted within the course and scope of his employment.

25. [25]

    Thus, on any scenario, a principal question in the fraud case was inevitably going to be whether Clarke acted in the course and scope of his employment with AH.

26. [26]

    In the second action (the fee case), AH sued Birketu and WIN for unpaid fees and disbursements in six matters totalling (after minor adjustments conceded by AH) $1,093,648.33. The fees are covered by seven invoices:

27. [27]

    Under an engagement letter dated 16 November 2017 (the investigation retainer), Birketu retained AH to advise and assist it in connection with the Deutsche frauds. This entailed investigating the circumstances in which AH’s own employee had perpetrated frauds on the Gordon interests for which AH might be, and was ultimately established to be, vicariously liable. For this work, AH rendered Statement of Account / Tax Invoice B10582 (the investigation invoice) for $172,686.27 to Birketu. [1] Of all the invoices, this is the most controversial one.

28. [28]

    Birketu denies liability for the investigation invoice because it says that, on 9 January 2018, Atanaskovic orally undertook not to charge for the work covered by it. Atanaskovic denies the undertaking. AH says that, if Atanaskovic gave it, Birketu gave no consideration for it and its terms are uncertain. AH says that such an undertaking is ineffective to inhibit it from enforcing its legal entitlement to its fees under its costs agreement with Birketu.

29. [29]

    As well, Birketu and WIN argue that AH’s fees are unfairly and unreasonably excessive to the extent of $303,606.51, of which $75,845.17 pertains to the investigation invoice.

30. [30]

    It is apt to note that in the fraud case Birketu and WIN argued that, if they were otherwise liable to AH for the investigation invoice fees, they were entitled to recover the equivalent amount from AH as part of the damages suffered by them as a result of Clarke’s conduct. AH’s answer was that the costs covered by the investigation invoice were not claimable as damages but were legal costs in the fraud case, given that those proceedings had been initiated by AH on Birketu’s behalf. They argued that those costs should be dealt with by the Court exercising its discretion as to costs.

31. [31]

    The trial occupied 13 hearing days.

32. [32]

    Before the trial, the parties attended an unsuccessful mediation.

33. [33]

    Mr B Walker SC opened the fraud case for the Gordon interests. The hearing was thereafter conducted by Mr M Ashhurst SC, leading Mr A Vincent. Mr P Brereton SC, leading Ms A Horvath, Ms K Boyd and Mr J Entwisle, appeared for AH in the fraud case. Mr P Wood, with Mr T O’Brien, appeared for Deutsche. Mr J Hutton appeared for AH in the fee case. On behalf of the Gordon interests, the fee case was conducted by Mr A Vincent. There was, inevitably, some crossover in the evidence and submissions in the fee case and the fraud case.

34. [34]

    The case was fact heavy. The Court Book comprised 30 volumes, running to over 10,000 pages. When the trial began, the Court Book was in an unsatisfactory state. This resulted in the case starting in earnest a few days late. The flow on effect was that after two weeks of hearing the case was adjourned and resumed two weeks later. The parties’ written submissions, which include schedules and footnotes, exceed 300 pages.

35. [35]

    The Court made it clear, on more than one occasion (although it was obvious), that findings on credit would be required and that such findings could have ramifications beyond the Court room. On more than one occasion, the Court conveyed the desirability of the parties settling the fee case.

36. [36]

    On 24 June 2019, I reserved judgment. I made it clear that no further argument would be permitted without leave.

37. [37]

    On Friday 19 July 2019, at 2.39 pm, I received from AH, by email, a Notice of Motion and supporting affidavit, which had been filed in the Registry, seeking leave to adduce further argument in the fraud case. The Registry allocated the Motion a return date of 26 July 2019. I informed the parties that I would deal with the Motion on Monday, 22 July 2019, at 2.00 pm. At 3.41 pm, I was informed by email that the fraud case had settled in principle but no agreement had been reached in the fee case. At 4.00 pm, I informed the parties that my judgment was complete and that I was in a position to deliver it. The judgment that had been prepared ran to 113 pages. The parties were directed to appear at 2.00 pm on Monday, 22 July 2019.

38. [38]

    On 22 July 2019, the parties appeared. Shortly before then, I received proposed consent orders intended to dispose of the fraud case. I was informed that the fee case had not settled. I made it clear that the fee case involved matters of credit, and that matters pertinent to the fraud case were relevant to that assessment. I informed the parties that unless I was informed by 4.00 pm on 22 July 2019 that the fee case had settled, I would deliver judgment in that proceeding at 9.15 am on Friday, 26 July 2019.

39. [39]

    However, on 23 July 2019, I received an email from AH attaching a Notice of Motion seeking leave to make further submissions and requesting that I hear the Motion that day or the following day. The Court was not able to accommodate this request, having regard to other judicial commitments. I fixed the Motion for hearing on 26 July 2019. The consequence was that I was not able to deliver this judgment on that day as planned.

40. [40]

    Over opposition, I gave AH leave to address additional submissions with respect to Atanaskovic’s credit. Birketu and WIN did not wish to have an opportunity to respond. I have had regard to the additional submissions.

41. [41]

    The work needed to recast the judgment has been considerable.

42. [42]

    The questions that arise for determination are:

    1. (1)

       is any part of the amount claimed by AH irrecoverable because it is unfairly and unreasonably excessive?

    2. (2)

       did Atanaskovic undertake not to charge the fees covered by the investigation invoice? If he did, are those fees recoverable?

43. [43]

    I will deal first with the alleged over-charging, other than in respect of the investigation invoice. I will then deal with the investigation invoice.

44. [44]

    Birketu and WIN argue that AH can only recover those costs which are fair and reasonable. They presently do not ask the Court to resolve the extent to which the amount claimed is excessive. They move the Court to appoint a referee under Uniform Civil Procedure Rules 2005 (NSW) r 20.15 to inquire and report into that question. They argue that there is sufficient material before the Court to conclude that there is a serious question that AH’s fees are unreasonably excessive.

45. [45]

    They identify a number of bases for the contention that AH is restricted to recovering an amount of costs which is fair and reasonable. These are:

46. [46]

    Each invoice is covered by a written retainer agreement. Each retainer agreement contains the following clause 4 headed “Fees”:

47. [47]

    Birketu and WIN served two expert reports of Mr Christopher Phillip Wall (Wall), a specialist costs assessor and costs review panellist. The reports were referred to but not formally read, presumably on the footing that Birketu and WIN only seek to establish sufficient prospect of over-charging to warrant reference of that issue to a referee. Wall’s approach was to consider each of the invoices and available back up material, and to assess whether the costs charged were fair and reasonable.

48. [48]

    AH relied on an expert report of a costs assessor, Valerie Edith Higginbotham.

49. [49]

    Birketu and WIN have not established that the rates charged by AH are excessive in relation to the work which the invoices purport to cover.

50. [50]

    Birketu and WIN are substantial and well-resourced commercial entities. Bruce Gordon is undoubtedly an experienced and sophisticated businessman.

51. [51]

    The matters, which were often complex and involving significant amounts of money, all required high level and high quality legal services.

52. [52]

    They agreed to pay AH a specified hourly rate for these services. There is nothing which takes the retainer agreements (excluding, perhaps, the investigation retainer) beyond, or even near, the bounds of professional propriety.

53. [53]

    The fact that an expert assessor may assess an amount as being that which would be recovered on an assessment does not mean that, in particular circumstances, any amount above that is unfair and unreasonable, let alone being beyond the bounds of professional propriety.

54. [54]

    I should say that there appear to be some charges which are not adequately supported by primary documentation. Wall says that although he has had access to electronic and hard copy files, he has seen almost no files notes dealing with attendances on other solicitors outside AH, other solicitors within AH, barristers, or representatives of the client or any other persons. The charges are reflected in AH’s internal accounting system called ‘Affinity’. Wall, however, approached the matter on the footing that where there was insufficient information to find the charges unreasonable or excessive he accepted them.

55. [55]

    Paul Springthorpe, a solicitor at AH, gave evidence to sustain the time spent on the various matters and was hardly challenged. As mentioned below, he conceded one error and some minor adjustments.

56. [56]

    In these circumstances, and leaving aside the investigation invoice which is dealt with later, I am not persuaded that WIN and Birketu have demonstrated sufficient prospect of establishing excessive charging so as to warrant reference to a referee.

57. [57]

    The investigation invoice is an entirely different position for three reasons. First, Birketu says that Atanaskovic undertook not to charge for work covered by it. Second, some of the work charged for concerned AH dealing with the position of conflict in which it undoubtedly was. Third, some of the work concerned issues, such as ostensible authority, on which AH took a specific forensic position in the fraud case in its own interests. This gives rise to the possibility that AH took the benefit of work for which it wishes Birketu to pay in circumstances where they were adverse to one another.

58. [58]

    On 16 November 2017, Birketu formally engaged AH in relation to the Deutsche frauds. AH allocated number 5983 to this matter.

59. [59]

    The investigation retainer states, relevantly:

60. [60]

    The terms of the investigation retainer reflect an acute awareness on the part of AH of the position of conflict or potential conflict in which it was. It is, however, mostly concerned with the position of AH in relation to a conflict asserted by Deutsche. Deutsche’s assertion was apparently in the context of a claim foreshadowed by it against Birketu. The investigation retainer has little to say about the acute conflict or potential conflict involved where Birketu itself had or might have had a claim against AH, in circumstances where Birketu may not recover its loss on the ‘$7m Loan’ referred to in the caption of the investigation retainer.

61. [61]

    On 9 January 2018, Lancaster and Bruce Gordon had lunch with Atanaskovic at Q Dining restaurant in Sydney.

62. [62]

    Lancaster gave evidence that Atanaskovic said words to the following effect:

63. [63]

    Lancaster says that Atanaskovic went on to say:

64. [64]

    Atanaskovic denies this conversation. He says that he recalls the lunch reasonably well. He says that at the time of the lunch he had no expectation that AH’s insurer would act in such a fashion – particularly not in January, when many legal and insurance people are on vacation. He says that he had already formed the view that at least part of each of Bruce Gordon, WIN or Birketu’s loss was caused by the incompetence, recklessness or gross negligence of Collis and Lancaster and that he had no intention of paying for their conduct (he did not reveal this to his clients).

65. [65]

    Atanaskovic says that he did observe that AH had not, and did not propose to, charge WIN, Birketu or Bruce Gordon for seeking an immediate freeze of Clarke’s bank accounts, or the extensive internal investigation AH had conducted and the extensive reporting to Bruce Gordon on these and directly related subjects.

66. [66]

    I believe Lancaster that Atanaskovic gave the oral undertaking. His evidence is to be preferred over that of Atanaskovic, not only with regard to the oral undertaking but wherever their evidence conflicts. I do not accept Atanaskovic’s evidence, except where it is corroborated by objective contemporaneous material.

67. [67]

    My assessment of their credit has, of course, been made on the basis of the evidence as a whole. It follows that, although the prolixity of this judgment will be increased, it is necessary in order to expose my reasoning to deal with evidence extending significantly beyond the oral undertaking itself.

68. [68]

    Between 9 January 2018 and 28 February 2018, Bruce Gordon and Birketu decided to change solicitors in the matter.

69. [69]

    On 28 February 2018, AH rendered to Bruce Gordon and Birketu the investigation invoice, under cover of the following letter:

70. [70]

    It is fair to say that the bulk of the evidence adduced at the hearing concerned whether Clarke’s conduct was in the course and scope of his employment with AH, with the consequence that AH was vicariously liable for it. This turned on whether Clarke’s employment with AH provided the opportunity for and was the occasion for his fraudulent acts.

71. [71]

    A secondary, but significant, issue was whether Clarke had Birketu’s ostensible authority to deal with Deutsche. If he did not, then Deutsche would be liable to Birketu and AH would be liable to Deutsche if Clarke’s behaviour was in the course and scope of his employment.

72. [72]

    My finding was, and is, that Clarke’s behaviour, with regard to the Gordon interests directly and with respect to Deutsche, was in the course and scope of his employment. My finding was, and is, that Birketu did not clothe Clarke with ostensible authority to deal with Deutsche as he did. This means that part of the attendances covered by the investigation invoice were for services where AH was in a position of actual conflict with its clients and where, subsequently, it was in heavily contested litigation with the client over the issues that gave rise to that very conflict.

73. [73]

    To explain why I reached my conclusions requires me to deal with a range of matters extending well beyond the direct confines of the fee dispute. It involves, amongst others, traversing the frauds committed by Clarke, his position at AH, the matters he worked on, and how Atanaskovic saw and treated him. It also necessarily involves an exposition, albeit brief, of the relevant principles of law concerning vicarious liability and ostensible authority.

The disbursement frauds

1. [74]

   Bruce Gordon and his wife, Mrs Judith Gordon, owned apartment 1102 in the fashionable Pullman Quay Grand building at 61-69 Macquarie St, Sydney, known as “the toaster”.

2. [75]

   They wished to buy apartment 1101 next door (the apartment), and break through the common wall.

3. [76]

   Bruce Gordon apparently has the practice of presenting a prospective vendor with a cheque for the deposit he will pay if the vendor will sell to him. It seems he may have conveyed to Clarke an intention to do this with the owners of the apartment.

4. [77]

   On 2 May 2016, Clarke sent Bruce Gordon a draft letter to the owner under cover of the following email which was copied to Atanaskovic:

5. [78]

   Atanaskovic gave evidence that he had not asked Clarke to prepare any letter for Bruce Gordon. He says that he spoke to Clarke very sternly, telling him that this sort of behaviour was not acceptable at AH. He says that he instructed Clarke not to initiate further contact with Bruce Gordon and that he told Clarke expressly that AH would not have anything further to do with the Gordon’s Quay Grand purchase, if any purchase was in fact to occur. I do not believe his evidence.

6. [79]

   Far from being corroborated by it, the objective contemporaneous material undermines this, as does Atanaskovic’s own behaviour at the time.

7. [80]

   Not only did Clarke’s involvement with the Quay Grand purchase not cease, it intensified over time to Atanaskovic’s knowledge and with his participation.

8. [81]

   Lancaster says that Clarke was actively involved with the acquisition of and building works and body corporate issues surrounding the apartment and that Clarke spent much time dealing personally with Bruce Gordon, so much so that it became a bit of a running joke between WIN and Birketu senior executives and AH personnel, including Atanaskovic. At Christmas 2016, Clarke sent a “Merry Christmas” email to Bruce Gordon, Lancaster and Collis with a photograph of a hard hat with the words “Bruce’s Foreman” written across the front of it. The hat had apparently been given to Clarke as part of the AH Kris Kringle.

9. [82]

   On 9 May 2016, Clarke emailed Atanaskovic:

10. [83]

    Atanaskovic did not react to this email, and did not give an adequate explanation for why he did nothing in the face of what he says was a breach of his instructions.

11. [84]

    Moreover, on the same day, Clarke instructed a specialist conveyancing lawyer, Mr Julian Peters (Peters) of Aitken Lawyers, to attend to the conveyance on behalf of the Gordons. It is clear that the name of Aitken Lawyers as a candidate to help the Gordons with the conveyance was introduced by Atanaskovic himself.

12. [85]

    Clarke’s email to Peters commenced with the statement: ‘we are acting for Bruce Gordon in relation to the acquisition of lot 103 on Strata Plan 58857’. On the same day, Peters emailed Clarke thanking him for his instructions in the matter.

13. [86]

    An issue to which the proposed acquisition of the apartment gave rise concerned the Gordons’ estate planning. They wished to leave the apartment to their daughter Genevieve. This necessitated changing their wills.

14. [87]

    The following demonstrates that Clarke was becoming involved in the matter with Atanaskovic’s imprimatur.

15. [88]

    The Gordons were imminently to leave Sydney for London.

16. [89]

    On 11 May 2016, Clarke emailed Venetia Brown (Brown), a solicitor working in AH’s London office, copied to Atanaskovic:

17. [90]

    Contracts for the purchase of the apartment were exchanged on 18 May 2016, with settlement due to occur on 22 June 2016.

18. [91]

    On 19 May 2016, Clarke emailed Atanaskovic:

19. [92]

    On 23 May 2016, Peters wrote a fairly lengthy letter to the Gordons, care of Clarke, confirming that the contracts had been exchanged and noting a number of things with respect to the contract, including that stamp duty of $570,510 would be payable on the contract (Clarke recast this letter somewhat in an email which he sent to the Gordons, copied to Brown, the following day).

20. [93]

    On the same day, Clarke informed Brown by email of the exchange and anticipated settlement date. Brown emailed Atanaskovic:

21. [94]

    On 24 May 2016, Atanaskovic emailed Brown, copied to Clarke, amongst others, relevantly:

22. [95]

    On 24 May 2016, Clarke emailed Brown, copied to Atanaskovic:

23. [96]

    On 25 May 2016, Brown emailed the Gordons, copied to Clarke and Atanaskovic:

24. [97]

    On 31 May 2016, Clarke emailed Bruce Gordon:

25. [98]

    Perhaps the first real portent of what was to happen occurred on 16 June 2016, when Clarke requested Collis to transfer $570,510 to the Westpac Account for the payment of stamp duty and some associated costs. Clarke’s email to Collis of that date read:

26. [99]

    On 16 June 2016, Collis arranged for the transfer of $570,510 by Birketu to the Westpac Account. Clarke was no doubt testing the waters for what he was later to do because, on 19 July 2016, he arranged for payment of stamp duty to be made to the OSR from the Westpac Account.

27. [100]

    On 20 June 2016, Collis emailed Clarke asking him to provide settlement details. Clarke did this, attaching a settlement sheet which, presumably, he had obtained from Peters.

28. [101]

    On 30 August 2016, Clarke called Collis. Clarke told him that the OSR had determined that Bruce Gordon had to pay a surcharge purchaser duty on the purchase of the apartment because he was considered a foreign person as he had a residence in Bermuda. Clarke told him that they should appeal the assessment, but that it would be prudent if the money was paid into trust pending determination of the appeal. Clarke said he would send an email to confirm.

29. [102]

    On 31 August 2016, Clarke emailed Collis:

30. [103]

    On 31 August 2016, Collis arranged for WIN to transfer $360,000 into the Westpac Account.

31. [104]

    In fact, no surcharge purchaser duty was payable. Clarke kept the money and never paid it back.

32. [105]

    On 15 September 2016, Clarke called Collis again. Clarke told Collis that the OSR had determined that a further final surcharge duty of $160,000 was payable on the purchase of the apartment. He told Collis that they had objected to the duty, but the objection had not yet been dealt with and that to avoid general interest charges it would be prudent to pay this amount into trust. He told Collis that they would hold funds until the OSR ruled on their objection. He said he would confirm in an email.

33. [106]

    On 15 September 2016, Clarke emailed Collis:

34. [107]

    On 16 September 2016, Collis arranged for WIN to pay $160,600 into the Westpac Account.

35. [108]

    In fact, no further surcharge purchaser duty was payable. Clarke kept the money and never paid it back.

36. [109]

    On 16 December 2016, AH rendered Invoice B10352 to Bruce Gordon for professional costs of acting for him between 1 May 2016 and 30 November 2016. That work included the review and amendments to the wills of Mr and Mrs Gordon and advice in relation to strata fees payable on the apartment. A number of the attendances charged for were in relation to work done by Clarke. Minor disbursements clearly incurred in relation to the conveyance itself, such as for searches, were charged for. Clarke’s direct work on the conveyance and renovation, it seems, was not.

37. [110]

    On 10 January 2017, Bruce Gordon apparently called Clarke to invite him to the apartment for lunch to see the end result.

38. [111]

    On 20 April 2017, Clarke called Collis. He told Collis that they had initially sought an exemption from land tax on the basis that the apartment would be Mr Gordon’s principal place of residence. He told Collis that the OSR had determined that Bruce Gordon was not entitled to the exemption and must pay $74,138 in land tax. He told Collis that Bruce Gordon had asked that they appeal the ruling and that, pending resolution of the appeal, the funds should be paid into trust to avoid any general interest charges if the appeal was unsuccessful. He said that he would email Collis to confirm.

39. [112]

    On 21 April 2017, Clarke emailed Collis:

40. [113]

    On 21 April 2017, Collis arranged for payment by WIN of $74,138 into the Westpac Account.

41. [114]

    In fact, the OSR had exempted Bruce Gordon from payment of land tax. Clarke kept the money and never paid it back.

42. [115]

    Birketu was a shareholder in Ten Network Holdings Ltd (Ten), a television station. Ten’s major financier was the Commonwealth Bank of Australia (CBA). Birketu had, as had other shareholders in Ten, guaranteed a proportion of Ten’s liability to CBA under a $66 million Loan Facility Agreement entered into on 16 October 2013.

43. [116]

    Illyria Pty Ltd (Illyria) is a company associated with members of the Murdoch family. Illyria was also a shareholder in Ten and guarantor to CBA.

44. [117]

    In 2017, Birketu and Illyria formed an alliance with respect to the potential future of Ten, including a capital restructure which they called Project XII. Illyria introduced Fort Street Advisers (Fort Street) as an independent specialist corporate advisory firm to be retained to advise the allies. Atanaskovic was not too impressed with what he saw was the imposition by Illyria of Fort Street on Birketu.

45. [118]

    Ms Linda Norquay (Norquay) was CFO of Illyria. Mr Jim McKnight (McKnight) and Mr Ben Keeble (Keeble) were two of Fort Street’s principals.

46. [119]

    In early April 2017, meetings between Birketu, Illyria and Fort Street took place. On 5 April 2017, a meeting was arranged to take place in Bruce Gordon’s apartment on 10 April 2017. Before the meeting, Atanaskovic emailed Lancaster (copied to Clarke), confirming that the meeting would take place ‘with Brody Clarke present from AH as a chaperone’. The email included the following:

47. [120]

    On 10 April 2017, Bruce Gordon, McKnight, Norquay and Clarke attended the meeting as planned. Although his earlier email seems to suggest that he would not be there, Atanaskovic was apparently there too.

48. [121]

    Lancaster met with Norquay and Clarke later that day, and they were then joined by McKnight and Keeble. Atanaskovic did not attend.

49. [122]

    Over the month of April 2017, the terms of Fort Street’s engagement were negotiated. Emails passed between Clarke, Norquay, Lancaster and Collis. Ultimately, a formal engagement letter was signed by Fort Street in early June 2017. It made provision for the payment to Fort Street of a monthly retainer by Birketu and Illyria of $125,000, commencing from 13 March 2017 (being the date on which Fort Street commenced its work) and capped at four months. Birketu’s half share was $62,500 per month.

50. [123]

    Lancaster recalls a telephone conversation with Clarke one evening in late April 2017, when Lancaster was at his daughter’s soccer training. Clarke told him that they were “just about there” in their negotiations with McKnight and Illyria. Clarke said that, while they were sorting out the final negotiations, it would be a good idea to put monies in AH’s trust account for the Fort Street payments as this would show good faith to Fort Street and would help finalise the negotiations. Clarke said that if Birketu paid the funds to the AH trust account, AH would direct payments from there. Lancaster suggested they speak again in the morning and would finalise.

51. [124]

    On 27 April 2017, Clarke called Collis. He told him that Illyria had agreed to the Fort Street fee proposal. He said that Birketu should agree to the fee proposal and that it involved retainer fees of $125,000 per month. Clarke said it had been agreed that two months’ retainer should be paid in advance. Birketu’s share for two months was $125,000. Clarke said that the letter of engagement had not yet been executed, but as a sign of good faith Birketu should pay the amount into the AH trust in preparation for the agreement being signed. Clarke said that he would follow this up with an email to confirm.

52. [125]

    On 28 April 2017, Lancaster instructed Collis that they were happy with Fort Street’s retainer and for the first two months’ payments to be paid into trust. Later that day, Clarke emailed Collis attaching an invoice from Fort Street:

53. [126]

    Also on 28 April 2017, Collis arranged for Birketu to pay $125,000 into the Westpac Account.

54. [127]

    On 25 May 2017, Clarke emailed Collis and Lancaster: [2]

55. [128]

    The following day, Clarke emailed Collis repeating the request. On 26 May 2017, Collis arranged for payment by Birketu of $62,500 into the Westpac Account.

56. [129]

    On 9 June 2017, Clarke forwarded the Fort Street retainer by email to Lancaster and Collis for execution.

57. [130]

    The Fort Street retainer was signed on behalf of Birketu on 9 June 2017.

58. [131]

    On 14 June 2017, Ten was placed under voluntary administration. Receivers were appointed to a number of companies in the Ten group. Solicitors King and Wood Mallesons (KWM) were retained by the receivers and managers.

59. [132]

    On 21 June 2017, Clarke forwarded to Collis an email, dated 20 June 2017, from Fort Street concerning fees incurred by KWM. Clarke stated that the fees were ultimately indemnified by Illyria and Birketu.

60. [133]

    On 23 June 2016 Collis arranged for Birketu to make a payment into the Westpac Account which included $62,500 for Fort Street.

61. [134]

    Birketu later found out that on 9 August 2017 and 4 September 2017, Clarke caused payments of $69,433.20 and $180,566.80 (i.e. $250,000), respectively, to be paid to Fort Street from the Westpac Account.

62. [135]

    A meeting of creditors in the Ten administration was scheduled for 26 June 2017.

63. [136]

    On 23 June 2017, Clarke sent Lancaster a text informing him that Birketu’s Proof of Debt for the meeting would ‘include guarantor fees and the Fort Street fees to increase the figure (even if administrator later contests).’ He asked Lancaster to approve payment of the amounts into trust.

64. [137]

    On 23 June 2017, Clarke emailed Collis:

65. [138]

    On 23 June 2017, Collis arranged for payment by Birketu of $249,026.65 into the Westpac Account in three separate payments (this included $62,500 in respect of Fort Street). Later that day, he emailed Clarke with confirmation of this.

66. [139]

    On 26 June 2017, Clarke emailed Collis:

67. [140]

    Clarke was appointed proxy for the meeting.

68. [141]

    AH never rendered an invoice for $119,641.50 (incl. GST). It did not have work in progress in that amount in respect of work carried out for Birketu in relation to its dealings with Illyria, Fort Street and Ten.

69. [142]

    In fact, Ten was responsible for payment of all fees legal fees incurred by Birketu in relation to its commercial dealings with Illyria, Fort Street and Ten. Ten was also ultimately responsible for payment of KWM’s fees.

70. [143]

    In an email to Collis on 18 September 2017 Clarke confirmed that Birketu would be reimbursed for payment of the KWM fees, but it never was. Similarly, Clarke did not pay any amount to AH in respect of its purported legal fees. The monies paid on supposed account of AH fees and KWM fees into the Westpac Account were never paid back by Clarke and were lost.

71. [144]

    WIN and Ten were parties to a Program Supply Agreement (Ten PSA) executed on 22 May 2016, under which Ten agreed to supply programs to WIN to be broadcast within the area of WIN’s television broadcast licence.

72. [145]

    Under the Ten PSA, WIN had to pay Ten an affiliation fee for the supply of the programs and WIN agreed to supply Ten with the Television Shopping Network (TVSN). Ten had to pay a data-casting fee for the supply of TVSN. The affiliation fee and data-casting fee were calculated on a monthly basis.

73. [146]

    The Ten PSA provided that every payment payable by a party under it may be set‑off against any amount due and payable by the other party.

74. [147]

    As at late June 2017, Ten owed WIN $2,016,666.63.

75. [148]

    Collis sought advice from AH as to the availability of a set-off of that amount against what WIN owed Ten.

76. [149]

    On 26 June 2016, Lawson Jepps (Jepps), a senior solicitor (subsequently a partner) at AH, [3] advised Collis by email, copied to Atanaskovic and Lancaster, that set‑off was available.

77. [150]

    On 29 June 2017, Clarke emailed Collis a draft letter to Ten electing to take advantage of a set-off. The email also said:

78. [151]

    Later that day, Clarke emailed Collis a slightly revised version of the proposed letter. Clarke enlisted the assistance of Springthorpe in preparing the letter.

79. [152]

    On the afternoon of 30 June 2017, Clarke called Collis. Clarke said words to the following effect:

80. [153]

    Lancaster also recounts a conversation between Clarke, Collis and himself, in which Clarke said:

81. [154]

    Lancaster says that as Ten was in administration he was conscious to ensure that they did everything that they were advised to do. He says that he was comfortable with the advice he had received. Accordingly, on 30 June 2017, WIN wrote to Ten claiming the set-off. In fact, the law of set-off required (and requires) no such thing.

82. [155]

    On 30 June 2017, Clarke emailed Collis relevantly:

83. [156]

    On the same day, Lancaster authorised Collis to transfer the claimed set-off amount of $2,016,666.63. Collis says that he arranged for WIN to pay the amount into the Westpac Account. He believed that the Westpac Account was a trust account maintained by AH.

84. [157]

    At this point it is apt to mention that Paragraph 11 of AH’s Standard Terms of Engagement is headed ‘Trust Moneys’ and states:

85. [158]

    There then followed a period during which Birketu tried, unsuccessfully, to get the deposited money back.

86. [159]

    On 14 July 2017, Collis emailed Clarke requesting an update on the return of the money. Clarke did not respond. He called Clarke, who told him that there had been an administrative mix up and that the AH accounts clerk had placed the funds into a 30 day term deposit. Collis told him to break the term deposit, and that they needed the funds repaid. Clarke’s response was that he would try.

87. [160]

    On 17 July 2017, Clarke called Collis. Clarke told Collis that the money was in a 30 day term deposit that he could not break. Collis told him that of course he could break it, they would just miss out on some interest. Clarke said he would see what he could do and would talk to the CBA. Collis told him that he could not pay outstanding AH invoices for legal fees without the money being returned. Clarke said that he would speak to the CBA and get back to Collis. Clarke called back about an hour later, he told Collis that he had not had any success with breaking the term deposit and was continuing to negotiate with the CBA to break it so as not to suffer any penalty for early termination. Collis told him to break it regardless of any early termination fees.

88. [161]

    On 24 July 2017, Clarke emailed Collis, relevantly:

89. [162]

    In early- to mid-August 2017, there were a number of email exchanges between Clarke and Collis concerning repayment of the money.

90. [163]

    On 15 August 2017, Clarke called Collis. He told Collis that the bank had agreed to release the funds with no penalty, and that the funds would be returned in the next 48 hours.

91. [164]

    On or about 17 August 2017 (18 August 2017 in Sydney), Lancaster was in California. He had a telephone conversation with Atanaskovic and Jepps. He says that the conversation was in relation to the payment of outstanding AH invoices and return of the set-off monies. His version of the conversation is as follows:

92. [165]

    Lancaster says that he found it a little odd that Atanaskovic and Jepps joked about not having a trust account and having no knowledge of the funds, but because Atanaskovic had a quirky sense of humour he did not think much more about it. Lancaster says that this conversation did not affect his assumption that AH operated a trust account and that AH had received payment of the set-off amount and was required to pay it back to WIN.

93. [166]

    Collis says that on or before 17 August 2017 he received a call from Lancaster, who had returned from overseas. He says a conversation to the following effect took place:

94. [167]

    Atanaskovic and Jepps have a different version of the conversation with Lancaster.

95. [168]

    Atanaskovic says that the call related only to the Ten set-off and that the matter of unpaid AH invoices was not raised. He says that Lancaster asked whether $2 million should be paid into a trust account as part of the proposed set-off. He says that he asked Lancaster why he thought that a trust account payment should be made, and that Lancaster responded that it was to show good faith. He says that Jepps joined the conversation after the call had already commenced, and was likely laughing because he was incredulous at the alleged virtue and manner of WIN placing money on trust. Atanaskovic disputes that Lancaster told him that he believed that an AH trust account was holding $2 million for either WIN or Birketu.

96. [169]

    Jepps’ version is that, having joined the conversation after it started, he heard Lancaster ask whether they had to put money on trust to show good faith. Jepps says that he answered no, and that either he or Atanaskovic then queried why Lancaster thought money should be paid into trust. Jepps says that Lancaster said that it was an idea but it had not been implemented. He says he chuckled slightly because he did not think that the idea of putting money into trust was a considered proposal. Jepps disputes that there was any discussion of AH billing or the fact that WIN had actually transferred money to any person in respect of the amount of the set‑off during the call.

97. [170]

    Lancaster’s version is to be preferred to that of Atanaskovic (and Jepps), where they collide. Lancaster, I consider, was an entirely truthful witness – as was Collis.

98. [171]

    Jepps gave an honest account to the best of his recollection, but he was not present for the whole conversation. He says he walked into his office and, to his irritation, found Atanaskovic in his chair and on the phone. I infer that Jepps may not have heard the part of the discussion that is in dispute.

99. [172]

    Lancaster’s version is supported by objective contemporaneous material.

100. [173]

     First, by the time of the conversation some time had elapsed since WIN had deposited over $2 million and, as a fact, AH had invoices outstanding. It is inherently probable (even leaving aside Collis’ unchallenged evidence that he told Clarke he could not pay those invoices without the money being returned) that they would have discussed both.

101. [174]

     Second, on 18 August 2017, the following email exchange took place between Lancaster and Collis in relation to the sum $2 million which had been paid by WIN:

102. [175]

     Atanaskovic obviously did not take seriously Lancaster’s assertion about paying money into trust because he did not do anything about it.

103. [176]

     On 18 August 2017, at 11.35 am, Collis sent an email to Clarke with the subject line “Heads up JLA is now aware of the $2m and Bills being held due to”. There was no text in the body of the email.

104. [177]

     Lancaster was justified in continuing to hold the belief that they were joking about not having a trust account because on 18 August 2017, $2,016,666.63 and $8,739 were deposited, by way of two bank cheques sourced from the Westpac Account, into the WIN bank account.

105. [178]

     On 18 August 2017, Collis emailed Clarke:

106. [179]

     Clarke replied:

107. [180]

     There was a direct connection between these payments and the fraud perpetrated by Clarke in relation to Deutsche. Clarke used the proceeds from the Deutsche frauds to repay the deposited sum plus interest.

108. [181]

     I am satisfied that each of Lancaster and Collis did not know that AH did not operate a trust account.

The Deutsche frauds

1. [182]

   A cash settled share swap (swap) is a contract under which an investor either gives or receives cash payments from its swap counterparty equivalent to any decrease or increase in the price of an underlying parcel of specified shares between the start date and the termination date of the swap. The swap must be settled in cash. It cannot be settled by a delivery of the underlying shares. As consideration, the investor pays the counterparty a financing charge.

2. [183]

   As at February 2016, Birketu held 14.9% of the issued shares in Nine Entertainment Co Holdings Ltd (NEC or Nine), a television station. Under broadcasting legislation, this was as much as it could hold. The use of a swap would enable Birketu to increase its economic interest in NEC to the legal limit, under corporations legislation, of 19.9%.

3. [184]

   Bruce Gordon was introduced to Mr Ashley Seeto (Seeto) of Deutsche on 13 January 2016. They discussed the possibility of a swap. Seeto was then introduced to Lancaster and Collis. Negotiations ensued. Seeto sent Lancaster and Collis a presentation document called ‘Swap accumulation’. Lancaster passed it on to Atanaskovic, who passed it on to Clarke.

4. [185]

   On 10 February 2016, Birketu and Deutsche agreed the commercial terms of a swap referenced to shares in NEC.

5. [186]

   Birketu placed its first order on 11 February 2016. The end date was extended on several occasions, first to 25 July 2016, then to 20 January 2017 and finally to 20 July 2017. It is necessary only to deal with the extension to 20 July 2017. This is dealt with below.

6. [187]

   On 14 March 2016, Birketu and Deutsche entered into another swap, this time with respect to shares in Ten (Ten Swap). It too was signed by Andrew Gordon and Collis on behalf of Birketu.

7. [188]

   Birketu proceeded to place orders with Deutsche for NEC “shares” and Ten “shares”, under the NEC Swap and the Ten Swap respectively.

8. [189]

   Deutsche needed Birketu’s bank account details to make payments (of dividends) to Birketu under the NEC Swap.

9. [190]

   On 19 April 2016, David McKay, of Deutsche, emailed Seeto and Collis:

10. [191]

    Collis responded:

11. [192]

    Attached to Collis’ email was the following letter:

12. [193]

    In mid-April 2017, Seeto discussed with Bruce Gordon the possibility of a “collar” for the NEC Swap. This was an idea to use put and call options for NEC shares to limit Birketu’s exposure under the swap. However, it would also limit Birketu’s upside potential. On 19 April 2017, Seeto emailed Atanaskovic with respect to this idea. He referred to his earlier discussion with Bruce Gordon.

13. [194]

    On 6 June 2017, Atanaskovic and Clarke exchanged emails about Clarke participating in a call with Birketu regarding the NEC Swap. The exchange ended with Atanaskovic emailing Clarke, copied to himself, relevantly (original emphasis):

14. [195]

    On 7 June 2017, there was a telephone conference involving Atanaskovic, Jepps, Clarke, Seeto and Tim Earlwood (from the loan department at Deutsche). Clarke took notes. Atanaskovic’s evidence was that Clarke’s role was simply as a note taker. It is apt to recount the following exchange between counsel for Deutsche and Atanaskovic:

15. [196]

    On 6 July 2017, Seeto emailed Atanaskovic:

16. [197]

    Within an hour, Atanaskovic forwarded this email to Bruce Gordon, with blind copies to a number of people at AH including Clarke, under cover of the following email:

17. [198]

    On the morning of 10 July 2017, Clarke responded to Seeto by forwarding Atanaskovic’s email, but first deleting the contents so that Seeto did not see Atanaskovic’s pejorative “snake oil salesman’s” reference. Clarke said:

18. [199]

    Seeto and Clarke then exchanged emails trying to set up a meeting. In one email, Clarke mentioned that he “was just on call to Bruce.”

19. [200]

    On the morning of 10 July 2017, Clarke called Seeto. Seeto’s recollection of the conversation is as follows:

20. [201]

    On the afternoon of 10 July 2017, Seeto emailed Clarke:

21. [202]

    Thereafter, and until 20 July 2017, there were a number of email exchanges and telephone discussions between Seeto and Clarke. In an email dated 12 July 2017, Clarke asked Seeto for a summary of Birketu’s existing NEC holding. In another email of the same date, Clarke asked Seeto if he “could also take a look at actual termination date etc, will be relevant.”

22. [203]

    Seeto says that he had a telephone conversation with Bruce Gordon on 14 July 2017, during which he mentioned that he had been speaking to Clarke about the NEC Swap and the Ten Swap. He says that Bruce Gordon said:

23. [204]

    On 14 July 2017, Clarke emailed Atanaskovic with regard to shares in NEC held by Oaktree which AH was looking into on Bruce Gordon’s behalf:

24. [205]

    On or about 14 July 2017, Seeto had a discussion with Clarke to the following effect:

25. [206]

    Seeto then emailed Clarke explaining how to extend the NEC Swap or sell some shares under it.

26. [207]

    On 18 July 2017, Collis informed Clarke (by forwarding an email from Lancaster) that Bruce Gordon had agreed to a three month extension of the NEC Swap.

27. [208]

    On or around 27 July 2017, Andrew Gordon, on behalf of Birketu, signed an Amendment Confirmation to the NEC Swap, extending it to 14 November 2017. Another director of Birketu, Mr Edwin Maxwell Cowley (Cowley), signed it on 28 July 2017. Clarke arranged for an AH paralegal, Ms Rosemary Enderby (Enderby), to attend Cowley’s home to obtain his signature.

28. [209]

    On 31 July 2017, Clarke emailed Seeto:

29. [210]

    Later that day, Clarke emailed Collis:

30. [211]

    On 31 July 2017, Clarke emailed Atanaskovic (original emphasis):

31. [212]

    On 9 August 2017, Seeto emailed Clarke and a number of others at Deutsche setting out his thoughts on releasing “c. $2.5m for Bruce, which would be documented as an amendment to the NEC Swap”.

32. [213]

    On 14 August 2017, Clarke emailed Bruce Gordon, copied to Collis:

33. [214]

    Seeto recalls conversations with Clarke, which he believes took place on 14 August 2017, during which Clarke told him that Bruce Gordon needed the money quickly (by the end of the week) in order to meet the deadline for when bids for Ten were due. Clarke told him that Bruce Gordon had asked for the trade to be done as soon as possible and that he had been berated by Bruce Gordon for not progressing it until then. Clarke told Seeto that if the funding did not come through there was going to be a problem at Bruce Gordon’s end.

34. [215]

    Seeto recalls that around this time Clarke made the point in a telephone call with him that the loan needed to be $4.5 million (rather than the initial $2.5 million they had discussed). His recollection is that Clarke explained that this was because the funding had been underestimated by Clarke and the team.

35. [216]

    On 16 August 2017, at Clarke’s request, Andrew Gordon met Clarke at a coffee shop in Elizabeth Street, Sydney, next door to AH’s offices. Clarke had a manila folder with him. Clarke presented Andrew Gordon with a document for signature. Andrew Gordon says that Clarke said words to the following effect:

36. [217]

    Andrew Gordon signed, thinking that the document was to achieve a further extension of the NEC Swap.

37. [218]

    Seeto recalls a conversation with Clarke, which he thinks took place on 16 August 2017, during which Clarke told him that the funds for the proposed Ten takeover bid were to be paid into an AH trust account and were to be held on behalf of the joint venture vehicle for the takeover.

38. [219]

    Seeto replied, stating that Deutsche would need to do a call back to confirm the account details.

39. [220]

    On 16 August 2017, Seeto emailed Clarke:

40. [221]

    On 17 August 2017, Seeto emailed Clarke: [4]

41. [222]

    Deutsche prepared an Amendment Confirmation to the NEC Swap, and emailed it to Clarke. The Amendment Confirmation introduced the notion of a “Financing Amount” of $4.5 million representing, in effect, a reduction in the total equity notional amount of the Swap, by way of a payment to Birketu and provided for Birketu to pay Deutsche a “Financing Fee Amount” of $45,000. In substance this is a loan at interest.

42. [223]

    At 5.37 pm on 17 August 2017 (the 17 August email), Clarke emailed Seeto copied to Andrew Gordon:

43. [224]

    The documents referred to were attached. The sponsorship agreement appointed Deutsche to be Birketu’s sponsor for physical trades of shares under the Australian Stock Exchange’s CHESS transfer system.

44. [225]

    The amendment confirmation bore, on its last page, what appeared to be the signatures of Andrew Gordon and Max Cowley, on behalf of Birketu. The payment direction was in the form of a letter on Birketu Pty Ltd letterhead, addressed to Deutsche, in the following form:

45. [226]

    The mobile phone number on the payment direction was not that of Andrew Gordon but was, in fact, the mobile phone number of a junior lawyer at AH, Anthony Farag. The evidence established that Andrew Gordon did not sign the document. Clark apparently scanned Andrew Gordon’s signature on to another document and used it.

46. [227]

    Seeto asked Mr Paul Lusinovski (Lusinovski), an associate at Deutsche, to do the callback. On the evening of 17 August 2017, Seeto emailed Clarke, telling him that Lusinovski would call Andrew Gordon. Lusinovski called the number given and spoke to whom he thought was Andrew Gordon. But it was Clarke, using Anthony Farag’s phone, pretending to be Andrew Gordon.

47. [228]

    On 18 August 2017, Deutsche (via the National Australia Bank) paid $4,455,000 into the Westpac Account. Deutsche charged Birketu fees of $45,000 in relation to the amendment of the NEC Swap. The National Australia Bank beneficiary advice shows the beneficiary account name as “Atanaskovic Hartnell Trust A.C”

48. [229]

    On 28 August 2017, Seeto had a telephone discussion with Clarke, during which Clarke told him that additional funding of $2.5 million was needed to “seed” the Ten takeover bid vehicle. Seeto then emailed Clarke about the possibility of providing a loan or selling shares under the NEC Swap. He suggested selling a short-dated call option on some of the NEC Swap.

49. [230]

    On 31 August 2017, there was an exchange of emails between Seeto and Clarke in relation to amending the NEC Swap.

50. [231]

    Deutsche prepared a further Amendment Confirmation increasing the Financing Amount to $7.026 million and the Financing Fee Amount to $70,260.

51. [232]

    On 1 September 2017, Deutsche received from Clarke the amendment confirmation purportedly signed on behalf of Birketu by Andrew Gordon and Max Cowley on 1 September 2017, and a direction to pay in the following form:

52. [233]

    The evidence established that Andrew Gordon did not sign the document. Once again, Clark apparently scanned Andrew Gordon’s signature on to another document and used it.

53. [234]

    On 1 September 2017, Lusinovski did another callback and again, thinking he was speaking to Andrew Gordon, spoke to Clarke.

54. [235]

    On 1 September 2017, Deutsche paid $2,500,740 into the Westpac Account with a Financing Fee Amount of $25,260.

The law

1. [236]

   An employer is vicariously liable for a tort committed by an employee in the course and scope of her or his employment. But there has been recent development in relation to how the concept of course and scope is to be viewed and applied.

2. [237]

   In State of New South Wales v Lepore (2003) 212 CLR 511 (Lepore) at 535, Gleeson CJ said:

3. [238]

   An employer’s vicarious liability may extend to intentional and criminal wrongdoing, engaged in solely for the benefit of the employee, even where the wrongdoing is a flagrant breach of the employment obligations. [5] It is the nature of that which the employee is employed to do on behalf of the employer that determines whether the wrongdoing is within the scope of the employment. [6]

4. [239]

   In Lepore, Gaudron J said: [7]

5. [240]

   More recently, however, the High Court considered vicarious liability in Prince Alfred College Incorporated v ADC (2016) 258 CLR 134 (Prince Alfred).

6. [241]

   The case concerned sexual abuse of a pupil by a boarding housemaster employed by a school. The Court said: [8]

7. [242]

   Lloyd v Grace, Smith & Co [1912] AC 716 (Lloyd) and Deatons Pty Ltd v Flew (1949) 79 CLR 370 (Deatons) are well known cases.

8. [243]

   In Lloyd, the managing clerk of a solicitor’s firm fraudulently induced a client of the firm to provide to him the deeds to the properties for their sale and procured her signature on two documents which she believed she had to sign the documents to effect the sale of the properties. In fact, the documents were a conveyance of the property and transfer of the mortgage to the clerk. The House of Lords held the firm liable for the clerk’s fraud as being conduct in the course of his employment. The case represented a significant development in the law. Previously, vicarious liability of an employer for the unauthorised fraud of an employee had been confined to conduct engaged in for the benefit of the employer. [9]

9. [244]

   In Deatons, a barmaid threw a glass of beer, and then the glass itself, into the face of a patron. He lost an eye. The High Court held that the employer was not vicariously liable because what the barmaid did was not incidental to the work she was employed to do. What she did was described as ‘a spontaneous act of retributive justice.’ [10]

10. [245]

    Lloyd was followed in Uxbridge Permanent Benefit Building Society v Pickard [1939] 2 KB 248 (Uxbridge), where the defendant was a solicitor practising in London with a branch office at Slough which was managed by a clerk. The plaintiffs were induced, by the Clerk’s fraud, to advance money, on mortgage of freehold property, to a person alleged by the clerk to be a client of the branch office. The supposed title to the property was fictitious and the title deeds were forgeries. The defendant was held vicariously liable. At 253, Sir Wilfrid Green MR said (citation omitted):

11. [246]

    The commencing words of para [80] of the High Court’s statement in Prince Alfred ‘[i]n cases of the kind here in question’ may, on one view, be viewed as limiting the ‘relevant approach’ identified by the High Court to cases of vicarious liability of institutions for conduct of employees where the victim is under their care and control and is, by virtue of the relationship, vulnerable to that misconduct.

12. [247]

    A close reading of the passage makes it clear, however, that no such limitation is intended.

13. [248]

    The exercise required, whatever the nature of the case, is to assess the closeness of the relationship between the employee’s role and responsibilities, on the one hand, and the wrongful acts, on the other. The requisite closeness required for the wrongful acts to be considered within the scope of the employee’s employment will be present if, fairly looked at, the employment provided both the opportunity, and was the occasion, for wrongful acts.

14. [249]

    Whilst the relevant circumstances to be considered in making this assessment will differ from case to case, and whilst the features identified by the High Court in Prince Alfred as important in that case will be different to which will be important in cases of a different kind, the relevant approach remains constant. Depending on the circumstances, the very role given to the employee and the nature of the employee’s circumstances may justify the conclusion that the employment provided both the occasion and the opportunity.

15. [250]

    It is to be observed that para [80] in Prince Alfred refers to both Lloyd and Deatons with approval.

16. [251]

    The statement in Lepore by Gleeson CJ that the aspects of the scope of employment are functional, geographic and temporal, and the articulation by Gaudron J that ‘[o]rdinarily, a person will not be estopped from denying that a person was acting as his or her servant, agent or representative unless there is a close connection between what was done and what that person was engaged to do’, are reflective of the same approach.

17. [252]

    In Ffrench v Sestili (2007) 98 SASR 28 (Ffrench) the Full Court of the Supreme Court of South Australia approved of a statement made by Diplock LJ in Rose v Plenty [1976] 1 WLR 141 that the notion of scope of employment must be looked at broadly, not dissecting the servants task into its component activities.

18. [253]

    None of the cases to which the Court was referred is quite like this one, but the relevant approach identified by the High Court fits just as easily to this case as to any other.

19. [254]

    One further observation is merited. In Lepore, Gummow and Hayne JJ said at [239]:

20. [255]

    However, in Prince Alfred, at [79], the plurality took the following, different, view (citation omitted):

21. [256]

    It was submitted on behalf of AH that to be within the course and scope of employment, the relevant act has to be ‘in pursuit of what it is that the employee was employed to do.’ As is apparent from what is said above, this is too narrow a view.

Clarke

1. [257]

   Before joining AH, Clarke worked for investment bank Goldman Sachs and then solicitors Ashurst.

2. [258]

   Clarke was offered employment by AH on 22 November 2013 as a salaried lawyer. He signed acceptance on 2 December 2013. His starting salary was $225,000 per annum.

3. [259]

   His time was charged out by AH at $575 per hour (plus GST).

4. [260]

   One indication of his seniority is that at least one partner, Jon-Thomas Skene (Skene), was charged out at $675 per hour (plus GST). [11] Jepps, then a senior solicitor and shortly to become a partner, was charged out at $600 per hour (plus GST). Junior solicitors were charged out at $325 per hour (plus GST).

5. [261]

   Another is that whilst AH’s employment structure did not formally use the designation “Senior Associate”, a number of documents emanating from AH describe Clarke as such.

6. [262]

   One such document was a letter, apparently written by Mr Jeremy Kriewaldt (Kriewaldt) an AH partner, to a potential client on 29 July 2016 providing a statement of AH’s capabilities to assist and described Clarke as a Senior Associate.

7. [263]

   Another such document was an engagement letter dated 30 May 2017, written by Kriewaldt, to Bruce Gordon and Birketu in connection with the proposed CBA facility with Ten. Clarke was listed as a Senior Associate at an hourly rate of $575 (plus GST).

8. [264]

   Atanaskovic’s explanation (which I found unconvincing) for the later letter was:

9. [265]

   Atanaskovic gave evidence that at no stage did he regard Clarke as a senior lawyer. It is not necessary to consider whether there is a point at which a lawyer may first be described as senior or whether Clarke met such a threshold. The level of responsibility he was given and the nature of the relationship he had with clients of AH can be observed by reference to the work he did and the contact he had with clients of the firm and other persons with whom he came into contact in acting for the clients.

10. [266]

    Clarke was plainly entrusted with matters of significant importance to clients of AH. He built up a close working relationship with those associated with the Gordon interests.

11. [267]

    As Lancaster pointed out in the context of the meeting with Fort Street and Illyria on 10 April 2017, which Clarke was to attend as a chaperone:

12. [268]

    On 12 December 2013, Tamim Rahman, a solicitor with AH who apparently had carriage of WIN related matters, wrote the following in an email to Lancaster, Collis and a number of other people, including Clarke and Kriewaldt:

13. [269]

    Lancaster says that Atanaskovic promoted Clarke as someone with considerable experience in commercial media transactions. He says that Atanaskovic told him that Clarke had joined them from Goldman Sachs and that he had a wealth of commercial experience and a lot of exposure to Nine’s deals.

14. [270]

    Collis attributes to Atanaskovic words to the same effect.

15. [271]

    Atanaskovic’s evidence was that he tried to be complementary, but he never said these things to Lancaster or Collis. It was put that if Atanaskovic had said these things they would not have been true and that it is improbable that the witnesses would have recalled Atanaskovic’s statement in the same terms.

16. [272]

    I prefer the evidence of Lancaster and Collis. There is no evidence of the extent of Clarke’s work at Goldman Sachs. Atanaskovic was no doubt spruiking his abilities. The fact that Lancaster and Collis recall the effect of the conversation in the same terms is, in my view, likely the consequence of the fact that that is what he said. I am not persuaded that Atanaskovic would not have said it, even if it was not true.

17. [273]

    Lancaster made the point that Birketu and WIN do not have internal, in-house legal Counsel. He says that, as a result, partners and senior lawyers at AH at times acted like a quasi-in-house legal team for WIN and Birketu in that they were heavily involved in advising on legal matters but also provided commercial advice to assist WIN and Birketu.

18. [274]

    Atanaskovic took issue with the suggestion that he saw Clarke as a young “hot shot” because he saw him as of only modest legal talent, he did not receive any increase in remuneration while at AH and was not considered for partnership. I think Atanaskovic thought better of Clarke than he now says.

19. [275]

    An inkling of how Atanaskovic, in truth, regarded Clarke is given by the following two events. First, in January 2015, Clarke suffered a default judgment (apparently for rent) at the suit of a lawyer at another firm. Atanaskovic encouraged him to take third party legal advice, put him in touch with other lawyers, and from his own personal company, Habeas Corpus Pty Ltd, paid those lawyers $5000 on account of fees for work done for Clarke on that dispute. Atanaskovic says that he had in mind the firm reimbursing it and that he paid the money to avoid Clarke being distracted by the matter. Second, in February 2016, Clarke said he needed a salary advance to provide his mother with some immediate funds to handle a few matters. He asked Atanaskovic for early payment of his salary. On 19 February 2016, Atanaskovic emailed him:

20. [276]

    The following are some of the matters on which Clarke worked for the Gordon interests.

21. [277]

    The purchase by a subsidiary of WIN from, and lease back to, Ten a property at Lot 55, Cottonwood Crescent, Dianella, for $10.8 million. This included the provision by Clarke of advice to WIN in connection with the transaction in respect of which no direct involvement of Atanaskovic or any other AH partner was evident.

22. [278]

    Clarke was the direct point of contact at AH for all correspondence and communications in relation to the transaction including emails, telephone calls and the person who provided WIN with advice in respect of the matter. He was also responsible for all acts associated with the purchase, namely, exchange of contracts, the payment of the deposit, related entities advice, calculation of stamp duty, direction of payments to complete the purchase and the preparation and execution of the leasing documents following the purchase.

23. [279]

    Clarke obtained instructions from Collis to instruct a firm of Perth lawyers to review the proposed contracts of sale and lease back documents. Clarke instructed Tottle Partners of Perth.

24. [280]

    On 14 October 2014, AH rendered its bill for work done on the transaction. It is apparent that the bulk of the attendances charged for were those of Clarke.

25. [281]

    The purchase by WIN from, and lease back to, IMB Limited (IMB) of a property at 253‑259 Crown Street, Wollongong, for $6.25 million.

26. [282]

    Clarke was responsible for negotiating the contract of sale and lease, exchanging contracts, directing payments, calculating and payment of stamp duty, preparing settlement figures, arranging a local agent to attend settlement and finalising the execution and registration of the lease.

27. [283]

    Clarke arranged with Collis for the lease to be executed. After execution by WIN, the lease was returned to Clarke who arranged for registration. No direct involvement of Atanaskovic, or any other AH partner, in these activities by Clarke was evident.

28. [284]

    WIN and Nine were parties to a television affiliation Program Supply Agreement (Nine PSA) which they had entered into in 2013. Under the Nine PSA, Nine gave WIN the right to broadcast its premium content and channels across regional Australia. The Nine PSA was plainly a very important agreement for WIN. In about October 2015, WIN and Nine started negotiating a variation of the Nine PSA. WIN retained AH under an engagement letter dated 29 October 2015, it refers to Clarke as one of the employees who will primarily by involved in the matter and gives his charge out rate. On the same day, Birketu retained AH to advise and assist it in connection with the proposal by Birketu to acquire approximately 13.4% of the ordinary shares in Nine. Clarke is referred to as an employee who will be primarily involved in the matter.

29. [285]

    Atanaskovic had a significant involvement in the negotiations, which included various email exchanges with Nine executives. Emails were written by Atanaskovic and copied to Clarke.

30. [286]

    Lancaster says that Clarke worked directly with Nine’s general counsel into the night of 30 December 2015 and the early hours of 31 December 2015 to “get the deal over the line” with Atanaskovic’s intermittent assistance. No other AH lawyers were involved. He described Clarke as the lead lawyer working on the transaction.

31. [287]

    Lancaster recalled that at about 10.00 pm on 30 December 2015, Atanaskovic said that he was “off to bed” for the evening and that Clarke kept going with the negotiations and amendment of the transaction document on his own.

32. [288]

    On 30 December 2015 at 11.20 pm, Clarke emailed revised versions of the proposed transaction documents, copied to Atanaskovic, to Nine’s representatives. Atanaskovic responded by email at 11.46 pm with some slight corrections marked-up in red.

33. [289]

    The deal was closed on New Year’s Eve 2015. Lancaster said that Clarke was the only lawyer he dealt with from about 10.00 pm on 30 December 2015 to the finalisation of the deal.

34. [290]

    In answer to a suggestion that his affidavit was apt to give a quite misleading role played by Atanaskovic, Lancaster responded:

35. [291]

    Before the NEC Swap, Atanaskovic asked Skene to do research on comparison of past announced swap terms. Skene apparently did not move as quickly as Atanaskovic wanted. Atanaskovic accordingly assigned the task to Jepps and Clarke.

36. [292]

    On 8 March 2016, the Australian Communications and Media Authority (ACMA) directed an inquiry to Birketu about the NEC Swap. Atanaskovic informed Bruce Gordon and Lancaster, copied to Jepps, Clarke and Skene, that AH would prepare a draft reply. A draft was prepared, and the final response was sent to ACMA on 10 March 2016.

37. [293]

    Matters in respect of Ten (in addition to those referred to above) in which Clarke was involved included the following.

38. [294]

    There was a proposal that Birketu would invest in Ten by way of convertible notes. Clarke was involved, with Atanaskovic, in the preparation of a confidentiality agreement with Ten and consideration of the terms of the investment.

39. [295]

    As mentioned earlier, Birketu was a shareholder in, and guarantor to the CBA for the obligations of, Ten. Ten had reporting obligations to the members of the guarantor group in relation to its financial affairs and performance. Ten reported monthly. Some of the financial information reported was confidential.

40. [296]

    From February 2014, Clarke emailed Collis on a monthly basis informing him that Ten had complied with its reporting obligations and providing a copy of the financial reports supplied. On occasion Clarke’s advice included whether any of the Ten information was material price-sensitive. Collis says that he and Clarke were in regular monthly contact from that point onward.

41. [297]

    In January 2016, the question of Birketu nominating a director to the board of Ten arose. Apparently, Bruce Gordon proposed to nominate Clarke for that directorship. At the time, the Chairman of Ten was Mr David Gordon (apparently no relation).

42. [298]

    On 12 January 2016, Atanaskovic emailed Clarke:

43. [299]

    He followed up shortly thereafter with another email:

44. [300]

    Clarke responded:

45. [301]

    From as early as March 2017, there was under discussion between Birketu and Illyria a potential proposal for a deed of company arrangement following an administrator being appointed to Ten. There were various communications, including telephone conferences and email exchanges, between AH and Illyria’s legal advisers. Clarke was a participant in this process.

46. [302]

    The placing of Ten into administration necessitated the entry into of various transaction documents, including a Standstill Arrangement between Ten, CBA and others. Clarke was involved in the documenting of these transactions.

47. [303]

    On 29 June 2017, Cowley and Andrew Gordon, on behalf of Birketu, executed a power of attorney in favour of Atanaskovic, Jepps, Kriewaldt and Clarke to execute documents on Birketu’s behalf (the power of attorney).

Conclusion on vicarious liability

1. [304]

   Much time during the trial was devoted to debating Clarke’s level of seniority.

2. [305]

   It was evident that Atanaskovic had an acute awareness that Clarke’s role and position were critical matters in the assessment of whether Clarke’s employment provided the opportunity and was the occasion for his frauds.

3. [306]

   A recurrent but unconvincing, and in my view contrived, theme of Atanaskovic’s evidence, especially that given under cross-examination, was that Clarke was a junior, mediocre, employed lawyer with no future at AH, who played no meaningful role in any matter on which he was engaged. In one instance Clarke was said to be no more than a “note taker”, in another his function was described as “post-box”.

4. [307]

   There is nothing which suggests that the work Clarke did, including on significant conveyancing transactions, was in any way inadequate or incompetent. As the frauds he perpetrated demonstrate, he was astute as a dishonest lawyer.

5. [308]

   I reject Atanaskovic’s description of Clarke, and I do not accept that the view he now says he held was the view he held at the time.

6. [309]

   Clarke was paid a large salary, almost on par with some AH partners. He was described on a number of occasions by AH as a “senior associate”. Clarke was left largely, if not entirely, unsupervised on significant transactions for the Gordon interests, including the Perth property, Crown Street, and negotiation of the Fort Street retainer. He was left alone to finalise negotiations of the terms of the Nine PSA, when Atanaskovic went to bed. He was deputed (in place of Skene) by Atanaskovic to do, with Jepps, research on comparison of past announced swap terms.

7. [310]

   Clarke worked on other substantial matters for the Gordon interests. He was involved, with Atanaskovic, for the Gordon interests with respect to the Ten convertible notes and, in particular, the confidentiality agreement.

8. [311]

   Clarke conveyed to Birketu financial information provided by Ten. The advice which Clarke gave, from time to time, about the price-sensitivity of the information is hardly “mechanical” or “post-box”.

9. [312]

   Clarke was nominated to be a director of Ten. In evidence, Atanaskovic made light of the proposal. The following exchange occurred during his cross-examination:

10. [313]

    Clarke was appointed as one of the attorneys under the power of attorney. Atanaskovic’s response on being asked, by counsel for the Gordon interests, why Clarke was appointed as an attorney was:

11. [314]

    Clarke was involved in responding to the ACMA inquiry. Atanaskovic’s response to a suggestion that he was keeping Clarke “in the loop” was:

12. [315]

    Atanaskovic gave evidence that Gordon did not like Clarke. There was no objective evidence to support this. Clarke played a role in the renovation of Bruce Gordon’s home. Bruce Gordon invited Clarke to lunch to see the completed apartment. He directed various enquiries to Clarke directly and nominated him to be a director of Ten.

13. [316]

    The Gordon interests regularly instructed AH. AH was, in effect, their in‑house counsel. Clarke built up a rapport with, and was trusted by, Bruce Gordon, Andrew Gordon, Lancaster and Collis. In various instances, including those induced by Clarke’s fraud, significant amounts of money were paid on behalf of the Gordon interests on Clarke’s say so, without any discernible intervention from any AH partner. Lancaster and Collis acted on Clarke’s advice that the claimed set-off amount had to be paid into trust, even though they had doubts about it. This reveals the trust they had in Clarke.

14. [317]

    The frauds were made possible because of Clarke’s position as a trusted solicitor working for a law firm for a longstanding and valuable client.

15. [318]

    Clarke had an involvement, to the knowledge of Atanaskovic and others at AH, in each matter which transpired to be the particular vehicle for each fraud.

16. [319]

    It is somewhat difficult to see how it could be said that Clarke’s employment did not give him the opportunity for and was not the occasion for the frauds.

The law

1. [320]

   Ostensible or apparent or authority is conferred where a principal represents that another has authority. The principal will be bound as against a third party by the acts of that other person within the authority which that person appears to have, though the principal had not in fact given that person such authority or had limited the authority by instructions not made known to the third party: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 (Pacific Carriers) at 466; Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 at 132-133; Junker v Hepburn [2010] NSWSC 88 at [46]; Bowstead and Reynolds on Agency, 17th ed (2001) Sweet & Maxwell par 3‑005.

2. [321]

   Ostensible authority is a manifestation of an estoppel, preventing the principal from disputing the authority: Lepore at 561 [130]-[131] (per Gaudron J).

3. [322]

   The representation, by the principal, of authority, when acted upon by the contractor by entering into a contract with the agent, operates as an estoppel preventing the principal from asserting that he is not bound by the contract: Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 (Freeman) at 503 (cited with approval in Pacific Carriers at 466); Credit Lyonnaise Bank Nederland v Export Credit Guarantee Department [1996] 1 Lloyd’s Reports 200 at 224.

4. [323]

   The holding out is usually implied from conduct, such as where an agent has been equipped with a particular title, status and facilities or where the agent has been armed with a document which, when signed, bears the hallmark of authenticity. In the well-known statement in Freeman, at 503 Diplock LJ articulated it as permitting the agent to act in some way in the conduct of the principal’s business with other persons. See, also: Clarey v Permanent Trustee Co Limited [2005] VSCA 128 at [107]; Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Company Pty Ltd (1975) 133 CLR 72 (Crabtree-Vickers) at 80; Pacific Carriers at 466 [36].

5. [324]

   Whether the representation is general, or relates specifically to the particular transaction, it must come from the principal: Pacific Carriers at 466 [36]; Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 147 at 187.

6. [325]

   In Magripilis v Baird [1926] St R Qd 89, Issacs J said at 91:

7. [326]

   In Armagas Ltd v Mundogas S.A. [1986] AC 717, Stephenson LJ said at 761 (citation omitted):

Conclusion on ostensible authority

1. [327]

   Deutsche argued that Birketu held Clarke out as having its authority to ‘give the payment directions’ of 17 August 2017 and 31 August 2017 or ‘represent their legitimacy’ because he was held out to Deutsche as being ‘a conduit of legitimate documents of Birketu’. It argued that Birketu did this by a number of acts and omissions.

2. [328]

   First, it said that Clarke was ‘held out’ as Birketu’s conduit with Deutsche in connection with the July extension of the NEC Swap.

3. [329]

   Second, it said that Clarke was ‘authorised by Birketu to negotiate with Deutsche […] concerning the Ten Swap, including its extension and fees payable in respect of it.’

4. [330]

   Third, it relied on Bruce Gordon’s statement to Seeto: “Brodie is one of John’s guys. He did work for me on my house and he’s done some good work for us”.

5. [331]

   Fourth, it said that Andrew Gordon (who did have authority to give payment directions), by failing to raise any alarm on receiving the 17 August 2017 email, represented to Deutsche that the actions being taken by Clarke, including the giving of the 17 August 2017 payment direction, were authorised by Birketu.

6. [332]

   At the outset, it is apt to observe that the only asserted holding out relied on by Deutsche that was in or part of the transactions that comprised the Deutsche frauds is the last of them: Andrew Gordon’s inactivity after receiving the 17 August 2017 email.

7. [333]

   The substance of Deutsche’s conduit submission was that because Birketu authorised Clarke to be the conduit of documents for the NEC Swap extension, it thereby held out that Clarke was an authorised conduit for some other documents in connection with another transaction and that those other documents would be genuine. I did not accept this submission.

8. [334]

   Clarke was actually authorised to be Birketu’s conduit for executed documentation in relation to the July extension of the NEC Swap. At Collis’ request, Clarke conveyed Birketu’s intention to extend the NEC Swap and he arranged for the necessary documentation to be signed by Andrew Gordon and Cowley and then transmitted to Deutsche. There was no relevant holding out. Had Clarke not been authorised to convey the executed documents, but had been armed with them by Birketu, Birketu would have conferred ostensible authority on him to convey them.

9. [335]

   Clarke’s authority in relation to the July extension had been exhausted.

10. [336]

    It did not seem to me that by Birketu authorising Clarke to deliver validly executed documents for the purpose of extending the NEC Swap, it could be fairly taken to have been impliedly represented that Clarke had authority to exchange documents for another transaction, let alone one which did not merely extend the life of an existing transaction but altered its parameters in a significant way.

11. [337]

    Even less did Birketu hold out that any documents that Clarke may provide in relation to a subsequent transaction would be genuine. Birketu held nothing out as to Clarke’s integrity. It, as did Deutsche, simply assumed it. After all, he was a lawyer working at AH. He was not in the employ of Birketu. He had no general authority. The documents that Andrew Gordon actually signed on 17 August 2017 did not arm Clarke. Had he conveyed those, there could not have been a fraud. Clarke armed himself with his own forgeries.

12. [338]

    As to Clarke’s involvement in the negotiation of the extension of the Ten Swap and fees payable to Deutsche, the same considerations apply. It was a separate transaction. But, in addition, the evidence did not reflect any holding out in respect of the Ten Swap that Clarke had any authority to negotiate or agree anything on behalf of Birketu.

13. [339]

    Deutsche unilaterally undertook not to charge fees under the NEC Swap referable to the time of Ten’s voluntary administration. The most Deutsche could fairly have taken from Clarke’s communications was that Clarke was authorised to ask.

14. [340]

    Bruce Gordon’s statement about Clarke being “one of John’s guys” held nothing out with respect to Clarke’s authority on any subject.

15. [341]

    It is clear that neither the contents nor the implications of the 17 August email reached Andrew Gordon’s mind. I did not think that his inaction is fairly to be characterised as a holding out with respect to Clarke’s authority.

16. [342]

    Even if there was, contrary to my view, some holding out as to Clarke’s authority in relation to the payment directions, at no time did Birketu hold out anything that can be fairly characterised as a representation that Clarke had authority to alter the account payment details which Deutsche had on file and which had been provided by Birketu on 19 April 2016.

17. [343]

    The reality is that it was not Birketu who held out to Deutsche that Clarke had authority in relation to the NEC Swap, but Clarke himself.

18. [344]

    Finally, whatever implied holding out there may have been by Birketu, Deutsche did not rely on it. It insisted, by way of a call back, on a direct express communication of authority. The call back misfired.

19. [345]

    It is apt to record that AH submitted that Clarke did not have Birketu’s ostensible authority to deal with Deutsche. The effect of this contention succeeding was that Deutsche would be liable to Birketu and would need to establish that AH was vicariously liable to it for the Deutsche frauds. If, on the other hand, there was ostensible authority, Birketu, AH’s client, would fail against Deustche on its simple lack of mandate case and would have to establish AH’s vicarious liability. It can be readily appreciated that it was inevitable that AH’s forensic decisions had potential effect on its client in the context of ostensible authority.

20. [346]

    Whether Atanaskovic gave the oral undertaking is a narrow question.

21. [347]

    Lancaster and Atanaskovic gave evidence and were cross-examined during the trial on a range of issues.

22. [348]

    My assessment of who should be believed on the oral undertaking has been made having regard not only to their evidence on that topic, but having regard to their evidence as a whole.

23. [349]

    Atanaskovic was an unsatisfactory witness whose evidence I do not accept where it conflicted in a material way with that of Lancaster (and, for that matter, Collis) and, in any event, where it is not is supported by objective contemporaneous material.

24. [350]

    Counsel for AH put to Lancaster that what Atanaskovic said was that he would not charge for the freezing order application or the various steps that had been taken in order to prevent further distribution of the money and find out where it was. Lancaster denies this.

25. [351]

    Atanaskovic says that he did not say anything at the lunch concerning the fees payable as regards the Deutsche claims against Birketu, this having been covered in previous extensive discussions he had with the Gordons and the AH engagement letter dated 16 November 2017. He says that the Deutsche matter had not come up at the lunch, so the position relating to it remained unchanged.

26. [352]

    On 10 January 2018, at 10.58 am, Lancaster emailed Bruce Gordon, copied to Judith Gordon, noting what Atanaskovic had said:

27. [353]

    There is no room to ascribe what Lancaster recorded to error or confusion on his part. If, as Atanaskovic would have it, none of these things were said, Lancaster’s email is a dishonest concoction. Appropriately, no such thing was put to Lancaster. There was no proper basis to do so. The cross‑examination of Lancaster, on the topic, went no higher than to suggest that Lancaster was confused.

28. [354]

    Lancaster’s version fits more comfortably with the inherent probabilities. The Gordon interests were an important and long-standing client of AH. The fees in dispute in this case alone are a significant amount of money. The following exchange occurred between counsel and Atanaskovic during cross‑examination:

29. [355]

    A catastrophic fraud, of which the Gordon interests were the victim, at the hands of an AH employee, had been discovered. The commercial, moral and ethical imperatives of the situation support Lancaster and undermine Atanaskovic.

30. [356]

    There is no logical or rational reason why a concession by Atanaskovic in these circumstances would be limited to work done on the freezing order and AH’s internal investigation. The Deutsche frauds were as much a product of Clarke’s frauds as were the other frauds.

31. [357]

    The reference in the 10 January 2018 email to the $1.025 million which Atanaskovic said he would pay if his insurer did not is plainly a reference to the disbursement frauds. Far from paying the amount, the Gordon interests had to sue for it.

32. [358]

    Where a party seeks to rely upon spoken words as a foundation for a cause of action the conversation must be proved to the reasonable satisfaction of the Court. This means that the Court must feel an actual persuasion of its occurrence or its existence. In the absence of some reliable contemporaneous record or other satisfactory corroboration, a party may face serious difficulties of proof. Such reasonable satisfaction is not a state of mind that is obtained or established independently of the nature and consequences of the fact or facts to be proved. The seriousness of an allegation made, inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question of whether the issue has been proved to the reasonable satisfaction of the Court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony, or indirect inferences: Briginshaw v Briginshaw (1938) 60 CLR 336 at 362; Helton v Allen (1940) 63 CLR 691 at 712; Rejfek v McElroy (1965) 112 CLR 517 at 521; Watson v Foxman (1995) 49 NSWLR 315 at 319.

33. [359]

    The sensation of feeling an actual persuasion, after a contest, that an event has happened or that something exists is one which is well known and recognised by experienced trial judges for what it is.

34. [360]

    I feel an actual persuasion that the conversation as recounted by Lancaster took place.

35. [361]

    AH argued that the oral undertaking was too vague to be effective. I reject this submission.

36. [362]

    An undertaking not to charge for work done in defending Birketu against Clarke and the Deutsche frauds situation is not vague. The plain meaning of the words used by Atanaskovic was that AH would not charge for working to protect its clients’ position, which had resulted from the fraud of AH’s own employee. Additionally, the undertaking was given in a particular context. The only scope for AH to charge for work within that category was under the investigation retainer. The undertaking relates to not charging for work done under that retainer.

37. [363]

    AH also argued that any such undertaking was not underpinned by consideration. Birketu did not in its submissions seek to identify any. For reasons which are set out below, it seems to me that the fact that a solicitor’s undertaking is not legally enforceable as a contract does not mean that it has, or should be given, no effect.

38. [364]

    Wall identifies a series of charges covered by the investigation invoice which are for work done by AH in investigating its own position of conflict.

39. [365]

    The investigation invoice includes the following items:

40. [366]

    The total fees charged are derived from AH’s internal time-recording system, Affinity. The following are examples of entries for matter 5983:

41. [367]

    There is also the following entry:

42. [368]

    These entries are capable of being characterised as charges for work done for the benefit of AH, rather than Birketu, where AH’s interests were adverse or potentially adverse to the interests of Birketu. If they are, a significant question as to whether they are unfair and unreasonable arises.

43. [369]

    The important question to which my finding that the oral undertaking was given gives rise is whether the Court should, in the circumstances in which it was given and exercising its supervisory jurisdiction, give effect to that undertaking or refuse to lend the Court’s powers to enforce the investigation retainer, in whole or in part. To do otherwise would be to permit a solicitor to act contrary to his undertaking to his client in what might be described as exceptional circumstances. How the Court should deal with this is a matter for the Court.

44. [370]

    I do not consider that the fact that the undertaking is not enforceable as a contract is determinative, although it may be relevant.

45. [371]

    I propose to give the parties the opportunity to be heard further on whether the Court can and should exercise its supervisory jurisdiction to withhold, directly or indirectly, enforcement of the investigation retainer.

46. [372]

    In the meantime, AH will have judgment against Birketu and WIN for the amount claimed less the investigation invoice amount (excluding the disbursements and less $333.66), which on my calculation is $928,982.

47. [373]

    If the Court concludes that the oral undertaking should not be given effect to, the question of referral to a referee does not arise and the value of the potentially objectionable line items need not be determined. Consideration of that question should accordingly be deferred.

48. [374]

    There will be judgment for the plaintiffs for $928,982.

49. [375]

    The Court will stand the matter over to allow the parties to consider these reasons, to bring to my attention any arithmetical errors, and to bring in short minutes reflecting this outcome, taking into account any interest payable on the judgment amount, and directions for the hearing of and determination of the question of whether the Court can and should exercise its supervisory jurisdiction with respect to the investigation retainer and investigation invoice.