Port Adelaide Power Investments Pty Limited as trustee for the Cygnatius Investment Trust v Mullins

1. [1]

   Mr Edgar Baltins is the sole director and company secretary of Port Adelaide Power Investments Pty Ltd, the plaintiff in these proceedings. I will refer to the plaintiff as Mr Baltins throughout this judgment. By a statement of claim filed on 30 September 2016, Mr Baltins claims that he was duped and deceived into providing the defendant, Gregory Mullins (“Mr Mullins”) with a series of cash advances totalling $350,000. These cash advances were provided between 6 September 2010 and 1 December 2010, and the agreement relating to them formalised by a series of agreements executed by Mr Mullins during that period.

2. [2]

   No money was ever repaid.

3. [3]

   The proceedings initially commenced included counts of breach of contract, unjust enrichment and misleading or deceptive conduct in contravention of the Fair Trading Act 1987 (NSW). As a result of the defendant becoming bankrupt in 2012 and being discharged from bankruptcy in 2015, it is accepted by Mr Mullins that those counts can no longer be pressed.

4. [4]

   An amended statement of claim was filed in Court on 12 February 2019, reflecting the position that the claim is now confined to damages and loss caused by Mr Mullins’ (common law) deceit.

5. [5]

   Mr Mullins took no active part in the proceedings other than a couple of appearances early on. The Court received email correspondence dated 11 February 2019 from Mr Mullins stating that he would not be attending, indicating that he had a general awareness that a case of fraud was being put against him “for what reasons I do not know”, and claiming that he had no copies of the documents purported to have been served. He concludes:

6. [6]

   By virtue of that piece of correspondence and the various affidavits of service to which I will come, served pursuant to orders made for substituted service in July 2018, I am satisfied that the defendant has been effectively served with the necessary material and is aware of the nature of the proceedings against him and has chosen to take no part in their defence. I will deal with this in more detail in the procedural chronology of this judgment, starting at paragraph [44].

7. [7]

   For the reasons that follow, I have formed the opinion that the evidence supports a conclusion that Mr Mullins made a series of false representations, knowing them to be false, in order to induce Mr Baltins to advance various sums to him between September 2010 and December 2010. I have further concluded that Mr Baltins relied on those representations and advanced $350,000 to Mr Mullins in five payments, with each payment being prefaced and induced by another elaborate lie, aimed at furthering the false story he had created that had induced Mr Baltins to become involved in advancing money to Mr Mullins.

Facts

1. [8]

   These facts are established by and extracted from the affidavits tendered by the plaintiff, namely:

   1. (1)

      Affidavit of Edgar Martin Baltins sworn on 4 October 2018 together with exhibit “EMB-1”;

   2. (2)

      Affidavit of Anton Jean-Pierre Roberts sworn on 23 November 2018 together with exhibit “AR-1”;

   3. (3)

      Affidavit of Anton Jean-Pierre Roberts sworn on 26 July 2018;

   4. (4)

      Affidavit of James Robert Hodge sworn on 26 July 2018;

   5. (5)

      Affidavit of Anton Jean-Pierre Roberts sworn on 19 December 2018; and

   6. (6)

      Affidavit of James Robert Hodge sworn on 19 December 2018.

2. [9]

   Mr Baltins met Mr Mullins whilst working together with a group of investors who were looking at a project to establish a fund to raise money for senior living projects. He became friends with Mr Mullins and trusted him.

3. [10]

   Mr Baltins says that on 3 September 2010 he had a conversation with Mr Mullins as follows:

4. [11]

   An email was sent by Mr Mullins on 3 September 2010 at 10.36am which stated:

5. [12]

   Mr Baltins stated that he believed that Mr Mullins was going to retrieve his father’s money and that he relied on Mr Mullins’ preparedness to sign a written contract about it. Mr Baltins was led to believe that the money was going to go from Mr Mullins father’s overseas bank account into Mr Mullins’ personal bank account.

6. [13]

   On 4 September 2010, Mr Baltins forwarded a loan agreement for the first loan which was apparently returned on 5 September 2010 signed by Mr Mullins although there is no copy of the signed loan agreement in evidence before me. However, an email from Mr Mullins saying he has signed and returned the agreement is before me. Given that this claim is not based on the signing of the agreement but on the conduct (unchallenged) exhibited by Mr Mullins to induce the loan, nothing turns on this. I also note that Mr Mullins’ modus operandi in respect of the next four advances involved deployment of further versions of the “Agreement” acknowledging the sum already borrowed and setting out the further sum to be advanced, signed by Mr Mullins and emailed to Mr Baltins prior to payment, in a charade of bona fides.

7. [14]

   Mr Baltins transferred $140,000 to Mr Mullins’ account on 6 September 2010 and confirmation was provided by Mr Mullins on 7 September 2010 that the money had been received.

8. [15]

   The second loan in the sum of $70,000 took place after a series of conversations in which Mr Mullins offered the same return rate, that is, a return rate of five times the amount of the initial loan. The explanation for the need for this sum was that there was a bank fee required by the overseas bank associated with the transfer of the (then said to be) US $23,750,000 held in the United States.

9. [16]

   The $70,000 was paid on 22 September 2010 by Mr Baltins into an account held by Mr Mullins. Receipt of that sum was acknowledged by email from Mr Mullins on 24 September 2010.

10. [17]

    The third loan was advanced on 27 October 2010 in the sum of $15,000. Mr Baltins says this was advanced because he was told by Mr Mullins there was a further necessary fee associated with the transfer of the sum from the United States. This was set out in an email by Mr Mullins on 26 October 2010:

11. [18]

    The fourth loan was provided on 5 November 2010. Mr Baltins says it was provided in response to an email from Mr Mullins dated 4 November 2010 which outlined that the National Australia Bank required particular fees to be paid to release the funds that were purportedly held by NAB “in escrow” pending payment of the fee.

12. [19]

    In support of this request, Mr Mullins forwarded to Mr Baltins an email chain which contained purported correspondence between himself and a Mr David J Russell from NAB. It is material to note that when Mr Russell was later contacted, he said he had no awareness of any such fee or arrangement. The bank records of Mr Mullins (which I will come to later) did not indicate any such fee ever being paid. Indeed the picture painted by Mr Mullins to Mr Baltins about the preposterously large sum of money in US dollars having been transported to Australia, and all the associated fees, were in my view part of an elaborate hoax constructed with the purpose of defrauding Mr Baltins from significant sums of money with the untruthful promise of significant returns. The text of the email chain reads as follows:

13. [20]

    In the same email chain was the email from Mr David J Russell:

14. [21]

    The fifth loan was in the sum of $90,000. The conduct engaged in to extract this last sum involved a meeting in a coffee shop on 26 November 2010 where Mr Baltins says a conversation took place as follows:

15. [22]

    Mr Baltins says that there was then a telephone call from a person who described himself as Douglas Lynn that same night at about 7.30pm which went as follows:

16. [23]

    Mr Baltins was concerned and suspicious about the suggestion made by Mr Lynn that he (Mr Lynn) was the only person who could get the funds, and that Mr Lynn could not provide any documentation to support what he was doing.

17. [24]

    A further email was sent by Mr Mullins on 30 November 2010 which provided further encouragement and explanation as to why the $90,000 was required:

18. [25]

    Attached to this email was a picture of what appears to be a large bundle of cash, referred to in the email as being “$100 bills”.

19. [26]

    Mr Mullins also executed and sent a further version of the Agreement including this further $90,000.

20. [27]

    The $90,000 was advanced on 1 December 2010 and confirmed as received by Mr Mullins on 2 December 2010.

21. [28]

    It was submitted by counsel for Mr Baltins that the contents of the email, together with the picture annexed, amounted to a representation that the cash money in fact had arrived in Australia and that Mr Mullins had seen it and photographed it for the benefit of Mr Baltins, to reassure him the money was “on shore”. This was done in order to induce Mr Baltins to make the further $90,000 payment. I accept that submission.

22. [29]

    Whilst the Transfer Request Details document evidences payment being made to Mr Mullins’ NAB account at 3.07pm, there was a follow up email that night at 7.32pm from Mr Mullins to Mr Baltins pursuing the Mr Lynn line of the story:

23. [30]

    The fact that Mr Baltins was entirely duped and believed the scenario painted by Mr Mullins is evidenced by email exchanges on 2 December 2010. Mr Baltins emailed at 9.30pm:

24. [31]

    The response a couple of hours later from Mr Mullins’ email account says:

25. [32]

    It seems reasonable to infer that this development served to delay, for a few days at least, any questions being asked precipitously by Mr Baltins about where his money was. Further to this, there was an email on 14 December 2010 at 3.15pm from Mr Mullins to Mr Baltins:

26. [33]

    Later on 14 December 2010 Mr Baltins emailed Mr Mullins:

27. [34]

    Mr Baltins, having received no money on 16 December 2010, emailed Mr Mullins at 9.00am:

28. [35]

    Later in December 2010 and into January 2011, there were further representations made by “Doug”, asserting that Mr Mullins had in fact spent part of the last $90,000 advanced, rather than paying the fees for the purposes alleged in Mr Mullins’ email of 30 November 2010. This led to further sums of money being extracted from Mr Baltins. I do not need to refer to those in any more detail as they do not comprise part of this claim, however they evidence that Mr Baltins continued to be duped by this false scenario apparently invented by Mr Mullins and continued in combination with Mr Lynn.

29. [36]

    Bank records tendered show that Mr Mullins held a number of NAB accounts. All the payments from Mr Baltins were made into a NAB account 082 067 account number 178014231. At the time of the first loan payment of $140,000, that account held a few hundred dollars. Over the ten days after payment, most of the $140,000 was withdrawn in cash or transferred by internet online transfer or tele-transfer to another NAB account. There were also two online payments, one to “Aceliving” referred to as “rent” in the sum of $4,871.43, and one titled “Tinas residence” in the sum of $5,347.

30. [37]

    In respect of the $70,000 received on 22 September 2010, that too was disbursed in a short space of time by cash withdrawals. An online transfer of $10,000 to someone referred to as Henrik Alksnis, a transfer to Louis Carr Real Estate trust account regarding “21 Fernbank Avenue” and on 6 October 2010, $4,512 was paid to Supercheap Storage.

31. [38]

    The $15,000 provided on 27 October 2010 was subjected to a cash withdrawal on 28 October 2010 of $10,000 and the balance was transferred to Rdm Group.

32. [39]

    The 5 November 2010 payment of $35,000 was disbursed within six days by cash withdrawals and a payment again to Louis Carr Real Estate regarding 21 Fernbank Avenue in the sum of $3,910.71.

33. [40]

    The 1 December 2010 payment of $90,000 was disbursed almost entirely within seven days by transfer to Mr Alksnis, a couple of internet online transfers to an unknown recipient and again to Louis Carr Real Estate regarding 21 Fernbank Avenue, as well as a large sum of $75,971.36 on 3 December 2010 by international tele-transfer.

34. [41]

    The bank records show no transfer of any sums to NAB or any other bank for the asserted “money transfer expenses”. The bank statements indicate that smaller items of expenditure in the period between 6 September 2010 and 1 December 2010 included restaurants, florists, Webjet (a flight company), Wotif.com (a discount accommodation and travel website), Manly Seaside Holidays, petrol, dry cleaning, AGL, Telstra and Optus bills.

35. [42]

    During this period the only deposits in addition to the $350,000 paid by Mr Baltins were a couple of payments of $500 from “Susan Mullins” and a transfer of $3,800 on 10 November 2010 titled “Minc”.

36. [43]

    There is no evidence of any repayment being made to Mr Baltins.

Service of the statement of claim and notice to the defendant of the proceedings

1. [44]

   The statement of claim was filed on 30 September 2016. According to the affidavit of Christian Roberts, personal service was effected on Mr Mullins at 62 Blackbutt Avenue, Pennant Hills on 28 November 2016. At that time Mr Mullins said “I’ve been declared bankrupt”. A bankruptcy search conducted confirmed that Mr Mullins had been declared bankrupt on 21 February 2014.

2. [45]

   The court records indicate, and the affidavit of Mr Roberts confirms, that Mr Mullins appeared before this Court on 30 January 2017. The matter was then stood over to determine what the position of the Trustee in Bankruptcy would be in relation to the proceedings.

3. [46]

   On 16 March 2017 Mr Mullins wrote to the court seeking an adjournment and the matter was adjourned to 12 May 2017.

4. [47]

   On 12 May 2017 counsel appeared for Mr Baltins. Mr Mullins did not appear and no communications had been received from the Trustee in Bankruptcy so the matter was adjourned to 9 June 2017.

5. [48]

   In June 2017 the court was informed that steps were being taken in the Federal Circuit Court to permit the proceedings to continue pursuant to s 153(2)(b) of the Bankruptcy Act 1966 (NSW). Some further adjournments followed and attempts at service of the orders made in August were made at an address in Thornleigh but apparently Mr Mullins had moved. A bankruptcy search was conducted on 18 October 2017 as part of finalising the application to be filed in the Federal Circuit Court and this showed that Mr Mullins had been discharged from bankruptcy on 23 September 2017.

6. [49]

   On 26 October 2017 counsel appeared before the Registrar for directions. Mr Mullins did not appear as he could not be located to serve notice. Orders were made by the Registrar standing the matter over to 14 December 2017 with Mr Mullins to file a Defence by 13 December 2017 and for Mr Mullins to be advised of the orders and the next listing.

7. [50]

   Mr Mullins was not located. Further orders were made at the directions hearing on 14 December 2017 standing the matter over to February 2018, and extending the time for Mr Mullins to file a Defence.

8. [51]

   Between February 2018 and May 2018, Mr Roberts, the solicitor for Mr Baltins, deposes to attempts made by Polo CPI to locate Mr Mullins with no success.

9. [52]

   On 4 May 2018 counsel obtained orders from the court permitting the plaintiff to file an application to extend time for service of the statement of claim.

10. [53]

    On 16 February 2018, Polo CPI informed Mr Baltins that they had located Mr Mullins and instructions were issued for Polo CPI to serve Mr Mullins. There were further attempts at service that were unsuccessful, including at the address of 10 Mazzer Court, Bray Park, Queensland which was the address of Mr Mullins’ daughter, Christina, who it seems refused to accept service. She said that Mr Mullins did not live at the property but “does call in every so often”. It is reported that she said that she had not seen him for over four weeks (as at 2 April 2018), and did not know his whereabouts. A neighbour confirmed that Mr Mullins did not live at the address. Investigators were unable to find an online presence, although contact was made with Mr Mullins’ son who confirmed his understanding was that his father resided with Mr Mullins’ daughter Christina at 10 Mazzer Court, Bray Park, Queensland.

11. [54]

    On 19 July 2018, the Court made orders extending time for service of the statement of claim and making orders for substituted service and for service to be effected at the Bray Park, Queensland address. The statement of claim was also emailed to an email address understood to be associated with Mr Mullins, “seqld212@gmail.com.” Notice was also sent via a text message to Mr Mullins on the phone number understood to be associated with him on 20 July 2018.

12. [55]

    On 24 July 2018 the statement of claim was personally delivered to the Bray Park, Queensland address.

13. [56]

    Orders were made by the Court on 30 November 2018 regarding service of all evidence by 30 December 2018 in accordance with the substituted service orders already granted. That was effected on 11 December 2018. It was effected by mail to the street address at Bray Park, Queensland and also to a post office box understood to be associated with Mr Mullins at Victoria Point, Queensland.

14. [57]

    The evidence was also served by email to the email address understood to be associated with Mr Mullins and a text message was sent giving notice that evidence was being served. There was also evidence that personal service was effected at the Bray Park address as set out in the affidavit of James Robert Hodge sworn 19 December 2018.

15. [58]

    An email dated 6 February 2019 was forwarded to Mr Mullins c/o seqld212@gmail.com, enclosing letters dated 6 February 2019, a sealed copy of the plaintiff’s submissions filed on 6 February 2019 and a sealed copy of the plaintiff’s memorandum of facts, issues and chronology, and requesting that Mr Mullins notify the plaintiff’s solicitor as to whether he intended to appear.

16. [59]

    Contact was made with the Court by Mr Mullins via the Enquiries (Shared Mailbox) from seqld212@gmail.com the day before the hearing, annexing a letter dated 11 February 2019. The letter stated that he had received an email from Roberts & Partners Lawyers “but had no copies of the documents they say that they sent”. It then goes on to state that he has never resided at the Bray Park address and spends most of his time in Toowoomba at an address he fails to disclose. This indicates to me that he was well aware documents had been served at that address. Mr Mullins says that he is not represented, and sets out some detail as to his father’s legacy, that Mr Baltins was “aware of his father’s situation” and that “Edgar made an agreement with me that no matter what, he would be there all the way to the end but from my recollection as to how things went around Edgar pulled funding”.

17. [60]

    Mr Mullins then goes on to describe health issues he had and that he had been declared a bankrupt. He said:

18. [61]

    He also stated:

19. [62]

    In those circumstances, I am of the view that it was appropriate to proceed to hear and determine the matter in Mr Mullins’ absence, as he was clearly aware of the nature of the claims made against him, and had decided to take no part because, amongst other things, he has no money or assets with which to pay any judgment.

Legal principles

1. [63]

   Mr Baltins contends that all the representations made by Mr Mullins were untrue. The basis of fraud at common law is set out in Derry v Peek (1889) 14 App Cas 337 at 374 per Lord Hershell:

2. [64]

   The evidence tendered satisfies me that the representations were made fraudulently with the sole intent of extracting money from Mr Baltins.

3. [65]

   As set out in Magill v Magill (2006) 226 CLR 551 at 587-588 per Gummow, Kirby and Crennan JJ:

4. [66]

   Obviously allegations of fraud are serious and the plaintiff bears the onus of proof on the balance of probabilities, however s 140(2) of the Evidence Act 1995 (NSW), applies given the nature of the claim:

5. [67]

   As stated by Justice Johnson in Williamson v Elders Rural Services Australia Limited (No. 2) [2018] NSWSC 1986 at [122]:

6. [68]

   Further in Vu v New South Wales Crime Commission [2013] NSWCA 282 McColl JA (Meagher and Emmett JJA agreeing) said at [77] to [78]:

Decision

1. [69]

   I am of the view that the evidence strongly supports an artful, elaborately constructed hoax to extract money from Mr Baltins.

2. [70]

   The measure of loss comprises the sums advanced, plus interest to be calculated from the date of the respective payments.

3. [71]

   Counsel for Mr Baltins identified 20 distinct false representations on which Mr Baltins relied, set out in the statement of claim.

4. [72]

   The Account Fund Representation was the “facts” represented on or about 3 September 2010 about Mr Mullins’ overseas bank account and his father’s dying wish. I find as a matter of fact that that representation was made and it was untrue.

5. [73]

   The second is the Transfer Assistance Representation made at about the same time, that the sum of $100,000 was needed to be paid to lawyers and “bankers” and that there were transfer costs. These representations were also made on 3 September 2010, referred to as the Transfer Assistance and the Cost of Transfer Representations.

6. [74]

   Also on 3 September 2010 was a representation described as the Investment Return Representation where orally (and as confirmed by email on 3 September 2010), Mr Mullins represented to Mr Baltins that for every $20,000 Mr Baltins advanced, Mr Mullins would pay the sum of $100,000. I concede that representation was made and can be inferred from the express representations made in the conversation of 3 September 2010 combined with the email of 3 September 2010 bearing the subject “Bill facility”.

7. [75]

   It is alleged, and I accept, that by making the representation in the email regarding the intention to pay $500,000, within it was a representation that Mr Mullins would have funds available to him from which that sum could be paid. This is referred to as the Funds Availability Representation.

8. [76]

   I accept that all these representations were false and that the defendant’s father did not have a bank account overseas credited with the funds referred to, or at the least the funds were not truly available to Mr Mullins.

9. [77]

   The Transfer Intention Representation was false and the Transfer Assistance Representation was false because the account funds did not exist and even if they did, they were not available to Mr Mullins to be transferred in the way he said. The Cost of Transfer Representation was false because the account funds did not exist and were not available to be transferred. The Funds Availability Representation was false because there were no account funds available to be transferred.

10. [78]

    I find that at the time Mr Mullins made each of the false representations he knew them to be false. He made them with the intention that Mr Baltins rely upon them in order to persuade him to pay a number of cash advances. I am of the view that Mr Baltins, acting as the sole secretary and director and shareholder of Port Adelaide Power Investments Pty Ltd, relied on those false representations and suffered damage in the form of the payment by him of loan advances one to five set out in paragraphs [13] to [27] of this judgment.

11. [79]

    An amended first loan request was made on 3 September 2010 and the email suggested that the amount advanced should be increased to $140,000, and that five times that amount would be repaid (a sum of $750,000). This is referred to as a $750,000 Payment Representation. In that same email was a representation of extended funds availability, that is, that the sum $700,000 could be inferred as available to pay that sum.

12. [80]

    This was followed by a representation on 19 September 2010 that an additional sum was required for transfer costs. This is referred to in the statement of claim as the September Transfer Cost Representation. In an email dated 19 September 2010, with the subject heading “Update”, Mr Mullins represented to Mr Baltins that the $70,000 was going to be used by him to pay transfer costs (the September Transfer Assistance Representation), and that as covered in their telephone discussion that day, Mr Mullins would pay the sum of $350,000 reflecting that $70,000 advance, i.e. the Foreign Currency Fund Representation, the September Transfer Assistance Representation, the Extended Funds Availability Representation, and the September Repayment Representation.

13. [81]

    I accept that all these representations were made by Mr Mullins with the knowledge they were false and that they were made with the intention of being relied upon by Mr Baltins and that Mr Baltins acted in reliance upon those false representations to advance the $70,000 comprising the second loan.

14. [82]

    To secure the third loan in October 2010, Mr Mullins represented that the account funds were a larger sum (Larger Foreign Currency Fund Representation), that there needed to be $15,000 more paid than had previously been understood (the October Transfer Cost Representation) and that that money would be used to pay the transfer costs (October Transfer Assistance Representation). These were relied upon by Mr Baltins, they were made by Mr Mullins with the knowledge that they were false and were made with the intention that they would be relied upon by Mr Baltins.

15. [83]

    The October 2010 Agreement was updated to include the three advances made at that time. The Agreement represented, by the act of Mr Mullins signing and providing it that he would have the funds to repay the loan amounts by 15 November 2010, that account funds would be available by that day to repay the second and third loan amounts, and that account funds available to him would at least be sufficient to pay the amount defined as the repayment amount ie $425,000.

16. [84]

    I conclude that all those representations were false and were made with the knowledge by Mr Mullins that they were false and that they were made with the intention of Mr Baltins relying upon them, and I find that Mr Baltins in fact relied upon them to make a third loan payment.

17. [85]

    In respect to the fourth loan, there were Transfer Costs Representations made again. An Investment Returns Representation in the email of 5 November 2010 represented that Mr Mullins would pay to Mr Baltins as soon as he had available a total sum of $1.3 million. This November Investment Return Representation was false because the account fund was not available or did not exist. The Foreign Currency Fund referred to was false, the Larger Foreign Currency Fund Representation was false and there were no transfer costs or fees in fact payable by Mr Mullins associated with the asserted US bank account. I conclude that Mr Mullins knew that each of the representations were false and these were made with the intention that Mr Baltins would rely on them to advance funds and that Mr Baltins in fact relied upon them to advance the funds.

18. [86]

    On 26 November 2010 there was a representation that the money was in fact at a NAB branch in Canberra and could be not released without payment of a further $90,000 (the November Transfer Costs and Late November Transfer Cost Representation). A further loan agreement was signed by Mr Mullins dated 30 November 2010, confirming the sums advanced and the further proposed sum and representing that repayment would be made by 10 December 2010 in accordance with the terms of the Agreement.

19. [87]

    I accept that the representations were false. There was no account fund, there was no Foreign Currency Fund, there was no account with an amount of cash held at a NAB branch in Canberra, there were no transfer costs in fact payable and I find that Mr Mullins knew these representations were false, Mr Mullins knew that Mr Baltins would rely on those representations together with the November Loan Agreement to advance the further sum, and Mr Baltins relied upon these false representations to advance the further sum.

20. [88]

    I conclude that the plaintiff has established his entitlement to the sum of $350,000 plus interest to be calculated from the date of payment of the five loans identified in this judgment.

    1. (1)

       Judgment for the plaintiff in the sum of $350,000 plus interest.

    2. (2)

       The defendant is to pay the plaintiff’s costs of the proceedings.

    3. (3)

       The plaintiff provide short minutes of order to give effect to my judgment within seven days by email to the defendant and my Associate, including a schedule of calculations of interest on the advanced sums up to the date of judgment.