Mackinnon as plaintiff representative of 153 plaintiff group members v Partnership of Larter, Jones, Miraleste Pty Ltd t/as USG Partner and Johnson, t/as "STC Sports Trading Club" (No 7)

1. [1]

   Mr Peter Foster, the twelfth defendant in these proceedings, is a notorious confidence trickster.

2. [2]

   Mr Foster has been found to have been involved in fraudulent schemes in the United Kingdom, the United States of America, in Australia and elsewhere over the past 30 years. He has been convicted, fined and imprisoned on many occasions here and abroad arising from these and other activities.

3. [3]

   Mr Foster was instrumental in establishing and operating a purported “sports trading” scheme involving a partnership styled “The Sports Trading Club Partnership”. Mr Foster was not a member of that partnership. The partners were the second defendant, Ms Anne Larter, and a solicitor, the fifth defendant, Ms Leigh Johnson. Mr Foster acted as “National Sales Manager” using the name “Mark Hughes”.

4. [4]

   Mr Ian Mackinnon brings these proceedings against Mr Foster, Ms Larter, Ms Johnson and others under Pt 10 of the Civil Procedure Act 2005 (NSW) as a representative of 153 named Group Members, including Mr Mackinnon, each of whom made an investment by way of loans to that partnership.

5. [5]

   Mr Mackinnon and his wife, Mrs Belinda Mackinnon, made their investment on 31 October 2013 and 4 November 2013, after they executed documents entitled “Loan & Profit Sharing Agreement” on 28 October 2013 and 4 November 2013. According to those documents, their investments were to be traded on sports and prediction markets.

6. [6]

   Mr Mackinnon alleges that The Sports Trading Club Partnership was a fraudulent scheme masterminded by Mr Foster and that none of the funds invested was used for sports trading. Instead, he alleges the funds were misappropriated by Mr Foster and transferred to his associates and family members, as well as to offshore companies and bank accounts associated with him and his niece, the eleventh defendant, Ms Arabella Foster.

7. [7]

   The total amount invested by Group Members was a little over $12.3 million.

8. [8]

   Other parties, who are not Group Members, invested a further $17.3 million. The total amount paid into the Westpac Banking Corporation account operated by The Sports Trading Club Partnership, including by the Group Members, was in the order of $29.6 million.

9. [9]

   Some $6.4 million of the $12.3 million invested by Group Members has been recovered. The shortfall is some $5.9 million. Mr Mackinnon, on behalf of the Group Members, seeks to recover that amount, plus interest and costs in these proceedings.

10. [10]

    The course I propose to follow is to:

Overall conclusions

1. [11]

   The “Sports Trading Club” was a fraudulent scheme devised, masterminded and controlled by Mr Foster. The moneys advanced by the Group Members were misappropriated at Mr Foster’s instigation and direction.

2. [12]

   The bankruptcy of Mr Foster and Ms Larter does not affect Mr Mackinnon’s ability to continue these proceedings against Mr Foster (because the claim against him is not for a provable debt) but does prevent Mr Mackinnon from proceeding against Ms Larter (because the claim against her is for a provable debt).

3. [13]

   The Group Members are entitled to judgment against Mr Foster for the unrecovered balance of the amounts advanced.

4. [14]

   Ms Johnson knew Mr Foster’s involvement in the Sports Trading Club could not be publicity revealed. She knew Mr Foster was using the alias “Mark Hughes”. She knew of the contents of the “Proposal” used to solicit investment in the venture and must have known it to contain false statements. By mid-2013 Ms Johnson knew Mr Foster was in control of the Sports Trading Club’s activities. By September 2013, she strongly suspected that investors’ funds were being misappropriated. She engaged in misleading or deceptive conduct by remaining silent, notwithstanding having those suspicions.

5. [15]

   Whether Group Members are entitled to judgment or other relief against Ms Johnson will depend on matters in respect of which I will need further submissions.

The parties – only one active defendant

1. [16]

   The pleading at the commencement of the hearing was the Amended Commercial List Statement. It named a partnership as the first defendant.

2. [17]

   That partnership was described as “The partnership of Anne Patricia Larter, Alan Jones [the third defendant], Miraleste Pty Limited trading as USG Partner [the fourth defendant] and Leigh Johnson [the fifth defendant], trading as ‘STC Sports Trading Club’”.

3. [18]

   The nomination of a partnership as a defendant was inapt. A partnership is not a legal person: Rose v Federal Commissioner of Taxation (1951) 84 CLR 118; [1951] HCA 68 at 124.

4. [19]

   Further, there was never a partnership with the membership alleged; and Ms Johnson was never a member of a partnership called “STC Sports Trading Club”.

5. [20]

   Mr Dixon, who appeared for Mr Mackinnon, sought to deal with this difficulty by seeking to amend the claim on the second day of the proceedings. I return to this below.

6. [21]

   Ms Larter, the second defendant, entered a submitting appearance.

7. [22]

   Subject to the Court’s approval under s 173 of the Civil Procedure Act, Mr Mackinnon has settled the claim against the third and fourth defendants, Mr Alan Jones and Miraleste Pty Limited.

8. [23]

   The sixth to eleventh defendants, to or through whom it is alleged that the investors’ funds passed, have either not appeared, consented to judgment, are the subject of default judgment, or have been deregistered. Mr Mackinnon sought no relief against those parties in the hearing before me.

9. [24]

   Mr Foster, the twelfth defendant, was recently released from a custodial sentence imposed by Logan J in proceedings in the Federal Court of Australia. I will refer to these proceeding later in these reasons. He is awaiting trial for matters arising from events related to those the subject of these proceedings. He entered an appearance and participated in some interlocutory skirmishes. He did not, however, participate in the hearing. Shortly before the hearing, through his solicitor, he stated he did not propose to appear nor seek an adjournment of these proceedings pending the outcome of the criminal charges against him.

10. [25]

    Only the fifth defendant, Ms Johnson defended the proceedings.

11. [26]

    The 17 hearing days of this matter were concerned almost entirely with the question of whether Ms Johnson is liable to Mr Mackinnon and the other Group Members for the loss they have suffered as a result of their investment in The Sports Trading Club Partnership.

Mr Foster

1. [27]

   Details of Mr Foster’s history are set out in the judgment of Spender J in Australian Competition and Consumer Commission v Chaste Corporation Pty Ltd (in liq) [2003] FCA 180; (2003) 127 FCR 418 at [42] to [56]. In that case Spender J referred to Mr Foster’s past conduct as “a sad and lengthy history of dishonesty, deception and evasion” including “direct involvement in marketing schemes which have resulted in the misappropriation of assets” (at [42] and [57]). A history of Mr Foster’s criminal offending from 1987 until 2008 is detailed by McMurdo P in R v Foster [2008] QCA 90; (2008) 183 A Crim R 437 at [2]–[5].

2. [28]

   The Chaste Corporation case involved the sale of distributorships in respect of a purported weight loss pill called “TRIMit”.

3. [29]

   On 2 September 2005 Lander J found Mr Foster and Chaste Corporation guilty of price fixing, misleading and deceptive conduct in contravention of the Trade Practices Act 1974 (Cth) in relation to the TRIMit product: Australian Competition and Consumer Commission v Chaste Corporation Pty Ltd (in liq) [2005] FCA 1212. Lander J fined Mr Foster $150,000 and made orders prohibiting him from being involved in any business relating to weight loss or to the cosmetic or health industries for a period of five years (at [303]). That prohibition was upheld by the Full Court of the Federal Court: Foster v Australian Competition and Consumer Commission [2006] FCAFC 21; (2006) 149 FCR 135.

4. [30]

   On 27 September 2013 Logan J found that Mr Foster to be in breach of those orders and thereby in contempt of Court by reason of his involvement in a company called SensaSlim Australia Pty Ltd which marketed a diet nasal spray: Australian Competition and Consumer Commission v Chaste Corporation Pty Ltd (No 3) [2013] FCA 984.

5. [31]

   Logan J’s decision assumes significance in this case for the reasons that I set out below.

6. [32]

   On 24 October 2013 Logan J ordered that Mr Foster be sentenced to three years imprisonment: Australian Competition and Consumer Commission v Chaste Corporation Pty Ltd (No 6) [2013] FCA 1112; (2013) 223 FCR 426 at [58].

7. [33]

   On sentencing Mr Foster, Logan J stated that it was difficult to “envisage a more flagrant and deliberate breach of injunctive orders” (at [40]) and that Mr Foster was “directly culpable and, further, utterly without remorse or contrition” (at [41]).

8. [34]

   Mr Foster failed to surrender himself to the authorities. A warrant was issued for his arrest. He was arrested on 28 October 2014, having then been on the run for a year.

9. [35]

   In the meantime, in September and October 2012, Yates J heard proceedings brought against SensaSlim Australia Pty Ltd by the Australian Competition and Consumer Commission. Yates J delivered judgment in 2014: Australian Competition and Consumer Commission v SensaSlim Australia Pty Ltd (in liq) (No 5) [2014] FCA 340.

10. [36]

    In a later judgment, Australian Competition and Consumer Commission v SensaSlim Australia Pty Ltd (in liq) (No 7) [2016] FCA 484, Yates J made the following findings concerning Mr Foster’s conduct in relation to that matter:

11. [37]

    The facts of this case bear a striking resemblance to those of the case before Yates J.

The loan agreements

1. [38]

   Each Group Member executed a document in the same form as the Loan Agreement executed by Mr and Mrs Mackinnon.

2. [39]

   The Loan Agreements recited that “The Sports Trading Club Partnership” was “a limited liability partnership”.

3. [40]

   The Loan Agreements recorded that “the Lender shall forthwith lend to the Partnership and the Partnership shall borrow from the Lender” a specified sum and that:

4. [41]

   Sports Trading Club Limited, the sixth defendant, is a Hong Kong company. At the relevant time, its sole shareholder was Bella Development Limited (the seventh defendant), whose sole shareholder at the relevant time was Mr Foster’s niece, Ms Arabella Foster (the eleventh defendant).

5. [42]

   The Loan Agreements provided that the principal amount would be repayable at the end of a fixed term; in the case of Mr and Mrs Mackinnon, three years for the 28 October 2013 agreement and one year for the 4 November 2013 agreement.

6. [43]

   The Loan Agreements further provided that statements made in the “Sports Trading Club Associate Member Proposal” (“the Proposal”) and the “Terms of Associate Membership” would apply as if incorporated into the Loan Agreements. I will return to the Proposal below. A copy of the Proposal was accessible through a website at www.sportstradingclub.com.

7. [44]

   The “Terms of Associate Membership” incorporated into Mr and Mrs Mackinnon’s contract included that:

8. [45]

   In the Loan Agreements, investors in STC were described as “Associate Members”. I shall use the same expression.

9. [46]

   The distinction between the publically accessible website www.sportstradingclub.com and the “member website”, www.stcmembers.com, accessible only by username and password is significant for the reasons I discuss below.

10. [47]

    I will refer to the website www.sportstradingclub.com as the “Public STC Website” and to the website www.stcmembers.com as the “Members’ STC Website”.

Two partnerships

1. [48]

   Two partnerships are referred to in the evidence. It is important to distinguish between the two.

2. [49]

   On 30 December 2012 the second defendant, Ms Anne Larter, and the fifth defendant, Ms Leigh Johnson, executed a “Limited Partnership Agreement”.

3. [50]

   The Limited Partnership Agreement recorded that:

4. [51]

   Section 50A of the Partnership Act provides that:

5. [52]

   Section 60 of the Partnership Act provides that the liability of a limited partner to contribute to the liabilities of the limited partnership is:

6. [53]

   Ms Larter and Ms Johnson intended to register their “Limited Partnership Agreement” so that Ms Johnson’s liability would be as a “Limited Partner”.

7. [54]

   However, evidently by oversight, the document was not registered. This fact emerged shortly before the commencement of the hearing as a result of enquiries made by Mr Argy, the solicitor who appeared for Ms Johnson.

8. [55]

   Thus, contrary to Ms Johnson’s and Ms Larter’s intention, and to the statement made in the Limited Partnership Agreement, the partnership between Ms Larter and Ms Johnson was not a limited partnership. The late stage at which that fact emerged gave rise to a pleading issue to which I return below.

9. [56]

   It is now common ground that Ms Johnson resigned as a partner of The Sports Trading Club Partnership on 21 January 2014.

10. [57]

    At around that time, what is now accepted to be a new partnership, known as “STC Sports Trading Club”, was formed. An application to register that business name was made on 15 January 2014.

11. [58]

    Ms Larter and others, but not Ms Johnson, became members of that partnership.

12. [59]

    It is now common ground that Ms Johnson has no liability to Mr Mackinnon or any other Group Member as a partner after 21 January 2014.

13. [60]

    For simplicity, I will refer to The Sports Trading Club Partnership, the partnership of which Ms Johnson and Ms Larter were members, as “the Partnership” or “STC”.

14. [61]

    However, the existence of the two partnerships, with confusingly similar names, should be borne in mind.

Bankruptcy of Ms Larter and Mr Foster

1. [62]

   Both Ms Larter and Mr Foster have been declared bankrupt. Sequestration orders were made in respect of the estate of Mr Foster on 14 December 2017, shortly before the hearing before me commenced, and of Ms Larter on 6 March 2018, a month after the hearing commenced.

2. [63]

   Section 58(3)(b) of the Bankruptcy Act 1966 (Cth) provides that it is not competent for a creditor to “commence any legal proceedings in respect of provable debt or take any fresh step in such a proceeding” after a debtor has become a bankrupt, unless such creditor obtains “leave of the Court and on such terms as the Court thinks fit”.

3. [64]

   The “Court” from whom such leave must be given is the Federal Court of Australia: Bankruptcy Act, s 27(1). No such leave has been sought.

4. [65]

   “Provable debt” is defined in s 82 of the Bankruptcy Act. Section 82(2) provides:

5. [66]

   Thus, Mr Mackinnon could not take “any fresh step” in these proceedings against Mr Foster or Ms Larter unless his claims, and those of the Group Members he represents, arose otherwise than by reason of contract.

6. [67]

   Mr Mackinnon and the Group Members claim damages from Mr Foster in respect of misrepresentations which are said to constitute misleading or deceptive conduct and deceit. Damages are also claimed for conversion and conspiracy.

7. [68]

   Claims for unliquidated damages for a fraudulent misrepresentation that induced the party misled to make a contract with a third party (a “tripartite case”) are not provable in bankruptcy: Coventry v Charter Pacific Corporation Ltd (2005) 227 CLR 234; [2005] HCA 67 at [5] and [48]. That is because such claims are said to arise “otherwise than by reason of a contract”. They are to be contrasted with a claim for unliquidated damages for fraudulent misrepresentation that induced the party misled to make a contract with the bankrupt (a “bilateral case”). The latter has been held to be a provable debt: Jack v Kipping (1882) 9 QBD 113 at 117 (Mathew and Cave JJ).

8. [69]

   The claims against Mr Foster for misleading or deceptive conduct in this case is a tripartite case. His fraudulent misrepresentations are said to have induced the Group Members to enter into loan agreements with a third party: STC. Applying their Honours’ conclusions in Coventry, those claims arise otherwise than “by reason of a contract” and are not “provable debts” for which leave is required.

9. [70]

   Mr Foster is alleged to have conspired with certain other defendants with the intention of causing damage to the Group Members by transferring their loan amounts under the fraudulent scheme. I am satisfied this claim for unliquidated damages also arises “otherwise than by reason of a contract, promise or breach of trust”.

10. [71]

    By the conversion claim, Mr Foster is said to have taken possession and dealt with Group Members’ loan amounts when he had no entitlement to do so. I am satisfied that this claim (assuming it is maintainable: I doubt that a fungible such as money can be converted) arises “otherwise than by reason of a contract, promise or breach of trust” such that it is not a “provable debt” for which leave is required.

11. [72]

    The Further Amended Commercial List Statement also contains a claim that Mr Foster acted as constructive trustee and is liable to account for such amounts as he currently holds. The remedy sought for this is described simply as a “proprietary” remedy. That claim does seem to me to be for a provable debt. The point is moot, as there is no evidence that Mr Foster holds any of the funds he is said to have misappropriated.

12. [73]

    Thus, relevantly to the manner in which I propose to resolve this claim against Mr Foster, it is competent for Mr Mackinnon to proceed against Mr Foster.

13. [74]

    Ms Larter became bankrupt after the hearing of these proceedings commenced.

14. [75]

    One of the claims made against Ms Larter is in contract. She was a party to each of the Loan Agreements. Each of the other claims made against Ms Larter, damages for misleading or deceptive conduct, in deceit, for conversion and for conspiracy, arises by reason of Ms Larter being a party to that contract.

15. [76]

    All of these claims are thus for “provable debts”.

16. [77]

    Mr Dixon submitted that Mr Mackinnon, by continuing to prosecute the proceedings against Ms Larter after the date on which she became bankrupt was not taking a “fresh step” in the proceedings.

17. [78]

    I do not agree.

18. [79]

    The continued prosecution of the hearing the proceedings against Ms Larter after her bankruptcy does constitute taking “fresh steps” against Ms Larter in the proceedings: Gertig v Davies (2003) 85 SASR 226; [2003] SASC 86 at [63]-[64] per Doyle CJ and Mullighan J; Australian Competition and Consumer Commission v The Bio Enviro Plan Pty Ltd [2004] FCA 415 at [7]-[9] (RD Nicholson J).

19. [80]

    Therefore it was not competent for Mr Mackinnon to take such “fresh steps” against Ms Larter without leave of the Federal Court.

20. [81]

    Accordingly it is not competent for me to deal with Mr Mackinnon’s claim against Ms Larter.

The Further Amended Commercial List Statement

1. [82]

   On the second day of the hearing, I granted Mr Mackinnon leave to file a Further Amended Commercial List Statement for the reasons I gave that day: Mackinnon as plaintiff representative of 153 plaintiff group members v The partnership of Larter, Jones, Miraleste Pty Ltd t/as USG Partner and Johnson, t/as "STC Sports Trading Club" (No 3) [2018] NSWSC 86.

2. [83]

   So far as concerns the allegation of partnership, the amendments did a number of things.

3. [84]

   First, the allegation concerning the first defendant was amended to read (showing revision mode):

4. [85]

   As can be seen, the allegation that the partnership was “limited” was altered to an allegation that the partnership was, in effect, unlimited.

5. [86]

   I granted leave to make that amendment upon the basis that it did not permit Mr Mackinnon to:

6. [87]

   As can also be seen, the allegation made in this paragraph is that there was one partnership that traded as “The Sports Trading Club Partnership” until 21 January 2014, when Ms Johnson resigned, and thereafter as “STC Sports Trading Club”.

7. [88]

   As I have mentioned, it is now common ground that there were two separate partnerships and that Ms Johnson was not a member of the second.

8. [89]

   Second, in an attempt to overcome the infelicity of nominating a partnership as first defendant, the following allegation was added, omitting an irrelevant reference:

9. [90]

   This mechanism was a somewhat inelegant way of dealing with the incorrect nomination of a partnership as a party. However, I concluded that it made clear enough that the pleadings were to be read as if references to “the first defendant” were to be read as referring to Ms Larter and Ms Johnson, as members of the Partnership.

10. [91]

    The key allegations in the Further Amended Commercial List Statement are that:

    1. (1)

       Ms Larter and Ms Johnson as “persons employed or directed by” Mr Foster, and Mr Foster himself, represented to Mr Mackinnon and the other Group Members that:

    2. (2)

       Mr Foster, Ms Larter and Ms Johnson represented that various statements in the Proposal were true, including statements that:

    3. (3)

       Those representations were false and or misleading or fraudulent because:

    4. (4)

       Mr Foster, Ms Larter and Ms Johnson:

11. [92]

    Arising out of those matters, the Further Amended Commercial List Statement contains allegations of breach of contract, misleading or deceptive conduct, deceit, conversion and conspiracy. Mr Mackinnon on his own behalf and the Group Members claims damages, the imposition of a constructive trust, and restitution of the loan amounts.

12. [93]

    I will return to these allegations after I have analysed what happened.

The involvement of Ms Johnson

1. [94]

   Ms Johnson swore an affidavit in the proceedings on 3 August 2017.

2. [95]

   It is 466 pages long and contains almost 1,000 paragraphs. It was prepared at a time when Ms Johnson did not have legal representation. Ms Johnson said it was prepared with the assistance of her clerk, Mr Leo Wassercug. Mr Wassercug was present in Court throughout the hearing and appeared to play the role of clerk to or instructor of Mr Argy.

3. [96]

   The affidavit purported to be comprehensive and precise.

4. [97]

   In the affidavit Ms Johnson said she was admitted to practice as a solicitor in 1984 and has specialised in criminal law.

5. [98]

   She said that her role as a limited partner in STC, between December 2012 and January 2014, was her “only foray into the business world”.

6. [99]

   The length, and apparently comprehensive nature of the affidavit, suggests that it includes all that Ms Johnson then thought could be said in defence of the claims made against her.

7. [100]

   In her affidavit Ms Johnson said she met Mr Foster through Ms Larter in or around August 2012 while on a holiday to the Gold Coast. Ms Larter introduced her to Mr Foster’s sister who invited Ms Johnson to her home where she met Mr Foster.

8. [101]

   In her affidavit Ms Johnson said Ms Larter told her:

9. [102]

   Ms Johnson said that during her visit to Mr Foster’s sister’s home, Mr Foster mentioned the then pending SensaSlim matter and, on her return to Sydney, telephoned her “and persuaded me to act for him to seek an adjournment”.

10. [103]

    The hearing of the SensaSlim matter was scheduled to commence before Yates J on 3 September 2012.

11. [104]

    On 29 August 2012 Ms Johnson appeared for Mr Foster before Yates J to seek an adjournment. Yates J refused the adjournment (Australian Competition and Consumer Commission v SensaSlim Australia Pty Ltd (in liq) (No 3) [2012] FCA 939) and noted (at [1]) that:

12. [105]

    Ms Johnson then appeared before Perram J, sitting as duty judge, on 2 September 2012 on an application for leave to appeal from Yates J’s decision. Perram J refused to grant leave (Foster v Australian Competition and Consumer Commission [2012] FCA 953).

13. [106]

    Those proceedings were ultimately resolved by the judgment of Yates J to which I referred at [35] above.

14. [107]

    Ms Johnson gave this evidence in her affidavit as to what occurred after the unsuccessful adjournment application:

15. [108]

    In cross-examination before me Ms Johnson gave this evidence about her knowledge of Mr Foster’s history:

16. [109]

    A short time later Ms Johnson gave this evidence:

17. [110]

    The passages in Ms Johnson’s affidavit that I have emphasised at [107] reveal that she knew more about Mr Foster than she was prepared to accept in cross-examination.

18. [111]

    In her affidavit, Ms Johnson said that Mr Foster stressed to her that he would not “involve himself in any more scams”. That is, he accepted, and indeed had asserted to Ms Johnson, that he had been involved in “scams”.

19. [112]

    Ms Johnson said that Mr Foster told her that “he had wasted too much of his life getting into trouble” and the STC business “would be a legitimate business”; from which Ms Johnson must have understood Mr Foster to be accepting that he had “got into trouble” by reason of businesses that were not “legitimate”.

20. [113]

    Ms Johnson said that she was reassured by Mr Foster’s statement that STC “had nothing to do with diets and the weight loss industry”. Ms Johnson had, only a short time earlier, appeared for Mr Foster before Yates and Perram JJ unsuccessfully seeking an adjournment of the SensaSlim matter. The fact that Ms Johnson was so reassured shows that she must have had a deeper understanding of the allegations made in the SensaSlim case, and the “case before that case” that she was prepared to accept in cross-examination (see [108]).

21. [114]

    Further, Ms Johnson must have understood from the fact that Mr Foster assured her that he would not involve Ms Larter “in anything improper” that he was acknowledging that his earlier activities were, or had been alleged to have been, improper.

22. [115]

    Ms Johnson’s evidence before me that she was only “vaguely” aware of Mr Foster’s antecedents, when compared to the detailed explanation in her affidavit of how it was that Mr Foster persuaded her to become partner in STC is an example of a persistent tendency in Ms Johnson’s evidence. That tendency was to assert the improbable, and deny the obvious on any occasion when she thought it might assist her deal with her perception of the problem posed by the question at hand. I will say more about this later in these reasons.

23. [116]

    In cross-examination Ms Johnson gave this evidence as to why Mr Foster was not to be a partner in STC:

24. [117]

    A matter that Ms Johnson emphasised in her evidence was Mr Foster’s early insistence that he would not participate in the management or operation of the STC business but would only be involved in “setting up and operating the business’s website and similar technological aspects”.

25. [118]

    In cross-examination Ms Johnson gave this evidence about that matter:

26. [119]

    Later Ms Johnson said:

27. [120]

    As the following account reveals, it became clear to Ms Johnson at least by mid-2013 that Mr Foster was not confining his activities to setting up or operating the STC website but was involved in “posting” the “trades” allegedly conducted by STC and, ultimately, conducting the “trading activity” itself.

28. [121]

    In any event, it appears that, at the outset, Ms Johnson was concerned about Mr Foster having any role in the business, including one confined to setting up the website.

29. [122]

    Thus, at one point in her cross-examination, Ms Johnson said in an answer which was not responsive to the question:

30. [123]

    Thus Ms Johnson offered the inconsistent position of being comforted by Mr Foster’s assurance he would only be involved in setting up the STC website and performing technical functions, and yet was exhorting Ms Larter to “get somebody else” to perform those functions.

31. [124]

    In cross-examination Ms Johnson said that she understood that the reason Mr Foster was not involved in STC was because he had been offered an opportunity to work in the purported “parent company” of STC. For reasons I will explain, I do not accept this evidence.

32. [125]

    On 30 December 2012 Ms Johnson executed the Limited Partnership Agreement with Ms Larter.

33. [126]

    At around this time Ms Johnson advanced $182,500 in cash to the Partnership. Ms Johnson described this as her “seed money”.

34. [127]

    Only Ms Johnson and the Associate Members (including Mr Mackinnon and the other Group Members) advanced money to the Partnership. Ms Larter advanced no funds. Mr Foster advanced no funds.

35. [128]

    Ms Johnson said that:

    1. (1)

       she borrowed all of the $182,500 in cash from “friends”;

    2. (2)

       the arrangement (with whom is not revealed in the evidence; it must have been with Ms Larter and or Mr Foster) was that she would be paid 100% interest on her advance;

    3. (3)

       the money would be repaid within months (in an email Ms Johnson sent Ms Larter and Mr Foster on 10 September 2013, Ms Johnson said the loan plus interest was to be repaid by February 2013); and

    4. (4)

       there was a document recording the arrangement but that she had been unable to locate it.

36. [129]

    Ms Johnson said she undertook no due diligence before advancing funds to STC. She said she did not ask Ms Larter how Ms Larter secured the rights STC was supposed to have, nor their value. She said she made no enquiries as to “who would be doing what” in the business.

37. [130]

    In her 10 September 2013 email to Mr Foster and Ms Larter, Ms Johnson said:

38. [131]

    I will return to this email. It has wide significance in the case. In the passage I have set out Ms Johnson asserted that Mr Foster “needed the money” to establish STC. Ms Johnson must have understood from this that from the outset that Mr Foster was to be closely involved in the establishment of STC.

39. [132]

    Ms Johnson said she paid the $182,500 in four tranches.

40. [133]

    The first tranche was $88,000. Ms Johnson paid that amount, in cash, to a Mr Bill Duffy, who she said was “a friend of Mr Foster’s”.

41. [134]

    In her 10 September 2013 email Ms Johnson said that “$100,000 of the $182,500 seed capital was to be placed into STC’s trading account to be traded by Richard Holmes”. Mr Holmes was a “trader” engaged by STC. I will return to Mr Holmes but note at this stage that there is no suggestion that he was involved in any dishonest conduct.

42. [135]

    However, in cross-examination Ms Johnson said she deposited the other three tranches ($37,000, $25,000 and $32,500), in cash, into a bank account and that she did not know who controlled the bank account.

43. [136]

    The Westpac account to which I referred at [8] was in the joint names of Ms Johnson and Ms Larter. It was opened on 28 December 2012. There is no record in the bank statements of that account of those deposits.

44. [137]

    There is no other evidence of the identity of the account into which Ms Johnson’s funds were deposited. It must have been one associated with Ms Larter or Mr Foster.

45. [138]

    The “loan” was unsecured. As I describe below, it was repaid with 100% interest by the time Ms Johnson retired from STC in January 2014.

46. [139]

    In cross-examination Ms Johnson said she understood from conversations she had with Ms Larter “that [Ms Larter] had secured the rights for Australia and New Zealand” for STC and that she had acquired them because “she was tipped into them by Peter Foster”.

47. [140]

    When asked to clarify what that meant, Ms Johnson said that Mr Foster “knew about” the rights, and later that he “had” them or “got” them; but that he did not want to “do them” and so he “gave them to [Ms Larter] to do”. Ms Johnson also said that she understood Mr Foster was “going to do it but then he decided not to” and then offered it “to [Ms Larter] – or to us”.

48. [141]

    Ms Johnson said she did not know why Mr Foster did not want to “do” the rights in STC. She said that it was “because he was going to be involved…with the head company”. She later elaborated that Mr Foster “was working in the actual business” by “organising the different areas [of STC]…in the world for the business”, “that’s what I was told in the beginning, and that that’s why he wasn’t taking up the licence for Australia and New Zealand”. She said that Mr Foster “was involved with the parent company that was dealing with the licences. I knew that from the start because that’s what he said. That’s why he was giving [Ms Larter] the licence because he was going to do Australia but then he’d been approached by the parent company to work for them”.

49. [142]

    Ms Johnson also said:

50. [143]

    As is the case with much of Ms Johnson’s evidence, it is difficult to reconcile the evidence I have just set out with her evidence that the reason Mr Foster could not be involved in the Australian business of STC was because he was “going to go to gaol” (see [116] above).

The scheme

1. [144]

   In early 2013 STC commenced advertising in a number of major newspapers throughout Australia.

2. [145]

   For example, the following advertisement was published in The Weekend West Australian on 9 February 2013:

3. [146]

   The advertisements invited potential investors to call “Mark Hughes”: an alias used by Mr Foster.

4. [147]

   Mr Foster obviously understood that his notoriety was such that he could not be seen to be associated with STC.

5. [148]

   Someone (I would infer Mr Foster or someone at his direction) prepared a “Sales Script” containing instructions for persons who received telephone calls from potential investors.

6. [149]

   Investors were to be told:

7. [150]

   Investors were directed to the Public STC Website.

8. [151]

   The Public STC Website had a link to a media release showing Ms Johnson with former Prime Minister the Hon Julia Gillard AC. It stated that Ms Johnson was involved in a $20 million partnership deal.

9. [152]

   The photograph of Ms Johnson and Ms Gillard was taken in the context unrelated to STC. Contrary to the “sales script”, the photograph was not taken on an occasion where Ms Johnson made any announcement about obtaining any rights connected with STC.

10. [153]

    There is an issue as to whether Ms Johnson accessed the Public STC Website. She was certainly aware of it. In her 10 September 2013 email, she demanded that “my name and all references to me be removed” from that website; which she named in terms. She agreed she saw the Public STC Website but denied clicking on the link to download the Proposal.

11. [154]

    As I have mentioned, there was also a Members STC Website, accessible only by Associate Members using a username and password. At that website, Associate Members could see the state of their “account” with STC. Ms Johnson agrees she accessed this website. I will return to this below.

12. [155]

    The key marketing document used to induce investors into loaning moneys to the STC partnership was the Proposal. It is an extravagant document.

13. [156]

    A copy of that document is an attached to these reasons (The Proposal (1.62 MB, pdf)).

14. [157]

    The Proposal was available through a hyperlink on the Public STC Website labelled “click to download proposal”.

15. [158]

    Mr Kenneth Gamble, an investigator retained on behalf of the Group Members, said that:

16. [159]

    The Proposal was also mailed to investors after the initial telephone call.

17. [160]

    There is an issue whether Ms Johnson saw or knew of the contents of the Proposal. On her behalf, Mr Argy submitted that Ms Johnson “categorically” denied ever seeing the Proposal before a copy was adduced in evidence in these proceedings. I will return to this.

18. [161]

    The Proposal included the Terms of Associate Membership to which I have referred.

19. [162]

    On the front page of the Proposal, Ms Larter was described as being the “General Partner” and Ms Johnson described as the “Legal Partner” (rather than a “limited” partner, as Ms Johnson thought herself to be).

20. [163]

    The Proposal included a photograph of Ms Johnson and Ms Larter and made the following statement concerning Ms Johnson:

21. [164]

    Ms Johnson said that this was not an accurate summary of her career. Ms Johnson said she had never acted for “politicians”, “actors”, “physicians” or “large corporations”.

22. [165]

    The Proposal contained the following statements (some of which are picked up as “representations” in the Further Amended Commercial List Statement):

23. [166]

    The Proposal concluded:

24. [167]

    The Proposal attached the form of Loan Agreement to which I have referred: see [38].

25. [168]

    Mr Mackinnon alleges that all the statements in the Proposal were false; that STC had not acquired any rights from Sports Trading Club Limited, or anyone else, to trade on sporting events or “prediction markets”; and that STC did not ever conduct any trading or betting activity of the kind described in the Proposal, or at all.

26. [169]

    I will return to these allegations and the question of whether Ms Johnson knew of the contents of the Proposal later in these reasons.

27. [170]

    Over 400 “Associate Members”, including Mr Mackinnon invested in STC. As I have mentioned, Associate Members deposited $29.6 million into STC’s Westpac account. The Group Members’ deposits comprised some $12.3 million of that $29.6 million.

28. [171]

    On 30 October 2014 shortly after Mr Foster’s arrest, Ms Larter sent an email to all “STC Members” headed “STC Statement” as follows:

29. [172]

    Only 5 of the 152 Group Members received a partial refund offered by Ms Larter. The total amount refunded was $138,905.

30. [173]

    Otherwise no Group Member has been repaid the amount advanced to STC. It has all been lost.

31. [174]

    The Westpac account was opened on 4 January 2013 with a deposit of $50. The next deposit, $150,000.00 was made on 19 February 2013 by a Mr Pieter de Klerk. Mr de Klerk’s evidence is of vital importance in this case. I return to it below.

32. [175]

    Thereafter, regular deposits were credited to the Westpac account. There were two deposits for $50,000 on 27 February 2013, a deposit of $25,000 on 1 March 2013, deposits of $50,000 on 6 and 8 March 2013, deposits of $100,000 and $50,000 on 11 March 2013, deposits of $50,000, $20,000 and $50,000 on 14 March 2013 and so on. The Westpac statements identify named persons as having made many of these deposits. I infer those named persons were Associate Members. Other deposits do not identify the identity of the depositor but I infer they were from Associate Members. Mr Gamble has identified all of the Group Members’ deposits in the Westpac account.

33. [176]

    Funds were withdrawn immediately after these deposits were made. The withdrawals are often in round numbers, suggesting that the funds were remitted to other unidentified accounts. For example: $60,500 was withdrawn on 19 February 2013, $6,000 on 19 February 2013, $2,000 on 20 February 2013, $40,000 on 21 February 2013, $25,000 on 22 February 2013 and again on 28 February 2013 and so on.

34. [177]

    There were also “debit card withdrawals” in odd amounts for apparently private purposes (Woolworths, Taste of Paradise restaurant, Telstra bill payment and the like).

35. [178]

    All of the money paid into the Westpac account has been paid away.

36. [179]

    I referred to Mr Gamble’s evidence at [158]. As I have mentioned, Mr Gamble is the investigator retained on behalf of the Plaintiff Group Members. He accepted in cross-examination that he stands to gain from the successful prosecution of these proceedings as he, or an entity with which he is associated, will receive a percentage of any recovery. He thus has an interest in the outcome of these proceedings and is, to that extent, not an objective witness. The conclusions and opinions formed by Mr Gamble were challenged, and I have not accepted them as evidence of their truth. However, the fruits of his investigation as to matters of fact were not challenged. I accept his evidence concerning those findings. They are supported by documentary evidence (such as bank statements and contemporaneous records of the STC website).

37. [180]

    Mr Gamble’s investigations reveal that almost $8.5 million of the funds paid into the STC Westpac account was transferred to an account with HSBC Bank in the name of the sixth defendant, Sports Trading Club Limited. Funds were then transferred from that account into bank accounts in Hong Kong and Vanuatu in the name of offshore companies associated with Ms Arabella Foster and Mr Duffy (the person to whom Ms Johnson handed cash in December 2012). Thereafter the funds were applied principally for the benefit of Mr Foster and his relatives and associates for purposes unrelated to those stated in the Proposal.

38. [181]

    Mr Gamble’s investigations have also shown that a further amount of some $5 million was transferred from the STC Westpac account to accounts controlled by Mr Duffy and were then used by Mr Foster for personal expenditure and payments to his relatives and associates. Almost $2 million was also paid directly to Mr Foster’s associates and relatives.

39. [182]

    Those transfers included:

40. [183]

    Almost $15 million of the money paid into the Westpac account has not been accounted for.

41. [184]

    Mr Gamble has analysed the STC Westpac account statements and prepared the following summary. It shows that, for the period set out below, deposits and withdrawals were made from that account as follows:

42. [185]

    As Mr Gamble observed, the closing balance in the STC Westpac bank account at the end of each month show that large amounts of money were transferred out of the account soon after being deposited.

43. [186]

    I have mentioned that Mr Gamble has ascertained that almost $8.5 million was transferred from the STC Westpac account to bank accounts in Hong Kong. Most of those transfers took place after the end of August 2013 as follows:

44. [187]

    There is no evidence that any of this money was spent for the purposes identified in the Proposal.

45. [188]

    Mr Gamble said that his investigations reveal that:

46. [189]

    Mr de Klerk said that he accessed his Members STC Website and observed what appeared to be some kind of “sports trading”. Mr de Klerk also visited a “trading room” in an apartment building on the Gold Coast where he witnessed what appeared to be “trading” activity. I detail this evidence below: at [214] to [219] and [304] to [311]. Ms Johnson also said that she viewed “trades” when she accessed the Members STC Website “for a day or two”.

47. [190]

    As I discuss below, it may be that Mr Foster choreographed some kind of “sports trading” activity, or the appearance of such activity, to lure investment.

48. [191]

    Ms Johnson was one of the two persons authorised to operate the Westpac account (the other was Ms Larter).

49. [192]

    There is however no suggestion that Ms Johnson authorised any payment out of the Westpac account or received any of the money deposited to that account, save for $50,000 that she withdrew in December 2013 as final repayment of her advance of $182,500 and interest. I return to this below.

50. [193]

    I have mentioned Mr Holmes: see [134]. Mr Mackinnon makes no allegation of impropriety against Mr Holmes. Quite how he was involved without being exposed to the fraudulent scheme remains a mystery.

51. [194]

    It also appears that a Prof Allan Snyder had some association with the STC enterprise. Ms Johnson said she met Prof Snyder. However Mr Gamble’s evidence is that he made enquiries with Prof Snyder and satisfied himself that, although Prof Snyder had been “approached” “for a significantly large amount of money”, he “never ended up getting involved”.

52. [195]

    To some extent, the evidence that Mr Mackinnon and the Group Members have lost their funds by reason of a fraud is circumstantial.

53. [196]

    What is clear is that their investment is lost, save for the small sums refunded shortly after Mr Foster’s arrest in October 2014.

54. [197]

    There is evidence as to where much of the money has gone; but much is unaccounted for.

55. [198]

    Mr Foster’s and Ms Larter’s dealings with Ms Johnson during 2013 and early 2014 point strongly to the conclusion that they were in control of the STC enterprise. Ms Larter was the only other signatory of the STC Westpac account and must have authorised the transfer of the funds deposited to that account. Ms Johnson’s account of her dealings with Mr Foster and Ms Larter from, at the latest, August 2013 points strongly to the conclusion that fraud was afoot, and that Mr Foster was directing it with the close assistance of Ms Larter. I will set out the detail of these matters later in these reasons.

56. [199]

    Neither Mr Foster nor Ms Larter has given evidence. As I have said, Mr Foster entered an appearance, participated in the proceedings for some time but, through his solicitor, informed the Court that he would not appear to defend the case against him. Ms Larter entered a submitting appearance. They obviously could both have given evidence explaining exactly what happened to the Group Members’ funds. I infer their evidence would not have assisted their case. Their failure to give evidence enables me to draw, with even greater confidence, the inference that I consider in any event arises strongly from the evidence, that they, with the involvement of others, have misappropriated the Group Members’ funds: for example see HML v The Queen (2008) 235 CLR 334; [2008] HCA 16 at [303] (Heydon J).

57. [200]

    As I have said, because of Ms Larter’s bankruptcy, it is not competent for me to deal with Mr Mackinnon’s claim against her. However, I do not consider that to be an impediment to making findings about her role at STC.

58. [201]

    Mr Argy conducted Ms Johnson’s case on the basis that Group Members’ funds had been fraudulently misappropriated. Mr Argy emphasised, over and again, what he described as the sophisticated nature of the fraud perpetrated by Mr Foster, with Ms Larter’s assistance. Mr Argy went so far as to submit that Ms Johnson had also been defrauded by Mr Foster and Ms Larter. Mr Argy described Ms Johnson as “the classic Good Samaritan who went to the aid of a person she thought was in distress [evidently Ms Larter] and was mugged and robbed for her trouble”.

59. [202]

    For reasons I set out below, I do not accept this as a fair characterisation of Ms Johnson’s role. However, for present purposes, the point is that throughout the hearing before me, there was no dispute but that Mr Mackinnon and the Group Members had been defrauded by Mr Foster and his associates.

The involvement of Pieter de Klerk

1. [203]

   Mr de Klerk is an important witness in these proceedings.

2. [204]

   On or about 9 February 2013, Mr de Klerk, who is originally from South Africa but now lives in Perth, read the advertisement in The Weekend West Australian to which I have referred at [145] above. As I have mentioned, the advertisement invited interested persons to telephone “Mark Hughes”.

3. [205]

   Mr de Klerk telephoned the number on that advertisement and spoke to “Mark Hughes”. They had this conversation:

4. [206]

   During February 2013 Mr de Klerk had several more telephone conversations with “Mark Hughes” during which “Mark Hughes” said words to the effect:

5. [207]

   On 14 February 2013 Mr de Klerk received an email from “Mark Hughes” attaching a copy of the Proposal. In the email “Mark Hughes” described himself as “National Sales Manager” of “The Sports Trading Club Partnership”.

6. [208]

   Mr de Klerk decided to loan moneys to STC. On 17 February 2013 he signed five loan agreements (each for $50,000). On 18 February 2013 he transferred into STC’s bank account at Westpac $150,000 of the $250,000 referred to in those agreements. That amount was credited to STC’s Westpac account on 19 February 2013.

7. [209]

   Mr de Klerk paid the further $100,000 called for by the loan agreements on 21 March 2013. I will return to this.

8. [210]

   The five loan agreements that Mr de Klerk signed were sent to him on 17 February 2013 in a letter signed by Ms Larter as General Partner.

9. [211]

   The letter read:

10. [212]

    At around this time, Mr de Klerk said that he spoke to “Mark Hughes” at least once a day concerning the “trading” activity STC was purportedly engaging in on Mr de Klerk’s behalf.

11. [213]

    Mr de Klerk said that within a week of trading “Mark Hughes” telephoned him and asked:

12. [214]

    Mr de Klerk said that, accessing the Members STC Website, he was able to observe “trades” being conducted on his behalf “in real time”.

13. [215]

    Mr de Klerk gave this evidence about those observations in answer to questions from me:

14. [216]

    Mr de Klerk also said that he was able to see the “live trades” being made on his behalf on his mobile phone.

15. [217]

    He gave this further evidence in response to questions from me:

16. [218]

    Mr de Klerk said that “one of the opposition companies” that he accessed was Betfair.

17. [219]

    This evidence shows that an account had been created for Mr de Klerk which appeared to show some kind of trading concerning sporting events and the accumulation of a “profit” for Mr de Klerk.

18. [220]

    Mr de Klerk also received a monthly “Statement of Account” from STC. The only one in evidence is that dated 31 August 2013. It set out details of the “loan amount”, the “profit to date”, the “account balance”, the “current funds in trade”, the “future funds in trade”, the “available balance” and the “funds available to withdraw”. A copy of that Statement of Account is attached to these reasons (Statement of Account (318 KB, pdf)).

19. [221]

    Evidently, all Associate Members were given an account name and password by which they could access the Members STC Website.

20. [222]

    Ms Johnson said she viewed similar activity when she accessed the Members STC Website.

21. [223]

    There is no evidence as to whether the “trading” activity and accumulating “profit” viewable via the Members STC Website was genuine.

22. [224]

    It seems that Mr Foster was able to create the impression that genuine trading and profit accumulation was occurring. Somehow he created an online platform by which Group Members viewed their STC profiles and “trading activity”. It may be that, for some time, investors’ money was used for some kind of genuine “trading”.

23. [225]

    The evident involvement of Mr Holmes, about whom no accusation of fraud is made, in this activity suggests that this may be so. As I discuss below, by August 2013 Mr Holmes was sufficiently concerned about the genuineness of the STC operation that he resigned.

24. [226]

    It may be that Mr Foster alone, or with the assistance of others, thus created the illusion of “trading” online.

25. [227]

    Either way, the existence and function of the Members STC Website reveals the extraordinary sophistication of the scheme that Mr Foster devised.

26. [228]

    Later in the conversation to which I have referred at [205] Mr de Klerk had this conversation with “Mark Hughes”:

27. [229]

    Although Mr de Klerk referred to “Robin Howard”, it is likely that “Mark Hughes” referred to “Howard Robin”. “Howard Robin” was in fact Robin Reichelt, an associate of Mr Foster.

28. [230]

    “Mark Hughes’s” reference to “Nico Botha” purchasing “the licence for STC in South Africa” ultimately led to Mr de Klerk paying US$1 million to Bella Development Limited to purchase “the licence for STC in South Africa”. There was no such licence and Mr de Klerk lost his US$1 million. That loss is not the subject of these proceedings. As a Group Member, Mr de Klerk seeks to recover the loans he made to STC pursuant to the loan agreements to which I have referred.

29. [231]

    On 6 March 2013 “Howard Robin” sent an email to Mr de Klerk stating:

30. [232]

    Shortly thereafter “Mark Hughes” telephoned Mr de Klerk and invited him to come to Sydney to discuss the South African “investment”.

Meeting at STC Market Street office on 13 March 2013

1. [233]

   Mr de Klerk travelled from Perth to Sydney and, on 13 March 2013, went to STC’s office in Market Street. He was expecting to meet “Mark Hughes” to discuss the proposed South African investment.

2. [234]

   By now, Mr de Klerk had paid $150,000 of the $250,000 referred to in the five loan agreements he signed on 17 February 2013.

3. [235]

   In his first affidavit Mr de Klerk said:

4. [236]

   “Kevin Joseph” was an associate of Mr Foster in fact named Mr Kevin McMullen. Mr McMullen was a respondent in the Chaste Corporation case: Australian Competition and Consumer Commission v Chaste Corporation Pty Ltd (No 3) [2013] FCA 984 at [43(pp)(iv)]. Why Mr McMullen passed himself off as “Kevin Joseph” is not explained in the evidence.

5. [237]

   In his second affidavit Mr de Klerk said:

6. [238]

   In cross-examination, Mr de Klerk accepted that he could not recall that Ms Johnson had said, in terms, that she was “the legal partner” of STC. Rather, Mr de Klerk recalled, she said something to the effect that she was in charge of legal affairs.

7. [239]

   On Mr de Klerk’s account of it, Ms Johnson had no difficulty responding to Mr de Klerk’s enquiry as to where “Mark Hughes” was. She explained that “Mark Hughes” was in Melbourne.

8. [240]

   Mr de Klerk said that later on 13 March 2013 either “Mark Hughes” or “Kevin Joseph” telephoned him and arranged for a meeting at Catalina restaurant at Rose Bay the following day.

Meeting at the Catalina restaurant on 14 March 2013

1. [241]

   The following day, 14 March 2013, Mr de Klerk met Ms Johnson and “Kevin Joseph” at the Catalina restaurant in Rose Bay.

2. [242]

   Ms Johnson agreed that she attended the meeting at Mr Foster’s request. She gave this evidence in cross-examination:

3. [243]

   Ms Johnson’s acceptance that it was Mr Foster who arranged for Ms Johnson to attend this meeting is significant. It must have indicated to her that Mr Foster was involved at a sufficiently high level at STC to be arranging meetings with potential investors. This is inconsistent with Ms Johnson’s stated understanding that Mr Foster’s role was merely to set up the website and deal with “similar technological aspects”.

4. [244]

   Further, Ms Johnson’s evidence was that she did not know Mr Foster was using the pseudonym “Mark Hughes”. If that is the true position, and as Mr Foster was pretending to be “Mark Hughes” in his dealings with Mr de Klerk, Mr Foster was running a significant risk that his true identify might be revealed by Ms Johnson. That suggests (although I accept at this stage not conclusively) that Mr Foster was confident there would be no problem because, contrary to Ms Johnson’s denial, she did know Mr Foster was passing himself off as “Mark Hughes”.

5. [245]

   Ms Johnson seemed to accept this was so. Thus, she gave this evidence:

6. [246]

   In his first affidavit Mr de Klerk gave this account of what happened at the restaurant:

7. [247]

   In his second affidavit Mr de Klerk gave a more detailed account of what happened as follows:

8. [248]

   Ms Johnson’s evidence is that she did not know “Mark Hughes”. She said in cross-examination:

9. [249]

   However, according to Mr de Klerk’s affidavit, on both 13 March 2013, at the Market Street office, and again on 14 March 2013, at Catalina, Ms Johnson apologised for “Mark’s” absence because (on 13 March 2013) he was in Melbourne and “not expected to return today” and (on 14 March 2013) was still “stuck in Melbourne…negotiating with the University to buy a program that will help STC to trade, to work out games’ results more accurately”.

10. [250]

    In evidence-in-chief, Mr de Klerk said:

11. [251]

    Mr Argy did not challenge this evidence. Indeed, the following exchange occurred in cross-examination:

12. [252]

    Later in the cross-examination, Mr de Klerk said that it was on 13 March 2013, at Market Street, rather than on 14 March 2013 at Catalina, that Ms Johnson said that the reason “Mark Hughes” was absent was because he was “getting information on footy history”.

13. [253]

    The following exchange followed:

14. [254]

    Mr Argy’s point was, evidently, to establish an inconsistency in Mr de Klerk’s evidence as to when Ms Johnson gave the explanation for “Mark Hughes’s” absence; rather than to challenge that Ms Johnson had apologised for the absence of “Mark Hughes”.

15. [255]

    Mr Argy submitted that this inconsistency pointed to the unreliability of Mr de Klerk’s evidence. I will return to the credibility of Mr de Klerk’s evidence as well as that of Ms Johnson later in these reasons.

16. [256]

    However, I record at this stage that (for reasons I explain in detail below) I accept Mr de Klerk as a reliable witness and do not accept Ms Johnson was a reliable witness. Where Ms Johnson gives evidence that contradicts Mr de Klerk’s evidence, I have no hesitation in preferring Mr de Klerk’s evidence. There are many instances where there is a conflict between the evidence of these two witnesses. I will from this point simply expose those conflicts without repeatedly stating my preference for the evidence of Mr de Klerk. Resolution of the conflicts in testimony turns on my conclusions as to their respective credit. Those conclusions appear below at [708] to [730].

17. [257]

    Mr de Klerk gave evidence that he asked Ms Johnson questions about “Mark Hughes”. In re-examination he gave this evidence:

18. [258]

    Further, according to Mr de Klerk’s affidavit, Ms Johnson told him that “Mark” was in charge of the “trading team” and that she would speak to “Mark” to arrange a visit to the “trading room”.

19. [259]

    Mr de Klerk gave similar evidence in cross-examination:

20. [260]

    On 15 March 2013, Ms Johnson sent Mr de Klerk a text message:

21. [261]

    Mr de Klerk replied:

22. [262]

    Mr Dixon asked Ms Johnson about her text message:

23. [263]

    In this evidence, Ms Johnson accepted that she had “very possibly” contacted Mr Foster in relation to Mr de Klerk’s request to visit the “trading room”. She asserted that she may instead have spoken to “Tom” or “Kevin”.

24. [264]

    But Ms Johnson knew from Mr de Klerk’s reply to her text message that “Mark”, and not “Tom, Kevin or Peter Foster”, had made contact with Mr de Klerk about this matter. The fact that Mr de Klerk referred simply to “Mark” without evidently eliciting any query from Ms Johnson is consistent with Mr de Klerk’s evidence that he and Ms Johnson had earlier discussed that she would arrange for “Mark” to call; and impossible to reconcile with Ms Johnson’s evidence that she did not know “Mark Hughes” and thought he “must be someone Anne knows” (see [248] above).

25. [265]

    And the fact that Ms Johnson knew from Mr de Klerk’s text message that “Mark” had contacted him suggests (albeit again not conclusively at this stage) that Ms Johnson knew that “Mark” and Mr Foster were one and the same. Later evidence puts the matter beyond doubt.

26. [266]

    Later, Mr de Klerk travelled to the Gold Coast to see the “trading room”. I return to this below.

27. [267]

    In his first affidavit, Mr de Klerk said no more about the discussion at Catalina than that it was about “personal matters”.

28. [268]

    Mr Argy asked what “personal matters” were discussed and with whom. Mr de Klerk then elaborated on his discussions with Ms Johnson.

29. [269]

    In his written submissions, Mr Argy criticised Mr de Klerk for offering this evidence.

30. [270]

    Thus Mr Argy submitted:

31. [271]

    This criticism of Mr de Klerk is unfair. It was Mr Argy’s cross-examination that opened that question up. Those questions also led Mr de Klerk to give evidence about having discussed the Proposal at the Catalina meeting.

32. [272]

    The following exchange took place. It shows that it was Mr Argy’s insistence on seeking details of the “personal matters discussed”, and Mr Argy’s explanation as to why that question could be relevant, that led to the evidence of which Mr Argy now complains:

33. [273]

    The answers that Mr de Klerk gave, particularly to the questions I asked, suggested to me that Mr de Klerk was saying that he discussed the Proposal with Ms Johnson.

34. [274]

    Mr Argy submitted that that was not clear, and that Mr de Klerk may have been referring to a “small p” proposal concerning the proposed South African investment.

35. [275]

    However, evidence that Mr de Klerk later gave made clear that Mr de Klerk was referring to the Proposal; and that Mr Argy as the cross-examiner understood this.

36. [276]

    Thus the following exchange took place:

37. [277]

    It is clear from this passage that, although the transcript records Mr Argy asking about the “proposal”, his question was directed to the Proposal. It is also clear that Mr de Klerk’s response was directed to the Proposal.

38. [278]

    That was confirmed in re-examination when Mr de Klerk gave this evidence:

39. [279]

    Mr de Klerk was thus clear that he had discussed the Proposal with Ms Johnson, evidently in some detail.

40. [280]

    This is significant because, as I have mentioned, Ms Johnson denied ever seeing the Proposal.

41. [281]

    Mr de Klerk said that he had reasons for discussing the Proposal with Ms Johnson at the meeting. In particular, he said he wanted to discuss the Proposal to confirm “who is responsible for what” given that “nobody was present”. Mr de Klerk said he felt pressure to “find a way to…go ahead” and “was trying to determine how solid this company was”; and that Ms Johnson answered his questions to his “satisfaction”.

42. [282]

    In re-examination Mr Dixon asked Mr de Klerk whether he asked “any other questions”. Mr de Klerk said that Ms Johnson said Ms Larter was:

43. [283]

    Mr Argy submitted that it was most unlikely that Ms Johnson would have referred to Ms Larter as “sleeping partner”. Mr Argy submitted that Ms Johnson knew Ms Larter was a “General Partner” and saw herself in contrast as a “Limited Partner”. Mr Argy submitted that Mr de Klerk’s assertion that Ms Johnson described Ms Larter as a “sleeping partner” reflected on his reliability and credit.

44. [284]

    It may be that Ms Johnson did not use those words to describe Ms Larter’s then role. However it is likely that Ms Johnson said something to the effect that Ms Larter was not then fully engaged in the STC business, as that was the case. In July 2011 Ms Larter’s daughter had been killed by her then boyfriend. At the time of the Catalina lunch he was about to stand trial for her murder. The trial started in early April 2013. Ms Johnson said that Ms Larter attended most if not all days of the trial and that she, Ms Johnson, regularly accompanied her to provide support.

45. [285]

    In those circumstances, it is understandable that Mr de Klerk had the impression that Ms Larter was a “sleeping partner”.

46. [286]

    Mr de Klerk said he asked Ms Johnson about “Robin Howard” [sic: “Howard Robin”]. “Howard Robin” was, as I have mentioned, in fact Robin Reichelt.

47. [287]

    Mr de Klerk said that Ms Johnson said that “she met Howard Robin a couple of times and had lunch with him and he was a really lovely man”.

48. [288]

    In cross-examination Mr de Klerk was adamant that Ms Johnson had said this. Mr de Klerk presented as having a detailed recollection of these matters. However the evidence does not enable me to come to any conclusion as to whether Ms Johnson knew that “Howard Robin” was really Robin Reichelt.

49. [289]

    Mr de Klerk also said that he asked about the “savants” referred to in the Proposal. Ms Johnson said that Prof Snyder, who was allegedly running the “savants program” was “one of Mark’s golf friends”.

50. [290]

    Mr de Klerk gave this evidence in re-examination:

51. [291]

    Again, Mr de Klerk presented as having a detailed recollection of these matters. The answer was given in re-examination. But Mr Argy’s cross-examination had opened the subject up. And Mr Argy did not object to the question posed in re-examination.

Mr de Klerk’s final tranche - clearing up “grey areas”

1. [292]

   Mr de Klerk paid $100,000, the final tranche of the $250,000, on 21 March 2013 (a week after the Catalina lunch).

2. [293]

   In his first affidavit Mr de Klerk said:

3. [294]

   Initially, in cross-examination, Mr de Klerk agreed that payment of the final tranche of $100,000 on 21 March 2013 was “simply honouring the previous commitment to put in that final $100,000”. He gave this evidence:

4. [295]

   For some reason, Mr Argy later returned to the subject and the following occurred:

5. [296]

   Mr Dixon took the last answer up in re-examination and asked “what considerations” Mr de Klerk took into account when making the final payment of $100,000.

6. [297]

   Mr de Klerk replied by saying that he saw “a lot of grey areas in the proposal” and that:

7. [298]

   Mr Argy submitted that the contrast between the evidence given by Mr de Klerk in response to Mr Argy’s initial questions (to the effect that he had decided prior to the Catalina meeting to make the final $100,000) and his later evidence (to the effect that he was withholding the last tranche pending clarification of matters in the Proposal) reflected badly on Mr de Klerk’s credit.

8. [299]

   However, Mr de Klerk only gave the further evidence because Mr Argy, having obtained the answers to which I have referred at [294], returned to the subject and asked questions which led Mr de Klerk to say that there were “specific reasons” for him holding back the final payment. As Mr Argy did not ask what those “specific reasons” were, Mr Dixon clarified the matter in re-examination. I accept that evidence.

Further events in March 2013

1. [300]

   On 20 March 2013 “Howard Robin” sent an email from “STC London” to Mr de Klerk saying:

2. [301]

   Although “Howard Robin” asserted in this email that he had heard from Ms Johnson about the “meeting in Sydney” (presumably a reference to the Catalina meeting) I am not prepared to find, based only on the email, that he had in fact had any communication with Ms Johnson about this.

3. [302]

   Mr de Klerk said he continued to talk with “Mark Hughes” on a daily basis about “the South African deal”.

4. [303]

   In the meantime, on 21 March 2013, as I have mentioned, Mr de Klerk arranged to transfer the balance of the $250,000, the subject of the five loan agreements he executed on 17 February 2013.

Mr de Klerk views the “trading room”

1. [304]

   Following the text message exchange with Ms Johnson on 15 March 2013, and the telephone call from “Mark”, to which I have referred at [261] to [265], Mr de Klerk travelled to the Gold Coast to “see the trading in real time”. This occurred several weeks after the 14 March 2013 Catalina lunch. Mr de Klerk said that “Mark Hughes” told him there would be some delay “because they’re moving [the “trading room” to] the Gold Coast.

2. [305]

   He met “Kevin Joseph” (really Kevin McMullen: see [236]) and the person that he understood to be “Mark Hughes’s head trader”, Mr Richard Holmes.

3. [306]

   Mr de Klerk was shown a “huge room” in an apartment building. He said there were “about six or seven monitors” showing what appeared to be actual live sporting events including “football, golf, basketball, tennis”.

4. [307]

   Mr de Klerk said Mr Holmes “was trading while I was sitting there” and that he asked Mr Holmes “how did he get access to the money” and questions about “all the technical stuff that I wanted to know”.

5. [308]

   Mr de Klerk gave detailed evidence about what he saw. For example, he said:

6. [309]

   Mr de Klerk said that when he returned to his hotel that night he could see, using his mobile phone what “profits” had been “paid over”.

7. [310]

   Mr de Klerk gave this evidence in answer to questions from me:

8. [311]

   Mr de Klerk had said that he was able to follow trading being made on his behalf “minute to minute” “on the TV screen or your phone”.

9. [312]

   Mr Dixon submitted that I should infer the monitors set up in Mr Holmes’s apartment was part of the elaborate ruse, and that the apartment had been set up to give the facade of legitimacy when in fact none existed.

10. [313]

    As I had said earlier, it is hard to know what to make of what Mr de Klerk saw. It may be that some kind of trading was being effected to give investors such as Mr de Klerk comfort that the STC business was bona fide. The fact that Mr Holmes, about whom no suggestion of dishonesty is made, was involved in the way Mr de Klerk described suggests this may be so.

11. [314]

    The evidence does not enable me to come to any conclusion about this.

Pikes & Verekers’ letter of 5 April 2013

1. [315]

   On 5 April 2013 Mr Robert Tassell, a partner of Pikes & Verekers Lawyers, wrote to Mr Neil Jenman and Mr Neville Baker (who I was informed were private investigators) as follows:

2. [316]

   The emails sent by Mr Jenman and Mr Baker to Prof Snyder are not in evidence. Evidently they asserted that the STC venture was a dishonest scheme under the control of Mr Foster.

3. [317]

   The letter purported to have been sent on the instructions of both Ms Johnson and Ms Larter. Ms Johnson agreed that she was with Ms Larter when instructions were given to Mr Tassell but said it was Ms Larter, and not her, that gave the instructions contained in that letter.

4. [318]

   Ms Johnson also accepted that she was present when instructions were given to Mr Tassell to write this letter and that she saw it once it was written. Ms Johnson gave the following evidence, initially in response to questions from me:

5. [319]

   Ms Johnson also said that on one occasion she attended on Mr Tassell alone. She gave this evidence:

6. [320]

   Ms Johnson agreed that she attended Pikes & Verekers in April 2013 to “try to shut down the attempt to make Mr Foster’s involvement public”. Ms Johnson elaborated that “he wasn’t supposed to be involved in it anymore”.

7. [321]

   Ms Johnson’s evidence was that Ms Larter asked her to attend Pikes & Verekers because Ms Larter stood to lose everything because Mr Foster’s involvement would be exposed. Ms Johnson said that it would “affect her [Ms Larter’s] business” if it “was said that [STC] was [Mr Foster’s] business”.

8. [322]

   Ms Johnson gave this evidence :

9. [323]

   Mr Dixon put to Ms Johnson that Ms Larter wanted Ms Johnson to supress public knowledge of Mr Foster’s involvement at this time. Ms Johnson agreed that Ms Larter “certainly did not want that position to be made public because he wasn’t going to be involved”.

10. [324]

    Mr Dixon then put to Ms Johnson that she knew “the entire business would collapse” the “second people knew that Mr Foster was involved”. Ms Johnson did not respond directly to that question but, when pressed, accepted that “it would not have been good, I suppose, for the business. It would have jeopardised the funds of anyone who had invested”.

11. [325]

    Ms Johnson said she recalled that Ms Larter spoke to Mr Tassell and said “this is a fledging business and, you know, this will destroy my business”.

12. [326]

    Ms Johnson accepted that the instructions were given to Pikes & Verekers to prevent Mr Foster’s involvement in STC from being exposed.

13. [327]

    Ms Johnson appeared also to accept that this was done at Mr Foster’s bidding. Ms Johnson gave this evidence:

14. [328]

    That answer also shows that Ms Johnson knew that by now Mr Foster was not merely setting up the website and attending to technological matters, but was also “getting going with the postings” and “doing the postings”.

15. [329]

    I am satisfied that Ms Johnson either gave Mr Tassell instructions to write the 5 April 2013 letter or did not demur when Ms Larter gave Mr Tassell those instructions.

16. [330]

    I also find that Ms Johnson acted this way because Mr Foster had asked her (and Ms Larter) to keep his identity secret and because she knew, in any event, that STC’s business would not attract investors if Mr Foster’s involvement in the business was known.

Further negotiations with Mr de Klerk

1. [331]

   During May 2013 Mr de Klerk continued to negotiate with “Mark Hughes” and “Howard Robin” concerning his proposed investment of US$1 million for the South African “rights” to STC.

2. [332]

   In early May Mr de Klerk travelled to London and met “Howard Robin” at STC’s “offices” in Canary Wharf.

3. [333]

   On 15 May 2013 “Mark Hughes” sent Mr de Klerk an email to which was attached a document purporting to have been prepared by “Jeremy Ingles”; said to be STC’s “Regulatory Affairs and Compliance Manager”. That document said that “the initial investment to buy the exclusive licence for South Africa is US$1 million”. It also set out details of the company proposed to be called “The Sports Trading Club South Africa Limited” to be “100% owned by Pieter de Klerk”.

4. [334]

   That document purported to have been copied to “Howard Robin”, Ms Johnson and “Mark Hughes”.

5. [335]

   Mr de Klerk said he was sent an email on 20 May 2013 saying that the “profit” he had earned was then $676,195.

6. [336]

   At around this time “Mark Hughes” telephoned Mr de Klerk. Mr de Klerk said that during this telephone call “Mark Hughes” “pressured me to come up with $1 million for the trading part of STC South Africa” and that he and “Mark Hughes” had a conversation to the following effect:

7. [337]

   A few days later Mr de Klerk spoke to “Mark Hughes” as follows:

8. [338]

   On 28 May 2013 “Mark Hughes” sent Mr de Klerk an email as follows:

9. [339]

   Although this email refers to the necessity to obtain “Leigh’s approval” and to the proposal being “put to Leigh” before the proposed meeting on 30 May 2013, there was no evidence that Ms Johnson knew of any of these matters.

10. [340]

    On 30 May 2013 Mr de Klerk travelled to Sydney. Based on “Mark Hughes’s” 28 May 2013 email, he was expecting to meet Ms Johnson, “Kevin Joseph” (really Kevin McMullen: see [236]) and “Mark Hughes”.

11. [341]

    In her affidavit Ms Johnson said “I was never asked to attend the meeting on Thursday 30 May 2013”. Initially, in cross-examination, Ms Johnson maintained that position. She said “no I wasn’t asked to go to that at all”.

12. [342]

    However, Mr Dixon drew Ms Johnson’s attention to a statement she made in her 10 September 2013 email to Mr Foster and Ms Larter:

13. [343]

    Having been reminded of that statement Ms Johnson agreed that “it must have been” the case that Mr Foster asked her to attend that meeting.

14. [344]

    Later Mr Dixon put to Ms Johnson that she knew that Mr Foster was “heavily involved” in persuading Mr de Klerk invest in the South African venture. Ms Johnson responded:

15. [345]

    Although Ms Johnson could not say whether she knew that Mr Foster was “heavily involved” in the South African negotiation, she had no difficulty accepting, indeed asserting, that Mr Foster “did ask me to attend” the 30 May 2013 meeting.

16. [346]

    Mr Foster must have expected that Ms Johnson would be present at the meeting. Only two days earlier, on 28 May 2013 he, as “Mark Hughes”, had told Mr de Klerk that Ms Johnson would be present. Mr Foster knew, of course, that he had been passing himself off to Mr de Klerk as “Mark Hughes”. As he expected Ms Johnson to be present, he must have had some reason to be confident that Ms Johnson would not call him “Peter Foster” or question any reference to him as “Mark” or “Mark Hughes” by Mr de Klerk. An obvious reason why Mr Foster would have no concerns about such a problem arising is that Ms Johnson knew Mr Foster was calling himself “Mark Hughes” and that Mr Foster knew that Ms Johnson knew that.

17. [347]

    Mr de Klerk said that when he arrived at the Market Street STC office he was greeted by “Kevin Joseph” and that “Kevin Joseph” introduced him to “Tom Nolan”.

18. [348]

    “Tom Nolan” was in fact Peter Nolan. His role at STC appears to have been as “National Sales Assistant”. Why Mr Nolan called himself “Tom” rather than “Peter” was not revealed on the evidence, although there is a suggestion that his full name was “Peter Thomas Nolan”.

19. [349]

    Mr de Klerk said that “Kevin Joseph” told him “Tom Nolan” would “help [Mr de Klerk] set up the South African operation. He will help set up the marketing and employee staff and get it all up and running. He has worked in South Africa before so he understands business there”.

20. [350]

    Mr de Klerk asked “[w]here is Mark Hughes?”, and “Kevin Joseph” replied:

21. [351]

    Mr de Klerk was then taken to a conference room where he met Ms Johnson.

22. [352]

    Ms Johnson disputed this. In her affidavit she said “I was not present at this meeting except for popping into the room for 2-3 minutes”.

23. [353]

    In cross-examination Mr de Klerk said:

24. [354]

    And shortly later:

25. [355]

    “Mark Hughes” then appeared on a laptop computer as part of a Skype call.

26. [356]

    In his first affidavit Mr de Klerk said:

27. [357]

    In her affidavit Ms Johnson was adamant that the call she witnessed was not a Skype call. Ms Johnson asserted that she spoke to Mr de Klerk only once on 30 May 2013 and that “that conversation took place during the call and not either before or after that call. That call was a phone call, not a Skype call”.

28. [358]

    In her affidavit Ms Johnson said:

29. [359]

    Despite that evidence, and presumably on instructions from Ms Johnson, Mr Argy cross-examined Mr de Klerk upon the basis that the call was a Skype call. Indeed Mr Argy put to Mr de Klerk that the computer screen upon which Peter Foster’s image appeared was placed further away from Mr de Klerk than Mr de Klerk had deposed and in a manner that would have made it difficult for Ms Johnson to see who was on the screen.

30. [360]

    Ultimately Ms Johnson gave this evidence:

31. [361]

    However, Ms Johnson denied that she saw Mr Foster’s image on the computer.

32. [362]

    Mr de Klerk was confident that Ms Johnson was able to see who was participating remotely on the Skype call. Mr de Klerk gave this evidence in response to questions from Mr Argy and from me:

33. [363]

    Mr Argy returned to the subject a short time later:

34. [364]

    Everyone in the conference room was sitting around a table speaking to “Mark Hughes”. His image was on the computer screen. I think it highly improbable that Ms Johnson did not see whose image was displayed on the computer screen. She certainly recognised the voice as being that of Mr Foster.

35. [365]

    Mr de Klerk did not say, in either of his affidavits, that he referred to Mr Foster as “Mark Hughes” during the Skype call.

36. [366]

    Nonetheless Mr Argy raised the topic in cross-examination:

37. [367]

    Mr Argy submitted that the last few answers given by Mr de Klerk in this cross-examination show that he did not actually recall Mr Foster being referred to as “Mark” or “Mark Hughes” but, rather that he thought it only natural that, as they knew each other, they would refer to each other by name; and that giving his evidence he was doing more than assuming that this is what happened on 30 May 2013. That might be right in relation to words Ms Johnson used. But Mr de Klerk was adamant that he had addressed “Mark Hughes” as “Mark” in Ms Johnson’s presence.

38. [368]

    Mr de Klerk and Ms Johnson agree that they discussed Mr de Klerk’s use of the “profits” allegedly generated by STC on Mr de Klerk’s account to help pay for the South African licence.

39. [369]

    In his second affidavit Mr de Klerk referred to the fact that, prior to 30 May 2013, “Mark Hughes” had agreed that Mr de Klerk “could use the profits from my loans in STC to make up the shortfall for the purchase of the South Africa rights”.

40. [370]

    However, Mr de Klerk said that, during the Skype call “Mark Hughes” contradicted this and said:

41. [371]

    Mr de Klerk replied by saying that he was not happy with that and that “if I can’t use my existing profits, I’ll pull out of the South African deal”.

42. [372]

    Mr de Klerk said that “Mark Hughes” responded by saying:

43. [373]

    In her affidavit Ms Johnson said:

44. [374]

    Mr de Klerk agreed that, during the discussion about whether Mr de Klerk could use his “trading profits” as part payment for the South African venture, “Mark Hughes” said “Anne Larter and Leigh Johnson would never agree”. As Mr Argy pointed out, the use by Mr Foster of the third person in making this statement might suggest that he did not realise that Ms Johnson was present. In any event Mr de Klerk recalled referring to Mr Foster as “Mark” in Ms Johnson’s presence. This could have occurred whether or not Mr Foster realised Ms Johnson was present.

45. [375]

    Mr de Klerk also agreed that, in response to Mr Foster’s words, Ms Johnson said something to the effect “it’s fine by me if Pieter uses his profits here to pay for South Africa”. Mr Argy submitted that this showed Ms Johnson was prepared to thwart Mr Foster’s activities if appropriate. I do not see how that follows. Ms Johnson was simply saying that she did not object to Mr de Klerk using his “trading profits” despite Mr Foster’s alleged assumption that she would object.

46. [376]

    Mr de Klerk did not agree that “Mark Hughes” then asked “[w]ho’s that?”, that Mr Nolan said “[i]t’s Leigh. She’s just walked in”, that Mr Foster said “[h]ow long’s she been there?” nor that Mr Foster then terminated the call.

47. [377]

    Ms Johnson said that immediately after the Skype call she received an abusive telephone call from Mr Foster during which Mr Foster said to her:

48. [378]

    In his second affidavit Mr de Klerk said “Mark Hughes” ended the Skype call because he was angry Mr de Klerk had threatened to pull out of the South African deal. Mr de Klerk said he then told Ms Johnson that he had said “I’m pulling out of the South African deal because Mark now says I can’t use my STC Australia profits to make up the shortfall”, and Ms Johnson replied:

49. [379]

    Mr Argy challenged Mr de Klerk about this in cross-examination and the following exchange occurred:

50. [380]

    For the reasons I set out below concerning the competing credibility of Mr de Klerk and Ms Johnson, I accept that events occurred as Mr de Klerk said.

51. [381]

    On 4 June 2013 “Howard Robin” sent an email to “Leigh and Mark” concerning Mr de Klerk’s proposed acquisition of “the rights to South Africa”. In the email “Howard Robin” purported to express impatience concerning Mr de Klerk’s failure to decide whether to invest in the South African venture.

52. [382]

    The email included:

53. [383]

    The email was addressed to leighjohnson.sydney@sportstradingclub.com.

54. [384]

    Ms Johnson’s evidence was that she did not at any stage use or have access to that email address.

55. [385]

    Ms Johnson also said that during her involvement with STC, she only used her private Hotmail email address (XXX@hotmail.com). That is not correct. The evidence reveals that Ms Johnson used four other email addresses over the period (not including the STC email purportedly in her name). Each address included her name or initials, as well as other words such as “law”, “lawyers” and “Australia”.

56. [386]

    There is in evidence an email which purports to be from Ms Johnson forwarding “Howard Robin’s” 4 June 2013 email to Mr de Klerk with the note:

57. [387]

    The email purported to have been sent to Mr de Klerk from the email address leighjohnson.sydney@sportstradingclub.com.

58. [388]

    The email from “Howard Robin” purported to have been sent from London at 8.16 am on 4 June 2013. The email purportedly from Ms Johnson (in Sydney) purports to have been sent to Mr de Klerk at 8.02 am on 4 June 2013.

59. [389]

    The time difference between Sydney and London makes clear that these emails could not have been sent in the order in which they purport to have been sent.

60. [390]

    I am satisfied that both emails are a concoction. In final submissions Mr Dixon did not submit that Ms Johnson had sent the 4 June 2013 email to Mr de Klerk. He accepted that “it may well have been a Peter Foster ruse”.

61. [391]

    Throughout June and July 2013 Mr de Klerk continued to have communications with “Mark Hughes” and “Howard Robin”. He travelled to London and met “Howard Robin” again. In London he had another Skype call with “Mark Hughes” who now said “we agree that you can apply the profit of about $700,000 in your STC account to the trading amount for South Africa”.

62. [392]

    Ultimately, on 1 and 8 July 2013, Mr de Klerk transferred the Australian dollar equivalent of US$1 million to an account in the name of Bella Development Limited. “Mark Hughes” stressed that these funds be sent to Bella Development Limited “not the STC Westpac account”.

63. [393]

    Ms Larter sent “Howard Robin’s” “wiring” instructions for that transfer to Mr de Klerk.

64. [394]

    Mr de Klerk did not acquire any rights to any South African STC venture in exchange for these funds.

65. [395]

    On 10 July 2013 Mr de Klerk made a further deposit to the STC Westpac account of $200,000 thus increasing his loan to STC from $250,000 to $450,000. Mr de Klerk has not been able to recover any of these funds.

66. [396]

    There is no evidence of any involvement by Ms Johnson in Mr de Klerk’s purported South African investment following the 30 May 2013 meeting.

67. [397]

    However, on 26 June 2013 she sent Mr de Klerk an SMS stating:

68. [398]

    Mr de Klerk replied:

69. [399]

    Ms Johnson replied:

Mr Foster’s email of 16 July 2013

1. [400]

   On 16 July 2013 Mr Foster sent Ms Johnson a lengthy email from the address teamleader@sportstradingclub.com, headed “Offer”.

2. [401]

   This is the first of three emails that Mr Foster sent Ms Johnson prior to her retirement as a partner of STC in January 2014. The others are dated 1 September and 29 December 2013. I will return to them.

3. [402]

   Although the email does not name Mr Foster as the sender, Ms Johnson accepted that she understood it to be from Mr Foster. The email was sent to one of Ms Johnson’s Hotmail email addresses.

4. [403]

   Ms Johnson accepted that the expression “team leader” was, by July 2013, an accurate way to describe Mr Foster’s role at STC. It was thus by now clear to Ms Johnson that Mr Foster was not merely taking care of “technological aspects” of STC’s business or merely posting the results of trades. He was now the “team leader”.

5. [404]

   Mr Foster’s email addressed four topics, albeit in a manner more disjointed than the following account suggests.

6. [405]

   First, Mr Foster alleged Ms Johnson had made allegations about the bona fides of the STC business.

7. [406]

   Mr Foster wrote:

8. [407]

   The latter remark was evidently directed to Ms Johnson’s involvement in instructing Pikes & Verekers to send the letter of 5 April 2013 to which I have referred.

9. [408]

   Second, Mr Foster denied anything was amiss. He said:

10. [409]

    Third, Mr Foster asserted that Ms Johnson had “yesterday” sent an email in which she said:

11. [410]

    This email is evidently what led Mr Foster to say “that you want to work full time in STC” (see [406]).

12. [411]

    Mr Foster asserted that, in his view, Ms Johnson was “incapable” of working full time at STC or of taking over the operation of the business.

13. [412]

    He asserted that Ms Johnson had attended “three meetings with two associate members” and that in return for those meetings “and one or two meetings with the Australian lawyer” (presumably Pikes & Verekers) “you have been paid approximately $70,000”.

14. [413]

    That allegation was not explored in cross-examination.

15. [414]

    Mr Foster made the following statements concerning Ms Johnson’s role.

16. [415]

    First he said:

17. [416]

    And:

18. [417]

    In that regard Mr Foster offered to pay Ms Johnson $12,500 per month “for your role as partner”. This was said to be the same amount paid to Ms Larter “for her role as General Partner”.

19. [418]

    Mr Foster referred to “your email of 16 March”. That email is not in evidence, but evidently concerned the $182,500 “seed capital” to which I have referred (see [125] to [138] above).

20. [419]

    Mr Foster said that he understood that the $182,500 had been repaid to Ms Johnson “and all that remains to be paid is the interest” of 100% on that advance.

21. [420]

    Mr Foster asserted:

22. [421]

    Mr Foster offered to pay “$50,000 today towards the interest on the loan” and said “you’ll receive a further $10,000 per week until the loan interest is paid in full”.

23. [422]

    Mr Foster concluded:

24. [423]

    In her 10 September 2013 email Ms Johnson agreed she “accepted” the “offer” made by Mr Foster on 16 July 2013. However, she said she received only one payment of $12,500.

Ms Johnson’s response to Mr Foster’s 16 July 2013 email

1. [424]

   Mr Foster sent Ms Johnson another email on 1 September 2013. He attached his 16 July 2013 email to that later email. Ms Johnson responded to both emails in her email of 10 September 2013, to which I have already referred. I discuss this below.

Ms Johnson’s conversation with Mr Glen Radica

1. [425]

   In his 16 July 2013 email Mr Foster said to Ms Johnson:

2. [426]

   Glen Radica was an Associate Member of STC.

3. [427]

   Mr Dixon asked Ms Johnson questions about that conversation:

4. [428]

   Thus, although Ms Johnson initially said that she did not recall whether Mr Radica enquired whether STC “was a scam”, she accepted that she did not tell Mr Radica that Mr Foster was involved with STC.

5. [429]

   Ms Johnson gave this explanation for not doing so:

6. [430]

   The “bullet in the head phone call” to which Ms Johnson referred occurred on 30 August 2013. I deal with it below. I will also deal later with Ms Johnson’s contention that she wanted to encourage Ms Larter to “step up” and run the STC business with her.

Ms Johnson’s 30 August 2013 conversation with Ms Larter and Mr Foster

1. [431]

   On 30 August 2013 Ms Larter rang Ms Johnson.

2. [432]

   According to Ms Johnson’s email of 10 September 2013, Ms Larter rang “pretending that she was concerned” about whether Ms Johnson’s $182,500 seed capital “was being repaid”.

3. [433]

   In her 10 September 2013 email Ms Johnson said that in response to that she made three points to Ms Larter during the 30 August 2013 telephone conversation.

4. [434]

   The first was that she was concerned about how STC was being run because if it had been properly managed, her seed capital plus interest would have already been repaid. Instead she said it was being paid in “dribs and drabs” accompanied by “constant excuses for delay” and threats.

5. [435]

   Second, Ms Johnson referred to what she said Kevin McMullen had told her about Mr Foster misusing investors’ money and operating as a giant Ponzi scheme.

6. [436]

   In her 10 September 2013 email Ms Johnson summarised what she said on 30 August 2013 as follows:

7. [437]

   Third, Ms Johnson reiterated that she “could not understand why it was a problem” to repay the loan plus interest given that Mr Holmes had successfully traded to earn a profit “in excess of $750,000”. Importantly she said that figure was “per what’s shown on the STC website”.

8. [438]

   Ms Johnson said that “after I made these points to [Ms Larter], [Mr Foster] revealed his presence on the phone” and started “screaming and wouldn’t let me speak”.

9. [439]

   Ms Johnson then described the highly offensive language Mr Foster then used to describe Ms Johnson. Ms Johnson said that Mr Foster said that:

10. [440]

    In cross-examination Ms Johnson described the telephone call as follows:

11. [441]

    Ms Johnson later told Mr Gamble that the threat that Mr Foster had made on 30 August 2013 to “put a bullet” in Ms Johnson’s head “if I told anyone he was involved”.

12. [442]

    Ms Johnson was well aware that Mr Foster was “involved” in STC. Mr Foster now made quite clear that his position was that his name was not to be associated with the business.

13. [443]

    Ms Johnson gave this evidence:

14. [444]

    Ms Johnson said that by now, she had formed the view that Ms Larter and Mr Foster were “interchangeable”.

15. [445]

    Ms Johnson was shaken by this call.

16. [446]

    It led her, almost immediately, to contact Mr de Klerk by SMS.

Ms Johnson’s SMS messages to Mr de Klerk – Peter Foster revealed

1. [447]

   On 30 August 2013, very shortly after her telephone conversation with Ms Larter and Mr Foster, Ms Johnson sent Mr de Klerk SMS messages stating that:

2. [448]

   The full SMS exchange was as follows:

3. [449]

   This was the first time that Ms Johnson had mentioned the name “Peter Foster” to Mr de Klerk.

4. [450]

   She gave this evidence in cross-examination:

5. [451]

   In her affidavit, Ms Johnson described her SMS messages as a “warning” to Mr de Klerk.

6. [452]

   She said:

7. [453]

   Ms Johnson was referring to the evidence given by Mr de Klerk in his first affidavit of what he did following receipt of Ms Johnson’s SMS messages. I set that evidence out below.

8. [454]

   The fact that Ms Johnson thought that her “warning” enabled Mr de Klerk to investigate who “Peter Foster” “was” shows that Ms Johnson believed, until then, that Mr de Klerk did not know who Mr Foster “was”; and that the mere mention of his name was a sufficient warning.

9. [455]

   Later in her affidavit, Ms Johnson said that on 30 August 2013:

10. [456]

    Ms Johnson thus saw her SMS “I believe she’s in [with] Peter Foster” as a warning to Mr de Klerk that Mr Foster was “involved” in STC. She must therefore have understood, as was the fact, that Mr de Klerk had not previously heard of “Peter Foster”; and that he did not until then know that a person called “Peter Foster” was “involved” in STC.

11. [457]

    Ms Johnson knew it was Mr Foster to whom Mr de Klerk was speaking over Skype on 30 May 2013. Ms Johnson knew that Mr de Klerk did not then know that he was dealing with “Peter Foster”. It must follow that she knew Mr de Klerk did not know that the real name of the person with whom he was dealing was Peter Foster.

12. [458]

    Mr de Klerk’s evidence, which I accept, was that on 30 May 2013, and in Ms Johnson’s presence, he actually used at least the first name of the alias that Mr Foster adopted: “Mark”.

13. [459]

    My conclusion in these circumstances is that Ms Johnson did know Mr Foster was using that alias.

Mr de Klerk’s response to the Peter Foster revelation

1. [460]

   In his first affidavit, Mr de Klerk described what he did after receiving Ms Johnson’s “I believe she’s in [with] Peter Foster” SMS:

2. [461]

   Mr de Klerk then said that he saw newspaper and other media references to Mr Foster as a “conman” and “white collar criminal”.

3. [462]

   Very shortly after receiving Ms Johnson’s SMS messages, Mr de Klerk received a telephone call from a journalist from a television channel (Mr de Klerk mentioned both Channel 7 and Channel 9). The journalist told Mr de Klerk that he had spoken to Ms Johnson and that Ms Johnson had mentioned Mr de Klerk’s name. The journalist said that he was investigating Mr Foster and informed Mr de Klerk that Ms Johnson and Mr Foster “knew each other from before”.

4. [463]

   Mr de Klerk said that this information caused him to wonder whether he could trust Ms Johnson.

5. [464]

   Although Mr de Klerk said he contacted the police about STC in early September 2013, he later said he later decided not to “spill the beans” because he understood there was an “ongoing investigation”, and because he was fearful “for my life and my family’s life” and that he “would have lost everything”. Mr de Klerk also said he was “scared" because Mr Foster “knew my address”. I infer that this was so because of Ms Johnson’s SMS telling Mr de Klerk that Mr Foster had threatened her with a “bullet to the head”.

6. [465]

   Mr Argy suggested that these matters meant that I “should be slow to infer” that any failure of Ms Johnson was the “cause of a lack of public awareness” of Mr Foster’s involvement in STC.

7. [466]

   I will return to this below.

Mr Foster’s email of 1 September 2013

1. [467]

   Two days later, on 1 September 2013, Mr Foster sent a lengthy and abusive email to Ms Johnson, this time from the email address stcdesk@outlook.com.

2. [468]

   Mr Foster asserted that he had complied with the “offer” made in his 16 July 2013 email by paying to Ms Johnson $50,000 interest immediately, a further $10,000 towards the outstanding interest per week thereafter, and the $12,500 per month stipend to which I have referred.

3. [469]

   He further asserted:

4. [470]

   In cross-examination Ms Johnson accepted that she was using an STC credit card on this basis. In her 10 September 2013 email she said she understood the benefit she thereby obtained “is to be deducted from my share of STC’s profits”.

5. [471]

   As I have mentioned, in her 10 September 2013 email Ms Johnson denied she was receiving $12,500 a month. She said she had received only one such payment.

6. [472]

   Mr Foster referred to what he described as:

7. [473]

   Mr Foster was evidently referring to an email that Ms Johnson had sent Ms Larter. If that email was ever sent, it was not in evidence before me.

8. [474]

   Mr Foster continued:

9. [475]

   Mr Foster complained that Kevin McMullen resigned as a result of Ms Johnson’s behaviour. As I have already mentioned, Kevin McMullen was an associate of Mr Foster’s, who was known as “Kevin Joseph” to the Associate Members of STC (see [236] to [237] and [347] to [350]).

10. [476]

    Mr Foster wrote:

11. [477]

    Mr Foster continued:

12. [478]

    Mr Foster continued:

13. [479]

    As in his 16 July 2013 email Mr Foster continued to assert that the business was bona fide.

14. [480]

    Thus he said:

Ms Johnson’s evidence about her dealings with Mr Holmes

1. [481]

   By now, Mr Holmes had resigned, evidently because of his concerns about what Ms Johnson was saying about the business. Ms Johnson said she understood Mr Holmes had resigned by August 2013. The fact that Mr Foster asserted he was now doing “all the trading” makes clear that whatever belief Ms Johnson may have had earlier in the year as to Mr Foster’s role at STC, by now she must have known that Mr Foster was exercising complete dominion over STC.

2. [482]

   I have mentioned Ms Johnson’s evidence that she had spoken to Mr Holmes and that “he was doing the trades and they were good trades” (see [429] above).

3. [483]

   Later, however, Ms Johnson gave evidence that she was not able to speak to Mr Holmes, despite endeavouring to do so. She gave this evidence:

4. [484]

   Thus, despite having earlier said that she had spoken to Mr Holmes about the trades and was comforted that “they were good trades”, Ms Johnson now said that “we were deliberately kept apart”.

5. [485]

   Her evidence was that, on the one hand, Mr Holmes told her he was told Ms Johnson was “too busy” to see him. On the other hand, Ms Johnson said she was told by Ms Larter that Mr Holmes “hated” her and that her speaking to him might cause STC to “lose him”; and that she did not contact him because she thought he was an experienced trader and “did not want to jeopardise that”.

6. [486]

   This is an example of Ms Johnson’s propensity not only to contradict herself, but to make improbable and far-fetched assertions to try to justify her position.

Ms Johnson’s email of 10 September 2013 to Mr Foster and Ms Larter

1. [487]

   Several days later Ms Johnson sent Mr Foster and Ms Larter the 10 September 2013 email to which I have referred.

2. [488]

   The email comprises over 12 pages of closely typed text.

3. [489]

   In cross-examination Ms Johnson asserted, for the first time, that she had not actually composed this email.

4. [490]

   She asserted that Mr Wassercug (to whom I have referred at [95]) prepared it. She said:

5. [491]

   I asked Ms Johnson whether she read the email before it was sent “to make sure it was what you wanted to say”. Ms Johnson replied:

6. [492]

   I do not accept this evidence.

7. [493]

   Mr Wassercug was present throughout the hearing. As I have mentioned, he appeared to be instructing Mr Argy. If Mr Wassercug did prepare this email based upon “things” Ms Johnson told him, he was available to give that evidence. I infer that Mr Wassercug was not able to give evidence that would assist Ms Johnson’s case.

8. [494]

   That is not itself proof that he did not prepare this email. But his failure to corroborate Ms Johnson’s evidence, combined with the form and detail of the email, makes me confident in drawing the inference that it was Ms Johnson’s work (see HML v The Queen at [303] (Heydon J)).

9. [495]

   Ms Johnson said that “when I was writing to these people, I was trying to…stick bombs under them to make them actually operate and do something…I was trying to get information”.

10. [496]

    Mr Argy went further and submitted that the email was “deliberately overstated” and intended as “an outrageously exaggerated and provocative communication” designed to cajole Ms Larter into exercising her responsibility as a general partner. He submitted that Ms Johnson felt constrained from seizing control because of her understanding of s 67 of the Partnership Act, namely that she (as a limited partner, which she believed she was) must not take part in the management of the business.

11. [497]

    That is not how I read the email. It is certainly, at times, written in passionate language. It includes exhortations to Ms Larter to exercise her obligations as general partner and demands that she and Mr Foster give Ms Johnson access to the financial records of STC.

12. [498]

    But I see no reason to conclude that the email does not accurately reflect the concerns Ms Johnson then had as to the integrity of the STC business.

13. [499]

    As Mr Argy accepted, following Ms Johnson’s telephone call with Mr Foster and Ms Larter on 30 August 2013, Ms Johnson was on “high alert” about the propriety of the STC business, the security of investors’ funds, and also the security of her financial position.

14. [500]

    The email was expressed to be a response to Mr Foster’s emails of 16 July and 1 September 2013.

15. [501]

    Its length and detail points strongly to the conclusion that it represents Ms Johnson’s complete response to those emails.

16. [502]

    At the outset of the email Ms Johnson recited what appears to be her understanding of the nature of the STC business:

17. [503]

    The email contains a clear acknowledgment by Ms Johnson that Mr Foster was in total control of STC’s operations.

18. [504]

    Thus she said:

19. [505]

    In his email of 1 September 2013, Mr Foster had accused Ms Johnson of causing Mr McMullen to resign by telling him that “millions and millions of dollars are going missing and we are all going to jail”.

20. [506]

    In her 10 September 2013 email Ms Johnson vigorously asserted that it was Mr McMullen who had expressed concerns about Mr Foster’s activities.

21. [507]

    Thus, as I have already set out at [436], she said:

22. [508]

    Ms Johnson continued:

23. [509]

    Later she said:

24. [510]

    In closing submissions, Mr Argy submitted that Ms Johnson was concerned as at 10 September 2013 that Mr Foster may have been gambling with partnership funds but that she hoped that the position could be remedied if Mr Foster could be expelled from the business and Mr Holmes persuaded to return as STC’s trader.

25. [511]

    But the passage I have just set out shows that Ms Johnson’s concerns were deeper than this. She was concerned that STC was committing fraud. She said the moneys of the Associate Members might be “in danger” and “being improperly used”.

26. [512]

    This was no doubt because of Mr McMullen’s statement that Mr Foster was operating STC as a Ponzi scheme and “using new money from [Associate Members] to make up for his losses of previous money from Associate Members”.

27. [513]

    Ms Johnson summarised her concerns as follows:

28. [514]

    In the email, Ms Johnson also gave this account of a comment that Ms Larter had made to her:

29. [515]

    Later in the email Ms Johnson said:

30. [516]

    At another point in the email Ms Johnson said:

31. [517]

    I do not see this passage as being inconsistent with those to which I have earlier referred. Here Ms Johnson was saying no more than that, despite her strong suspicions, she did not actually know whether money was being stolen.

32. [518]

    Ms Johnson gave this evidence about this in cross-examination:

33. [519]

    On the other hand, in her affidavit Ms Johnson said that when she left STC:

34. [520]

    That evidence cannot be right. It is irreconcilable with what Ms Johnson wrote in her 10 September 2013 email. She was obviously concerned that Mr Foster was causing the investments of Associate Members to be stolen.

35. [521]

    In her 10 September 2013 email Ms Johnson made repeated demands for access to STC’s accounts and bank statements.

36. [522]

    But Ms Johnson was one of the signatories on the Westpac account. She could have obtained copies of the bank statements from Westpac at any time.

37. [523]

    In the 10 September 2013 email Ms Johnson recorded that Ms Larter had instructed her to go to STC’s office in Market Street “to collect all the contracts of the [Associate Members] so that [Ms Larter] could determine how much money had been received by STC from the [Associate Members].”

38. [524]

    Ms Johnson continued:

39. [525]

    Mr Dixon asked Ms Johnson about this passage. She made the extraordinary assertion that:

40. [526]

    It was in this context that Ms Johnson asserted that she was “trying to stick bombs under them to make them actually operate and do something”. It was also in this context that Ms Johnson gave evidence that she did not compose the email.

41. [527]

    That evidence was given in the context of my enquiry of Ms Johnson as to why she made the statement in her email set out at [524] if she did not know it to be true. The full passage from the transcript is as follows:

42. [528]

    I do not accept this evidence. I do not accept that what Ms Johnson wrote in her 10 September 2013 email was “not really my words” or that she made this statement as to what she had “reminded” Ms Larter of in order to “get them to say where [the Associate Members’ contracts] were”.

43. [529]

    The strong impression I had was that Ms Johnson was saying the first thing that came into her head in order to distance herself from the words she had written and her understanding, sitting in the witness box, of their significance.

44. [530]

    I do not accept Ms Johnson’s evidence that she did not actually know the matters that she asserted in this passage of the email. I find it impossible to accept that Ms Johnson would make such a detailed allegation in an email sent to people who would know the true position, unless she also understood it to be true.

45. [531]

    As well as expressing concern about the propriety of the STC business, Ms Johnson insisted in the email that she be able to ensure that “the lenders have been repaid the seed capital loan” and that “I am paid the amounts owed to me by STC”.

46. [532]

    Ms Johnson agreed that she had accepted the offer made by Mr Foster in his 16 July 2013 email to be paid the stipend of $12,500 per month and “an instalment repayment plan to repay the $182,500 seed capital loan”.

47. [533]

    She complained that, despite accepting this offer, she had only been paid one amount of $12,500 and that “to date the ONLY benefit I have had is the use of the STC credit card”.

48. [534]

    Ms Johnson thus accompanied her statements of concern about the propriety of the STC business with a strident demand that she be paid all that was due to her under her arrangements with STC, and a vigorous assertion of her entitlement to use the STC credit card as she saw fit.

49. [535]

    In cross-examination Ms Johnson said that, by sending this email:

50. [536]

    However, the manner in which Ms Johnson concluded the email is more likely accurately to set out the position she then maintained. The demands she prioritised in the email included the removal of her name and references from the Public STC Website (which she nominated in terms: www.sportstradingclub.com), ceasing the use of her name and image generally, and payment to her of her share of “profits”, her seed capital and interest.

51. [537]

    Thus the 10 September 2013 email concluded:

Ms Johnson’s 23 September 2013 email to Ms Larter

1. [538]

   On 23 September 2013 Ms Johnson sent Ms Larter an email in which she said that she was “very worried about STC”.

2. [539]

   She said:

3. [540]

   Ms Johnson said:

Ms Johnson’s 23 September 2013 email to Mr Foster

1. [541]

   On the same day, Ms Johnson wrote an email to Mr Foster reiterating “my strong concerns about the management and operations of STC”.

2. [542]

   Evidently, Mr Foster had asserted that a report from KPMG on STC’s financial position would shortly be available.

3. [543]

   Ms Johnson said she looked forward to receiving that report but:

4. [544]

   There is no evidence that, prior to September 2013, Ms Johnson had sought to monitor STC’s business in any way; let alone “regularly and consistently”.

Logan J’s judgment in Australian Competition and Consumer Commission v Chaste Corporation Pty Ltd (No 3)

1. [545]

   On 27 September 2013 Logan J published his judgment in Australian Competition and Consumer Commission v Chaste Corporation Pty Ltd (No 3) [2013] FCA 984.

2. [546]

   As I have mentioned, Logan J found Mr Foster guilty of two charges of contempt of court, arising out of a breach by Mr Foster of orders made by Lander J on 2 September 2005 in Australian Competition and Consumer Commission v Chaste Corporation Pty Ltd (in liq) [2005] FCA 1212.

3. [547]

   Lander J had made findings about Mr Foster’s involvement in marketing the TRIMit weight loss pill and orders prohibiting Mr Foster from being involved in any business relating to weight loss or to the cosmetic or health industries for a period of five years.

4. [548]

   Logan J found Mr Foster’s later involvement in the SensaSlim business constituted a breach of Lander J’s orders.

5. [549]

   Mr Foster’s conduct in relation to the SensaSlim product was to become the subject of the judgment of Yates J to which I have referred: Australian Competition and Consumer Commission v SensaSlim Australia Pty Ltd (in liq) (No 5) [2014] FCA 340.

6. [550]

   Logan J fixed 24 October 2013 for the hearing of submissions as to penalty.

7. [551]

   Logan J ordered that Mr Foster be detained in custody pending sentence. When Mr Foster failed to appear Logan J ordered that a warrant be issued for his arrest unless Mr Foster surrendered to authorities by 5 pm on 27 September 2013. Mr Foster did not surrender. A warrant was issued. Mr Foster remained on the run until his arrest 12 months later on 28 October 2014.

Ms Johnson’s 28 September 2013 emails to Ms Larter

1. [552]

   Ms Johnson was aware of the warrant issued for Mr Foster’s arrest.

2. [553]

   Thus, on 28 September 2013 (or perhaps 29 September 2013; copies with both dates appear in the Court Book), Ms Johnson sent an email to Ms Larter:

3. [554]

   In this email, Ms Johnson stated that she had read the “entire lengthy 254 paragraph” judgment of Logan J.

4. [555]

   She swore in her affidavit that she had read the judgment. She said: “I was unaware of the details and characteristics of Peter Foster’s modus operandi until I read Logan J’s judgment” in the Chaste Corporation matter.

5. [556]

   But before me, in cross-examination, for the first time, she asserted that this was not true. She gave this evidence:

6. [557]

   Again, Mr Wassercug was available to corroborate that evidence if it were true. But he did not.

7. [558]

   Whatever the truth may be about this, it reflects badly on Ms Johnson’s credit. Either she falsely asserted to Ms Larter and swore in her affidavit that she read the judgment; or she falsely swore before me that she did not.

8. [559]

   What is clear is that Ms Johnson understood precisely the import of Logan J’s findings and their significance so far as concerned STC.

9. [560]

   In her email, Ms Johnson said she came to the “shocked and sickening realisation of a striking similarity of methods, techniques and facts to those which Justice Logan found Peter has used in the SensaSlim scam”.

10. [561]

    Mr Argy submitted that what Ms Johnson was “shocked and sicken[ed]” about was the evident similarity between the findings Logan J made about Mr Foster’s involvement with the SensaSlim product and the findings made by Lander J concerning the TRIMit product in the Chaste proceedings.

11. [562]

    However, that is not something Ms Johnson asserted. She did not say that in her affidavit. Her response in cross-examination was simply to say that she had not read the judgment: see [556].

12. [563]

    Further Mr Argy only developed this argument in final submissions.

13. [564]

    The context in which Ms Johnson said that she was “shocked and sicken[ed]” by the “striking similarity of methods, techniques and facts” makes clear to me that Ms Johnson was comparing Logan J’s findings about Mr Foster’s modus operandi in the SensaSlim case to that which she understood he was using at STC.

14. [565]

    Her email opens with repetition of her “deep concerns about STC”. She reminded Ms Larter that Ms Larter bore “unlimited liability for STC’s business”.

15. [566]

    Immediately following her observation about the “striking similarity” she said “I warned you in my emails that STC could ruin your life if things went wrong”.

16. [567]

    Mr Argy’s submission cannot stand with the words that Ms Johnson used when seen in the context of the email as a whole.

17. [568]

    Even if the correct conclusion is as Mr Argy submitted, and that Ms Johnson’s email bespeaks a realisation by her that Mr Foster had employed “methods” and “techniques” in the SensaSlim business which were “strikingly similar” to those he deployed in the TRIMit business, Ms Johnson must have been deeply concerned to come to that realisation. She had expressed in her 10 September 2013 email grave concerns as to the propriety of the STC business. Those concerns must have been heightened by whatever she drew from Logan J’s judgment.

Ms Johnson’s 29 September 2013 email to Ms Larter

1. [569]

   On 29 September 2013 Ms Johnson wrote a further email to Ms Larter:

2. [570]

   Ms Larter’s departure to Hong Kong must have put Ms Johnson on high alert that something was seriously awry in the STC business.

3. [571]

   The general partner that she been exhorting to “step up” and assume responsibility in the business had left the country. And Mr Foster, who by then Ms Johnson well understood was in total control of the STC business, had disappeared and was on the run after a warrant had been issued for his arrest.

Pikes & Verekers’ letter to The Courier Mail

1. [572]

   Less than a week later, on 3 October 2013, Pikes & Verekers wrote a letter to Mr David Murray, the Crime and Courts Editor of The Courier Mail newspaper. Again the letter was written by Mr Tassell, a partner at Pikes & Verekers.

2. [573]

   Evidently, Mr Murray had enquired about Mr Foster following the events I have described.

3. [574]

   The letter read, relevantly:

4. [575]

   In cross-examination Ms Johnson said that she did not know whether she gave Mr Tassell the instructions in this letter. She said “I don’t remember this letter to be honest”.

5. [576]

   It was obviously quite untrue to say, as Mr Tassell was instructed to say, that “Mr Foster has absolutely no connection” to the STC business. Mr Foster was intimately involved in, and in total control of the business. Later events show that he remained actively involved in the business until his arrest in October 2014.

6. [577]

   Mr Tassell’s letter concluded with an invitation to answer “written questions to our clients via this office”.

7. [578]

   Mr Murray did not take up that offer. Rather he spoke directly to Ms Johnson.

Ms Johnson’s dealings with The Courier Mail

1. [579]

   That occurred on or about 4 October 2013.

2. [580]

   Ms Johnson said she had a clear memory of this. At one point she said that she called Mr Murray. Later in her evidence she said that Mr Murray had called her. She agreed that Mr Murray asked her questions about STC. Ms Johnson said she then asked Mr Murray to put his questions in writing.

3. [581]

   Accordingly, on 4 October 2013 Mr Murray sent an email addressed to Ms Johnson at sydney@sportstradingclub.com.

4. [582]

   Ms Johnson said that she did not use and did not have access to the email address sydney@sportstradingclub.com. But Ms Johnson must have given this email address to Mr Murray. How else would he know of it? At one point Ms Johnson said that she had given Mr Murray one of her private email addresses and said “I think he emailed me to my personal email”. I had the distinct impression that Ms Johnson made that evidence up on the run. In any event, any email that Mr Murray sent to Ms Johnson’s personal email address is not in evidence.

5. [583]

   Ms Johnson agreed that she saw the questions set out at in Mr Murray’s email. She said “I certainly received an email with a whole lot of questions and I accept that these were the questions”, having twice previously said that she could not remember “if it was these questions”.

6. [584]

   Ms Johnson was not clear as to how she came to see Mr Murray’s questions. At one point she conjectured “it must have been forwarded from STC to me”. I think it more likely that she saw the email that Mr Murray had addressed to sydney@sportstradingclub.com. Even if someone at STC forwarded Mr Murray’s 4 October 2013 email to Ms Johnson, she must have seen that Mr Murray had addressed his questions to that email address.

7. [585]

   Ms Johnson gave this evidence in cross-examination:

8. [586]

   Mr Murray’s email was headed “Questions for Leigh Johnson – response requested by 4pm today, Friday 4 October”.

9. [587]

   The email read:

10. [588]

    There followed 10 questions including:

11. [589]

    These questions must have been amongst those Mr Murray asked of Ms Johnson in their conversation. Logan J’s orders, the issue of a warrant for Mr Foster’s arrest and his disappearance had received significant publicity. It was obviously the reason for the enquiry Mr Murray made that led to Pikes & Verekers’ 3 October 2013 letter.

12. [590]

    Ms Johnson could easily have told Mr Murray the true position: that Mr Foster’s connection to the STC business was that he was in control of it; he was “running the sales team and doing all the trading”.

13. [591]

    Ms Johnson could have offered to give information to Mr Murray on condition of anonymity. Or she could have sent him the information anonymously. As I discuss below, Ms Johnson contends that around this time she did seek to provide information anonymously to various parties. On her account of those matters, she did feel the need to speak out.

14. [592]

    Instead, Ms Johnson invited Mr Murray to put his questions in writing by email.

15. [593]

    Someone called “Leo” replied by email from sydney@sportstradingclub.com to Mr Murray’s email on 4 October 2013.

16. [594]

    That letter “from our lawyers” was the Pikes & Verekers letter of 3 October 2013.

17. [595]

    Ms Johnson said that she did not know who the “Leo” was that sent this email. She denied it was Mr Wassercug. Ms Johnson said “it’s a classic Foster trick that I realise now from a very clever psychopath”.

18. [596]

    As I have said, Ms Johnson agreed that the questions that she received, whether directly from Mr Murray, or from “Leo” or someone else at STC, were those set out in Mr Murray’s 4 October 2013 email.

19. [597]

    Ms Johnson said that she prepared answers to those questions but sent her response to STC, rather than directly to Mr Murray. She said she “sent it to the desk”. In her affidavit Ms Johnson said that she knew Mr Foster used the email address stcdesk@outlook.com. By sending her draft “to the desk” Ms Johnson must have understood it would be seen by Mr Foster.

20. [598]

    The following day, 5 October 2013, a reply purportedly authorised by Ms Johnson was sent to Mr Murray from the email address stcdesk@outlook.com responding to Mr Murray’s questions.

21. [599]

    That email replied to the question “what connection does Peter Foster have with the Sports Trading Club?” as follows:

22. [600]

    In response to the question “how would you describe your relationship with Peter Foster?” the reply said:

23. [601]

    The email stated, later:

24. [602]

    Ms Johnson denied that she composed these answers. The email purports to be signed off by “Leigh Johnson Legal Partner”.

25. [603]

    Ms Johnson denied that she ever described herself as the “Legal Partner” of STC.

26. [604]

    Ms Johnson gave this evidence in cross-examination:

27. [605]

    Thus, at this point of her evidence, Ms Johnson said that the answers she drafted to Mr Murray’s questions included the assertion that Mr Foster was involved in setting up the “internet” but that he “wasn’t running it”.

28. [606]

    But by now Ms Johnson well knew that Mr Foster was “running” STC. She had received emails from Mr Foster in which he described himself as “STC Team Leader”. In his 1 September 2013 email he asserted, and Ms Johnson in her 10 September 2013 email accepted, that he was “doing all the trading myself” and that he was working “18 hours a day 7 days a week running the sales team”.

29. [607]

    In her email to Mr Foster and Ms Larter of 10 September 2013 she had recorded that the roles of sales manager and senior trader had been “replaced by one person, you” and that “STC is in fact operated from Peter’s Gold Coast home where Peter holds all the [Associate Members’] contracts”. Ms Johnson knew Mr Foster was “running it”.

30. [608]

    Thus what Ms Johnson claimed at this point of her evidence to have been her actual draft answer, albeit one intercepted and edited by (presumably) Mr Foster, was to her knowledge false.

31. [609]

    But later Ms Johnson gave this evidence, in answer to questions from me:

32. [610]

    Thus, having earlier asserted that her draft included the allegation that Mr Foster “wasn’t running it”, Ms Johnson now conjectured that her answer would have said “he was managing the posting of the trades”.

33. [611]

    Ms Johnson appeared oblivious to the inconsistency of her responses.

34. [612]

    It may be that Ms Johnson did not compose the answers that were actually sent to Mr Murray.

35. [613]

    However, it must have occurred to Ms Johnson that the course she adopted of sending her draft answers to Mr Murray’s questions to STC left open the near certainty that her answers would be changed. Ms Johnson knew how fiercely determined Mr Foster was not to have his involvement in STC revealed. Ms Johnson must have thought it likely, if not certain, that Mr Foster would intervene to ensure that the answers given to Mr Murray falsely represented that Mr Foster had no involvement with STC.

36. [614]

    A further email, again purporting to be from Ms Johnson as “Legal Partner” was sent to Mr Murray on 9 October 2013 from stcdesk@outlook.com. It concluded:

37. [615]

    I think it likely that that email was composed and sent by Mr Foster.

38. [616]

    Mr Murray’s article was ultimately published in The Courier Mail on 28 October 2013.

39. [617]

    The article asserted that:

40. [618]

    The article did not mention Mr Foster but attributed to Ms Johnson various detailed comments about “Howard Robin”. Those comments were taken from the 5 October 2013 email.

41. [619]

    On Ms Johnson’s account of it, the article thereby attributed to her comments about “Howard Robin” that she had not made.

42. [620]

    Nonetheless, when she read the article she remained silent and confined her complaints to Ms Larter.

43. [621]

    Thus she gave this evidence:

44. [622]

    It is extraordinary that, having spoken to Mr Murray on 4 October 2013, and having at his invitation prepared and sent to STC answers to his questions, Ms Johnson would not complain to Mr Murray that his article contradicted what she had said.

45. [623]

    And even if, as she said, Ms Johnson confined her remonstrations to Ms Larter, she must have been deeply alarmed that something was seriously wrong at STC. After all, on Ms Johnson’s account of it, someone had falsely represented to Mr Murray that she had made comments about “Howard Robin”. Ms Johnson must have thought Mr Foster or Ms Larter was responsible.

More letters from Pikes & Verekers to The Courier Mail

1. [624]

   Between 10 and 18 October 2013 Mr Tassell, from Pikes & Verekers, wrote four letters to Mr Murray at The Courier Mail. Each stated that it was sent on the instructions of Ms Johnson and Ms Larter.

2. [625]

   I have already mentioned the letter of 3 October 2013: see [572] to [574].

3. [626]

   On 10 October 2013 Mr Tassell wrote to Mr Murray stating that he had received instructions about communications between Mr Murray and Ms Johnson concerning Mr Murray’s enquiries about STC.

4. [627]

   Mr Tassell said:

5. [628]

   Ms Johnson said that she “didn’t instruct them anything in this letter. I don’t even know how this letter came about”.

6. [629]

   On 11 October 2013 Mr Tassell sent a further letter to Mr Murray which included:

7. [630]

   On 15 October 2013 Mr Murray sent a further email to the email address stcdesk@outlook.com with further questions including what connection STC had with “Peter Foster’s niece, Arabella Foster” or what connection STC had with “Peter Foster’s associate, Robin Howard Reichelt” and what contact Ms Larter had with “Peter Foster, his sister or anyone else in the Foster family”.

8. [631]

   On 18 October 2013 Mr Tassell wrote a further letter to Mr Murray referring to Mr Murray’s 15 October 2013 email stating that “our clients” have “resolved in good faith to answer your further enquiries” but that:

9. [632]

   Mr Tassell wrote:

10. [633]

    Mr Tassell clearly understood that he had instructions from both Ms Johnson and Ms Larter to write these letters. Ms Johnson denied that she had involvement in those instructions. The instructions must have come from Ms Larter.

Mr Mackinnon’s investment

1. [634]

   It was after the occurrence of all these events that Mr and Mrs Mackinnon made their investment.

2. [635]

   In October 2013 Mr Mackinnon saw an advertisement in the Sydney Morning Herald which was to the same effect as that set out at [145] above.

3. [636]

   Mr Mackinnon spoke to a person who introduced himself as “Tom Nolan” (actually Peter Nolan) who said words to the effect:

4. [637]

   Mr Mackinnon also spoke by telephone with “Mark Hughes”, who spoke of his experience in “foreign exchange trading with Barclays Bank in London”.

5. [638]

   On 28 October 2013 Mr Mackinnon received an email from “Mark Hughes”, who described himself as National Sales Manager of STC, attaching a letter from Ms Larter and inviting Mr Mackinnon to telephone him on a nominated telephone number “if I can be of assistance”. Thus, although Mr Foster was on the run, emails were being sent out from “Mark Hughes”. Mr Foster was maintaining control of the STC business.

6. [639]

   The letter from Ms Larter to Mr Mackinnon thanked Mr Mackinnon for his confirmation that he wished to “proceed with a loan of $100,000 for a term of three years”, attached a Loan Agreement, invited Mr Mackinnon to print out the agreement, sign it and return it to “Mark Hughes” and to deposit $100,000 to the STC bank account at Westpac.

7. [640]

   Mr and Mrs Mackinnon executed a Loan Agreement in respect of the $100,000 on the same day, 28 October 2013.

8. [641]

   Mr Mackinnon’s deposit of $100,000 is shown as a credit entry in the STC Westpac account on 31 October 2013.

9. [642]

   On 4 November 2013 Mr and Mrs Mackinnon signed a second Loan Agreement and, on 7 November 2013 transferred a further $100,000 to the STC Westpac account.

10. [643]

    Mr and Mrs Mackinnon’s first loan was repayable on 28 October 2016. The second loan was repayable on 4 November 2014. The loans have not been repaid.

11. [644]

    In his affidavit, Mr Mackinnon said:

12. [645]

    Mr Argy submitted that it is not credible that the mere mention of Mr Foster’s involvement would have deterred Mr and Mrs Mackinnon’s investment. However, Mr Argy did not challenge Mr Mackinnon in relation to this evidence. In those circumstances, I am not prepared to reject it.

The circumstances leading to Ms Johnson’s resignation as a partner

1. [646]

   In late December 2013 Ms Johnson withdrew $50,000 from the STC Westpac account.

2. [647]

   In her affidavit she said that “the money was owing to me and I used it to repay what I had borrowed to provide [STC] with its start-up money”.

3. [648]

   Ms Johnson was evidently unconcerned about the provenance of the money she withdrew. It must have occurred to her that the money represented investments made by Associate Members. A glance at the Westpac bank statements, access to which she (as one of the account holders) was entitled, would have revealed this. Over the days prior to 19 December 2013 there were numerous deposits to the account, all in round numbers, and many identifying the names of the Associate Members making the deposits.

4. [649]

   On 30 December 2013 Mr Foster sent Ms Johnson an email from the email address teamleader@sportstradingclub.com. Thus, although a warrant had been issued from the Federal Court for his arrest, and he was on the run and being sought by Police, he had access to STC’s email server. He was obviously still running the show.

5. [650]

   Mr Foster wrote:

6. [651]

   Mr Foster accused Ms Johnson of having spent $42,500 on STC’s business credit card “all for your own personal use”, that she would receive $12,500 on the first of each month “and not a penny more” and that:

7. [652]

   Ms Johnson replied on 13 January 2014 repeating her demand for financial statements and records and saying, amongst other things:

8. [653]

   Ms Johnson also said:

9. [654]

   This statement shows that Ms Johnson maintained an interest in participating in STC and that that interest did not depend upon Mr Foster ceasing his involvement.

10. [655]

    Thus she said:

11. [656]

    It is not clear what payments Ms Johnson was referring to as being “due to me”. By now she had withdrawn $50,000 from the account.

12. [657]

    The point, for present purposes, is that Ms Johnson coupled her stated interest in obtaining more information about the financial state of STC with her demand for funds.

13. [658]

    Ms Johnson did not enquire as to Mr Foster’s whereabouts, mention the fact that he was on the run from the Police, or advise that he turn himself in. Nor did she express any surprise at having heard from Mr Foster or about receiving an email from the teamleader@sportstradingclub.com email address. Mr Foster’s communication by that email address must have made perfectly clear to Ms Johnson that Mr Foster was still actively involved in the STC business.

Ms Johnson’s resignation as partner of STC on 21 January 2014

1. [659]

   On 21 January 2014 Ms Johnson resigned as a partner of STC.

2. [660]

   On that day she sent an email to Ms Larter:

3. [661]

   Ms Johnson’s email reveals she had no difficulty instructing Westpac to freeze STC’s bank accounts. As I have mentioned, Ms Johnson and Ms Larter were each authorised to operate that account and, as the events of 21 January 2014 reveal, freeze it. Ms Johnson could have taken that step at any time prior to 21 January 2014.

Findings concerning Ms Johnson’s decision to resign as partner

1. [662]

   As far as concerns Ms Johnson’s knowledge of the fraud at the time of her resignation, Mr Argy submitted:

2. [663]

   That submission is reflected this evidence of Ms Johnson:

3. [664]

   Similarly she said, later in her cross-examination:

4. [665]

   Ms Johnson said she approached Mr Holmes and sought to persuade him to return to STC. Thus she said in cross-examination:

5. [666]

   I do not accept this evidence.

6. [667]

   There is no hint in Ms Johnson’s lengthy 10 September 2013 email, nor in her affidavit, of any of these matters. These matters arose for the first time in cross-examination.

7. [668]

   Moreover, the evidence is inconsistent with Ms Johnson’s statement to Mr Foster in her 13 January 2014 email that she “would contribute a hell of a lot more to STC were I allowed to”: extracted at [653]. It is also inconsistent with her accusation in that email that Mr Foster and Ms Larter had “relied on [her] good name” and “deliberately excluded [her] from further participation in, or information about, STC”: also extracted at [653].

8. [669]

   Nor is there any suggestion in Ms Johnson’s evidence that after “Peter Foster was gone” (in that he was on the run from September 2013) Ms Johnson sought further contact with Mr Holmes.

9. [670]

   There is no evidence (apart from Ms Johnson’s oral evidence in cross-examination) of Ms Johnson seeking to persuade Ms Larter to sever any connection with Mr Foster.

10. [671]

    Following Ms Johnson’s communications with Mr Murray from The Courier Mail in October 2013, there is no evidence (including in Ms Johnson’s lengthy affidavit) of her playing any further role in STC (apart from withdrawing the $50,000 from the STC Westpac account in December 2013).

A new partnership

1. [672]

   During the hearing my attention was drawn to various applications made to the Australian Securities and Investments Commission concerning the existing “The Sports Trading Club Partnership” and the new “STC Sports Trading Club” partnership.

2. [673]

   As it is now common ground that a new partnership of which Ms Johnson was not a member was thereby created, and that Ms Johnson has no liability as a partner after the date of her resignation (see [48] to [59] above), I do not need to deal with the detail of that evidence.

Email exchanges with Mr Foster

1. [674]

   On 14 March 2014 Mr Foster sent an email to Ms Johnson from teamleader@sportstradingclub.com:

2. [675]

   Ms Johnson replied the following day by simply saying:

3. [676]

   On 29 April 2014 Mr Foster sent a further email to Ms Johnson:

4. [677]

   I will return to this email exchange when considering the question of Ms Johnson’s knowledge of the contents of the Proposal.

Mr Seng correspondence

1. [678]

   On 23 March 2014 Mr Paul Seng, a prospective investor in STC, sent an email to Ms Johnson:

2. [679]

   Ms Johnson replied on 23 April 2014:

3. [680]

   On 30 April 2014 Mr Seng sent a further email to Ms Johnson:

4. [681]

   Ms Johnson replied the same day:

5. [682]

   Although Ms Johnson’s reply constitutes a warning to Mr Seng not to invest in STC, Ms Johnson did not take advantage of this opportunity to tell Mr Seng that Mr Foster was involved in STC and, indeed, that he was using the alias “Mark Hughes”.

Ms Johnson’s 3 November 2014 telephone conversation with Mrs Mackinnon

1. [683]

   On 3 November 2014, shortly after Mr Foster’s arrest, and after receipt of Ms Larter’s email of 30 October 2014 offering Associate Members “a refund” (extracted at [171]), Mr Mackinnon rang Ms Johnson on her mobile telephone. She was not available but rang back a few hours later and spoke to Mrs Mackinnon.

2. [684]

   Mr Mackinnon gave this evidence:

3. [685]

   This evidence, which I accept, has implications concerning the question of whether Ms Johnson was aware of the Proposal. It also constitutes an occasion on which Ms Johnson spoke to an Associate Member without disclosing Mr Foster’s involvement in STC.

Did Ms Johnson seek to alert any third parties of her concerns about the STC business?

1. [686]

   Ms Johnson gave inconsistent evidence as to whether and how she sought to draw attention to the involvement of Mr Foster in STC.

2. [687]

   In her affidavit Ms Johnson said she “tried to anonymously tip off some people about my concerns. I was also concerned that I would be sued for defamation if I publicised unsubstantiated allegations of wrong doing”.

3. [688]

   She continued:

4. [689]

   In cross-examination Ms Johnson insisted she tried “to have him arrested” by providing “secretly, whatever information I could. I sent, or I caused to be sent, anonymous emails to the lawyers for ASIC and…Justice Logan's associate”.

5. [690]

   She gave this evidence in response to questions from me:

6. [691]

   My question “did you just make up that evidence you gave?” was amongst the reasons that Mr Argy, on 12 February 2018, applied for an order that I recuse myself from the further hearing of the proceedings. I rejected that application for the reasons I gave in Mackinnon as plaintiff representative of 153 plaintiff group members v Partnership of Larter, Jones, Miraleste Pty Ltd t/as USG Partner and Johnson, t/as "STC Sports Trading Club" (No 4) [2018] NSWSC 147.

7. [692]

   As I have said in that judgment (at [116]) I did find it strange that Ms Johnson did not know whether she had, in her affidavit, mentioned sending anonymous emails to “the lawyers for ASIC” and to Logan J’s Associate.

8. [693]

   However, as I have set out, Ms Johnson’s affidavit does refer to her anonymously tipping off “some people” about Ms Johnson’s “concerns”, although she made no mention there of contacting Logan J’s Associate or ASIC.

9. [694]

   Mr Gamble gave unchallenged evidence of a telephone conversation he had with Ms Johnson on the day Mr Foster was arrested in October 2014 in which she said she had written “anonymous letters to the police, to the media, newspapers”.

10. [695]

    Again, Ms Johnson did not assert to Mr Gamble that she had tried to contact Logan J’s Associate or ASIC. Although Ms Johnson told Mr Gamble she had sent anonymous letters to, “the media, newspapers” she made no mention of doing so in the course of her evidence about her dealings with Mr Murray.

11. [696]

    But if, as she asserts, Ms Johnson did behave in this way, it bespeaks a realisation by her that she should disclose her “concerns” about Mr Foster’s involvement in STC (as well as information that might have led to his apprehension).

12. [697]

    Mr Argy sought to adduce evidence of two draft paragraphs of Ms Johnson’s affidavit. He took the matter up with Ms Johnson in re-examination as follows:

13. [698]

    The two paragraphs said to have been accidently omitted from Ms Johnson’s affidavit were in the following form:

14. [699]

    I allowed this material as evidence relevant to any suggestion that might be made of recent invention by Ms Johnson. According to those paragraphs, Ms Johnson did send anonymous letters to the police, the media, the Associates of Yates and Logan JJ, and the ACCC.

15. [700]

    However, according to this material, those emails were not sent until 2014, and only a matter of months before Mr Foster’s arrest on 28 October 2014.

16. [701]

    According to this material one piece of information Ms Johnson provided was the registration number of Mr Nolan’s wife’s car, in the hope that someone might follow that car and thereby be led to Mr Foster.

17. [702]

    In that regard, Ms Johnson had said earlier in her evidence that when Mr Foster was on the run, she was “having meetings with Tom Nolan” and trying to get “records”. In response to my question “just remind me who Tom Nolan is”, Ms Johnson said Mr Nolan was “the other person who was running the business for [Ms Larter]”. Ms Johnson then volunteered without any further question being asked:

18. [703]

    Thus Ms Johnson was saying that because Mr Nolan did not “have his car” (evidently it was in fact his wife’s car) at the places where Ms Johnson met him, and because she thought Mr Nolan knew where Mr Foster was located, she arranged for “somebody else” to wait until Mr Nolan left their meeting, and for that “somebody else” to follow Mr Nolan and make a note of the number plate of the car in which Mr Nolan drove away. That number plate number was, according to the draft paragraphs omitted from her affidavit, the intelligence she anonymously passed on to Logan J’s Associate, Mr Flitcroft and others.

19. [704]

    Curiously, in her affidavit, Ms Johnson made one reference to having sent an email to the Associate of Yates J. However, that was in the context of stating that following her appearance before Yates and Perram JJ in August 2012 (see [104] and [105]) she had “requested all parties in the Court to delete me from their mailing lists in regard to the SensaSlim trial”. She said that “despite this I remained on the Court’s and Corrs’ mailing list for several years afterwards despite again pointing out to them I was not and had not acted for Peter Foster in the substantive proceedings”. Ms Johnson annexed to her affidavit a number of documents “with regards to this” including a document she described as:

20. [705]

    For some reason that email was not included in the Court Book. Assuming however that it was directed to the subject matter to which Ms Johnson referred, it reveals the very peculiar circumstance of Ms Johnson communicating to the Associate to Yates J in relation to an essentially administrative matter at a time when, she says, she was so concerned about Mr Foster’s behaviour that she wished anonymously to draw his conduct and possible location to the attention of various parties.

21. [706]

    I find it hard to know what to make of this evidence. I find it hard to accept that Ms Johnson actually took all the steps she claims to have taken and, if she did, that she could possibly have thought that they would be of any practical assistance to persons proposing to invest in STC or in tracking Mr Foster down.

22. [707]

    The most obvious persons who could claim to have a reasonable expectation that those “concerns” be disclosed to them were the persons who were continuing to invest in STC.

The credit of Ms Johnson and Mr de Klerk

1. [708]

   In critical respects, the evidence given by Mr de Klerk is irreconcilable with that of Ms Johnson.

2. [709]

   In recognition of this, Mr Argy made extensive submissions about Mr de Klerk’s credit.

3. [710]

   As Mr Argy accepted, Mr de Klerk gave his evidence in a firm and confident manner. Evidently, English is not Mr de Klerk’s first language. He made a number of references to “my English”. However, I did not detect that Mr de Klerk had any difficulty understanding the questions put to him, or formulating his responses to those questions.

4. [711]

   Nonetheless, Mr Argy submitted, Mr de Klerk’s evidence was “unreliable, inconsistent, often implausible, and often based on assumptions or hypotheses that resulted from being pre conditioned by what he had been told by [Mr Foster] about [Ms Johnson’s] role”.

5. [712]

   Mr Argy pointed to a number of aspects of Mr de Klerk’s evidence.

6. [713]

   First, Mr Argy pointed to Mr de Klerk’s evidence concerning the apologies offered for the absence of “Mark Hughes” on 13 and 14 March 2013 (see [248] to [254]). I see no inconsistency in the evidence given by Mr de Klerk. In his affidavit evidence he said that Ms Johnson apologised for the absence of “Mark Hughes” on both 13 March 2013 (at STC’s Market Street office) and again on 14 March 2013 (at the Catalina restaurant). In the passage from the transcript that I have set out at [253] above, Mr de Klerk did agree that the “we sat down” conversation took place on 13 March 2013, and not 14 March 2013. But in the same passage of evidence Mr de Klerk made clear that his recollection was that Ms Johnson had apologised twice for the absence of “Mark Hughes”.

7. [714]

   Next Mr Argy submitted that Mr de Klerk had given inconsistent accounts of his reasons for withholding the last $100,000 of the $250,000 called for by the loan agreements Mr de Klerk executed on 21 February 2013. As I have set out above at [294], initially, Mr de Klerk agreed that his decision to make the payment of $100,000 was “simply honouring the previous commitment” and not the result of a decision made after he met Ms Johnson. Later Mr de Klerk said that he held back the last payment because a number of “grey areas” that Ms Johnson “filled in”. Those answers are not consistent. But they arose from the fact that Mr Argy, having obtained the initial response to which I have referred, returned to the topic and elicited Mr de Klerk’s answer “but I hold back $100,000 for specific reasons”; which response Mr Dixon took up in re-examination (see [292] to [299]). I do not see how that course of events casts doubt on Mr de Klerk’s credit.

8. [715]

   I have already mentioned Mr Argy’s criticisms of Mr de Klerk’s evidence about the “personal matters” discussed at the Catalina lunch (see [267] to [272]). As I said, that criticism is unwarranted as it was Mr Argy’s cross-examination that opened that question up.

9. [716]

   Mr Argy further submitted that Mr de Klerk’s evidence that Ms Johnson described Ms Larter as a “sleeping partner” showed that his evidence was not reliable because, Mr Argy submitted, Ms Johnson is unlikely to have described Ms Larter that way. However, as I have discussed, it is understandable in the circumstance that Mr de Klerk gained the impression that Ms Larter was a “sleeping partner” (see [282] to [285]]. Even if Ms Johnson did not use those words to describe Ms Larter’s role, Mr de Klerk’s recollection that Ms Johnson said something to that effect is understandable. It certainly does not reflect on his credit.

10. [717]

    Mr Argy also pointed to the fact that Mr de Klerk is not a disinterested witness. He is one of the Group Members and has invested a total of $450,000 into STC. He also has lost the US$1 million that he paid to Bella Development Limited for an interest in the STC South African business. I accept that that is a factor to be taken into account when assessing Mr de Klerk’s evidence.

11. [718]

    However, overall, the confidence and clarity with which Mr de Klerk gave his evidence, and the detail he was able to recall as to his dealings with Ms Johnson and others (much of which is not in contest in these proceedings) persuades me that Mr de Klerk is a witness of truth whose evidence I can, with confidence, accept.

12. [719]

    On the other hand, I found Ms Johnson to be an unreliable witness.

13. [720]

    She seemed to be unable to face up to the catastrophic situation in which she found herself and equally unable to accept the significance of her actions and inaction while at STC.

14. [721]

    I found it impossible to tell what Ms Johnson holds to be true. She gave inconsistent evidence. She was prepared to assert the improbable and to deny the obvious.

15. [722]

    There are many examples.

16. [723]

    The most obvious are her assertions, made for the first time in cross-examination, that she did not write her lengthy 10 September 2013 email (see [489] to [491]) and did not read Logan J’s 27 September 2013 judgment (see [554] to [556]).

17. [724]

    Further, in relation to her 10 September 2013 email, I find incredible Ms Johnson’s assertion that she did not know whether Mr Foster held the Associate Members’ contracts at his Gold Coast home (see [523] to [527]).

18. [725]

    An insight into Ms Johnson’s preparedness to embroider her evidence arose during Mr Dixon’s cross-examination about her SMS exchanges with Mr de Klerk on 30 August 2013.

19. [726]

    Mr Dixon asked Ms Johnson whether she had kept SMS messages sent at this time. Ms Johnson replied:

20. [727]

    Implicit in Ms Johnson’s answer was the proposition that not only was her mobile phone unable to be fixed following being dropped into the dish washing water but that some attempt had been made to retrieve data from the phone. It may be true that Ms Johnson “lost all her data” following her phone’s immersion in the sink; but it strains credulity to think that a failed data retrieval exercise followed.

21. [728]

    Other evidence that Ms Johnson gave which persuades me that she is an extremely unreliable witness is:

22. [729]

    Overall, I cannot accept Ms Johnson as a witness of truth. She exhibited a tendency to eschew responsibility for the actions that her own correspondence showed she had engaged in, and to be unable to face up to the consequences of the manner in which she conducted herself while a partner in STC. In my opinion she was prepared to assert, on her oath, whatever she thought was necessary to repel the express or implicit burdens, as she perceived them, of questions put to her in cross-examination or of other difficulties she perceived to be facing her.

23. [730]

    I have no hesitation in preferring Mr de Klerk’s evidence to that of Ms Johnson at each point where that evidence is in conflict.

The pleaded case

1. [731]

   Various causes of action are pleaded in the Further Amended Commercial List Statement. However, at the heart of the case advanced by Mr Mackinnon is the proposition that Mr Foster, Ms Larter and Ms Johnson made a series of representations about STC that were misleading or deceptive and, indeed, false.

2. [732]

   As Mr Mackinnon does not have leave from the Federal Court under s 58(3)(b) of the Bankruptcy Act to proceed against Ms Larter, it is not competent for me to deal with Mr Mackinnon’s claim against her. I have outlined this above at [62] to [66] and [74] to [81]. I shall therefore not discuss whether Mr Mackinnon’s claims against Ms Larter would otherwise have been made out.

3. [733]

   So far as concerns Mr Foster and Ms Johnson, two series of representations are alleged to have been made to Mr Mackinnon and the other Group Members.

4. [734]

   The first are said to be have been made between February 2013 and October 2014 by Mr Foster or by “persons employed or instructed by” Mr Foster, including Ms Johnson.

5. [735]

   The second are said to have been made by Mr Foster and Ms Johnson in the Proposal.

Representations by Mr Foster or persons employed or instructed by Mr Foster

1. [736]

   The following representations are alleged:

2. [737]

   There are numerous examples in the evidence of correspondence sent by “Mark Hughes”, describing “Mark Hughes” as the National Sales Manager of STC. One example is the email from “Mark Hughes” to Mr de Klerk of 14 February 2013 (see [207] above). Another is the email that “Mark Hughes” sent Mr and Mrs Mackinnon on 28 October 2013 (see [638] above).

3. [738]

   I am satisfied that Mr Foster wrote these emails.

4. [739]

   He also represented himself to Mr Mackinnon (see [637] to [639]) and Mr de Klerk (see [204] to [207]) as being “Mark Hughes”.

5. [740]

   It is also clear beyond any argument that Mr Foster, by silence and by adopting an alias, represented that he himself was not involved in STC.

6. [741]

   Otherwise the representations that Mr Foster made were those set forth in the Proposal to which I will return.

7. [742]

   Ms Johnson was not “employed” by Mr Foster.

8. [743]

   The question is whether she was “instructed” by Mr Foster.

9. [744]

   The further question is whether, on its proper construction, the allegation is that Mr Foster “instructed” Ms Johnson to make the representations; or whether the allegation is that Ms Johnson made the representations while “instructed” by Mr Foster in a general sense, albeit not necessarily to make the representations.

10. [745]

    On one reading of this clause, the words “employed or instructed” are merely adjectival and simply describe the class of persons who made the representations. On another reading, those words convey what the persons were “employed or instructed” to do; make the representations. The use of the word “employed” as well as “instructed” points, albeit not strongly, to the former construction. It is hard to contemplate a person being “employed” to make representations; as opposed to being “instructed” to make representations. But this is not clear. And if the pleading is merely an allegation that Ms Johnson was “instructed” in some way, and in that circumstance made the representations, what nature and frequency of “instruction” is alleged? To attend one meeting? Or two meetings? Or to act generally in a particular way? And if so, what way?

11. [746]

    This is a further example of the infelicity of the pleading. A pleading should be clear. A party, especially one facing allegations as serious as those directed to Ms Johnson, should not be left in any doubt about the case brought and should not have to parse and analyse a pleading to divine its true meaning.

12. [747]

    Ms Johnson is entitled to the benefit of the doubt. Resolution of the doubt in Ms Johnson’s favour means that the pleading should be construed as imposing on Mr Mackinnon the burden of showing that Ms Johnson was “instructed” by Mr Foster to make the representations in question.

13. [748]

    In closing submissions, Mr Dixon confined this aspect of the case against Ms Johnson to the representations alleged in subpars 20(c), (c)(i), (d), (e) and (f) of the Further Amended Commercial List Statement.

14. [749]

    I shall deal with them in turn.

15. [750]

    A central claim in the Further Amended Commercial List Statement is that “Mark Hughes” was an alias adopted by Mr Foster. This allegation should be understood as an allegation that a person whose real name was “Mark Hughes” held that position.

16. [751]

    The question is whether Mr Foster instructed Ms Johnson to represent, and whether Ms Johnson did represent, that “Mark Hughes” was the National Sales Manager of STC. Further, the question is whether Ms Johnson knew that there was no person at STC whose real name was “Mark Hughes” and that Mr Foster was using that name as an alias.

17. [752]

    For the reasons I have set out above (see especially [447] to [459]) my conclusion is that Ms Johnson did know that Mr Foster was using the alias “Mark Hughes”.

18. [753]

    Ms Johnson twice apologised for the absence of “Mark Hughes” at the 13 and 14 March 2013 meetings at the Market Street office and at the Catalina restaurant (see [237] and [248] to [254] respectively).

19. [754]

    Mr de Klerk also asked Ms Johnson about the role of “Mark Hughes” and that Ms Johnson replied he was the “head of trading”, that the “marketing side is under his portfolio” and that STC was his “idea”.

20. [755]

    Ms Johnson also knew that it was “Mark” who had contacted Mr de Klerk on 15 March 2013 to arrange a visit to the “trading room” (see [258] above). She arranged that contact (see [260] to [262]).

21. [756]

    The fact that Mr Foster asked Ms Johnson to attend the 14 March 2013 and 30 May 2013 meetings with Mr de Klerk, knowing that Mr de Klerk knew him as “Mark Hughes”, is consistent with and indeed confirmatory of the conclusion that Ms Johnson knew the truth about this matter.

22. [757]

    Ms Johnson agreed that Mr de Klerk had asked her about “Mark Hughes”. She claims that she said to Mr de Klerk that she did not know “Mark Hughes” and that “he must be someone Anne knows” (see [248] above).

23. [758]

    I do not accept that evidence. I accept Mr de Klerk’s evidence that he addressed Mr Foster as “Mark” at the 30 May 2013 meeting in Ms Johnson’s presence.

24. [759]

    Ms Johnson thus did know “Mark Hughes”. She knew that “Mark Hughes” was Mr Foster.

25. [760]

    There is no evidence that Ms Johnson represented to Mr de Klerk that “Mark Hughes” held the precise position of “National Sales Manager”. But Ms Johnson expressly represented to Mr de Klerk that “Mark Hughes” (that is, a person whose real name was “Mark Hughes”) was the “head of trading” at STC and was running the “marketing side” of STC. That representation is to the same effect.

26. [761]

    There is no direct evidence that Ms Johnson did this on Mr Foster’s instructions. But the inference is overwhelming that she did. There is no other rational reason for Ms Johnson to have behaved this way.

27. [762]

    My attention has not been directed to any evidence that Ms Johnson expressly represented that “Mark Hughes” was the National Sales Manager of STC to any other Associate Member or Group Member.

28. [763]

    I will invite submissions as to the significance of this fact after delivery of these reasons.

29. [764]

    Silence can amount to misleading or deceptive conduct. In Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32 Black CJ said:

30. [765]

    Silence may constitute misleading or deceptive conduct if there is a reasonable expectation that the silence would be broken. This was the analysis in Rafferty v Madgwicks (2012) 203 FCR 1; [2012] FCAFC 37, where the Full Court of the Federal Court said:

31. [766]

    Ms Johnson knew from the outset that Mr Foster was involved in STC. Ms Johnson also knew that it was vital for the sake of STC’s “business” that Mr Foster’s involvement remained concealed.

32. [767]

    Her involvement in instructing Mr Tassell to send the Pikes & Verekers letters of 5 April 2013 bespeaks her active representation to the recipients of Mr Tassell’s letter Mr Foster was not involved in STC. This was contrary to what she knew to be the fact.

33. [768]

    Mr Radica asked Ms Johnson whether “STC was a scam”. Notwithstanding the fact that in July 2013 Ms Johnson was concerned that Mr Foster was operating a Ponzi scheme, she did not reveal Mr Foster’s involvement in STC to Mr Radica at that time.

34. [769]

    On 30 August 2013 Mr Foster threatened to put a bullet in Ms Johnson’s head if she revealed his involvement in STC. But Ms Johnson was aware well before his threat that his involvement was to remain a secret.

35. [770]

    As Mr Argy accepted, from 30 August 2013 Ms Johnson was on “high alert” about the state of affairs at STC. She knew that Mr Foster was controlling STC’s activities.

36. [771]

    Ms Johnson made her concerns clear in her 10 September 2013 email. As I have discussed, that email shows that Ms Johnson was concerned that Associate Members’ funds were at risk (see [513]).

37. [772]

    When she read Logan J’s judgment in the Chaste Corporation case she was “shocked and sicken[ed]” by the similarity between what she read about Mr Foster’s “methods” and “techniques” in the SensaSlim case and those used in STC.

38. [773]

    On 4 October 2013 Mr Murray, from The Courier Mail, asked Ms Johnson directly whether Mr Foster had any connection with STC. As I have discussed, Ms Johnson gave inconsistent evidence as to the answers she gave to Mr Murray’s emailed questions. She could have easily told Mr Murray the truth. Instead, on her account of it, she relayed her draft answers (at least one of which was to her knowledge false: see [605] to [606]) to STC in circumstances where, as I have found, she must have known they would be intercepted and, to the extent necessary, changed by Mr Foster to exclude any reference to him.

39. [774]

    Nonetheless, apart from the steps that Ms Johnson claims she took anonymously (see [686] to [705]), Ms Johnson took no steps to alert existing Associate Members (apart from Mr de Klerk) and prospective investors in STC of Mr Foster’s involvement in STC and of Ms Johnson’s serious misgivings as to the implications for investors of that involvement.

40. [775]

    The only person to whom Ms Johnson revealed Mr Foster’s involvement was Mr de Klerk on 30 August 2013.

41. [776]

    And yet Ms Johnson was conscious of the need to speak.

42. [777]

    That is revealed by the steps she claims to have taken anonymously.

43. [778]

    It is also revealed by this passage of evidence:

44. [779]

    I do not accept Ms Johnson’s evidence that she did not know whether investors in STC would want to know whether Mr Foster was involved. It must have been obvious to Ms Johnson that Mr Foster’s involvement would be a matter of acute interest to all existing and prospective STC investors.

45. [780]

    Ms Johnson’s evidence that had she “would have told every one of them” about Mr Foster shows that Ms Johnson was acutely aware of the need for her to speak up about Mr Foster’s involvement in STC.

46. [781]

    The evidence of Ms Johnson’s communications with Mr Foster and Ms Larter in September 2013 does show that she was trying to obtain some information about Associate Members. But there was no evidence that she persisted to seek this information after September 2013. And otherwise than anonymously, she took no other step to alert Associate Members of what she must have understood to have been the parlous state of their investment.

47. [782]

    By the end of September 2013 any persons who had already invested in STC and persons, such as Mr and Mrs Mackinnon, were then contemplating investing in STC were entitled reasonably to expect that if Ms Johnson, as a partner in STC, knew of matters which suggested that investment in STC was unsafe, or that funds invested in STC may be “in danger and may be being improperly used” (Ms Johnson’s words in her 10 September 2013 email: excerpted at [509]), those matters should be disclosed to them, or to a person or a body that would cause them to become aware of those matters.

48. [783]

    Further, such persons were entitled reasonably to expect that if, as Ms Johnson said in her 10 September 2013 email, she was “extremely concerned” that “STC is being improperly managed and operated”, “STC may be being operated as a Ponzi scheme by [Mr Foster] and hence is being illegally and fraudulently managed and operated”, that the Associate Members’ “accounts and records may be being falsified” and that the “Associate Members’ moneys may be at risk and are not being properly accounted for”, those matters would be disclosed to them, or to a person or body that would cause them to become aware of those matters.

49. [784]

    Ms Johnson disclosed Mr Foster’s involvement to Mr de Klerk.

50. [785]

    Ms Johnson claims that she made the “anonymous” disclosures to which I have referred (at [686] to [705]).

51. [786]

    But Ms Johnson did not take any steps to disclose those matters to those most directly affected: the Associate Members.

52. [787]

    She also did not disclose these matters to Mr Murray from The Courier Mail. She must have known that if she had made those matters known to Mr Murray, Mr Murray would have caused them to be publicised and that Associate Members and prospective investors in STC may very well have become aware of that publicity.

53. [788]

    Ms Johnson knew that the ACCC was acutely interested in Mr Foster’s activities. She had appeared for Mr Foster on an application to adjourn the ACCC proceedings before Yates J and had read Logan J’s judgment of 24 September 2013. She continued to receive emails in relation to the Federal Court proceedings until at least 27 March 2014.

54. [789]

    Ms Johnson could have approached the ACCC. It is impossible to imagine that the ACCC would have ignored the detailed intelligence that Ms Johnson would have been able to give them about her concerns about Mr Foster’s involvement in STC.

55. [790]

    Instead, Ms Johnson remained silent; or effectively silent. She remained a partner of STC until 14 January 2014. She helped herself to the $50,000 that she contended was due to her, notwithstanding that she must have understood it was likely to represent the funds of Associate Members. She took no steps to bring about a cessation of Mr Foster’s role in STC despite the fact that, as his 29 December 2013 email made clear, he remained actively involved in, if not in charge of STC’s activities.

56. [791]

    I find that, in all these circumstances, by her silence, Ms Johnson represented to Associate Members, and to prospective investors in STC, that Mr Foster was not involved in STC.

57. [792]

    I also find that she did so in accordance with Mr Foster’s instructions. Mr Foster’s 30 August 2013 threat makes this clear. He then directly instructed Ms Johnson not to reveal his involvement. But Ms Johnson’s active concealment of Mr Foster’s role started (a least) in April 2013 by her involvement in the instructions given to Mr Tassell. There is no direct evidence that Mr Foster instructed Ms Johnson to join with Ms Larter in giving these instructions. But I find the inference that he did to be overwhelming. Mr Foster certainly asked Ms Johnson to attend the 14 March 2013 and 30 May 2013 meetings, at which Mr Foster’s involvement was not revealed and indeed concealed.

58. [793]

    A representation that “Tom Nolan” was the National Sales Assistant of STC is said to be false because the person describing himself as “Tom Nolan” was in fact Peter Thomas Nolan.

59. [794]

    Mr Dixon did not develop submissions as to how it was that Ms Johnson represented to Group Members that “Tom Nolan” (rather than Peter Nolan) was the National Sales Assistant of STC, nor as to what difference this would have made to any Group Member.

60. [795]

    I do not think this allegation takes matters any further.

61. [796]

    I accept Mr de Klerk’s evidence that he asked Ms Johnson the identity of the “responsible sureties” at the 14 March 2013 meeting at the Catalina restaurant (excerpted at [278]). Mr de Klerk said he wanted to know how investment in STC “was secured”. Mr de Klerk said, and I accept, that Ms Johnson told him that she and Ms Larter had invested $10 million in STC of which some “would be held as security”. This answer was given in the context of Mr de Klerk’s questions as to how his investment was “secured”.

62. [797]

    This evidence satisfies me that Ms Johnson did represent to Mr de Klerk that his loan was secure. There is no direct evidence that she did this on Mr Foster’s instruction. But I find the inference to be overwhelming that this was so.

63. [798]

    My attention has not been drawn to any other evidence, apart from the content of the Proposal, that Ms Johnson made this representation to any other Group Member.

64. [799]

    For the same reasons, I am satisfied that Ms Johnson represented to Mr de Klerk that STC had assets of $10 million and that she did so on Mr Foster’s instruction.

65. [800]

    Again, apart from what is said in the Proposal, there is no evidence that Ms Johnson made that representation to any other Group Member.

Representations to Mr Mackinnon and Group Members in the Proposal

1. [801]

   Mr Mackinnon alleges that the following representations were made in the Proposal:

2. [802]

   The Further Amended Commercial List Statement does not allege that, in terms, each of these representations was false but alleges that:

3. [803]

   I am satisfied that STC was a fraudulent scheme and that, in substance, each of the representations in the Proposal was false.

4. [804]

   There is no direct evidence of who composed the Proposal. But it must have been Mr Foster or someone acting at his direction. He must have been instrumental in its composition and circulation.

5. [805]

   Mr Foster must have known that, in substance, there was no truth to the representations made in the Proposal. The representations were fabricated by Mr Foster to attract investment to STC.

6. [806]

   The representations set out above were made in the Proposal.

7. [807]

   I am satisfied that Mr Foster, by causing the Proposal be published to prospective investors, made those representations.

8. [808]

   Mr Argy did not seek to justify the representations made in the Proposal. Indeed, Mr Argy conducted Ms Johnson’s case upon the basis that STC was a fraudulent scheme and thus the representations in the Proposal about the scheme were also false.

9. [809]

   Mr Argy’s case was that although the Proposal contained numerous false and indeed absurd claims, Ms Johnson did not know this as she had never seen or read the Proposal during her time at STC.

10. [810]

    Ms Johnson was adamant that she had not seen the Proposal until after the commencement of these proceedings.

11. [811]

    Ms Johnson knew her name and references to her appeared on the Public STC Website. In her 10 September 2013 email Ms Johnson made specific reference to the Public STC Website (which she correctly identified as being www.sportstradingclub.com) and demanded that “my name and all references to me be removed”. Ms Johnson told Mrs Mackinnon in November 2014 that she had “asked Ms Larter to take her name off the proposal”.

12. [812]

    Ms Johnson’s email exchange with Mr Foster on 14 March 2014, and Mr Foster’s further email of 29 April 2014, shows that Ms Johnson then remained concerned about being named in the Proposal.

13. [813]

    In his 14 March 2014 email (referred to at [674]) Mr Foster said all references to Ms Johnson had been removed from the website and that he would forward “in the next email” a copy of the front page of the Proposal showing that her name “as well as your accountant’s name” had been removed. Mr Foster’s “next email” is not in evidence.

14. [814]

    Mr Foster also referred to “the front page where it used to have your photo and Anne’s with the headline ‘Meet the Partners’”. Mr Foster’s email reads as if he thought Ms Johnson was familiar with the form of the Proposal. Ms Johnson simply responded “thank you”. Ms Johnson expressed no surprise at Mr Foster’s assertion that the Proposal had included these details.

15. [815]

    These matters suggest, albeit not decisively, that Ms Johnson was familiar with the form of the Proposal.

16. [816]

    The matter is however put beyond doubt by Mr de Klerk’s evidence about his discussion with Ms Johnson at the Catalina restaurant on 14 March 2013 about the Proposal (see [273] to [281] above), which evidence I accept. Mr de Klerk’s evidence shows that Ms Johnson’s denial cannot be correct.

17. [817]

    Mr de Klerk was clear that he asked Ms Johnson detailed questions about various aspects of the Proposal and that Ms Johnson was able to “clarify” the matters of concern to Mr de Klerk (see [278] above).

18. [818]

    I am satisfied that Ms Johnson knew the contents of the Proposal and that she was sufficiently familiar with it to discuss it in some detail with Mr de Klerk.

19. [819]

    Ms Johnson must have also known the Proposal was made available to all prospective investors in STC. As one of the partners in STC she must therefore be taken to have represented to investors that its contents were true. The contents of the Proposal were false.

Section 34 of the Partnership Act

1. [820]

   Mr Argy submitted that, at some point during 2013, the STC Partnership was dissolved by operation of s 34 of the Partnership Act. That section reads:

2. [821]

   By an amendment made to her Commercial List Response pursuant to leave I granted on 13 February 2018, Ms Johnson pleaded:

3. [822]

   Mr Argy did not develop a submission as to whether, and if so when, an event had occurred which made it “unlawful” for the STC business to be carried on.

4. [823]

   However, assuming that it was “unlawful” for a fraudulent scheme to be carried on, and assuming that STC partnership of which Ms Johnson was a member was, at some point during 2013 dissolved by operation of s 34 of the Partnership Act, I do not see how it could affect Ms Johnson’s liability on the bases that I have found.

5. [824]

   My conclusion that Ms Johnson made the representations to which I have referred does not depend upon whether a partnership in fact existed.

6. [825]

   I find the point to be irrelevant.

Breach of contract

1. [826]

   Mr Mackinnon’s claim in contract is directed primarily to Ms Larter. As Mr Mackinnon does not have leave under s 58(3)(b) of the Bankruptcy Act to proceed against Ms Larter, it is not competent for me to deal with this claim.

2. [827]

   A claim in contract is not available against Mr Foster. He was not a party to any contract with Mr Mackinnon or the Group Members.

3. [828]

   The claim in contract is also not available against Ms Johnson because of the terms upon which I granted Mr Mackinnon leave to file the Further Amended Commercial List Statement (see [86]).

Other relief sought

1. [829]

   Mr Mackinnon also seeks relief against Mr Foster and Ms Johnson on the grounds of deceit, conversion, conspiracy, in equity and on the basis of an allegation that STC was a managed investment scheme for the purposes of Ch 5C of the Corporations Act 2001 (Cth).

2. [830]

   Mr Dixon developed some submissions in relation to these matters.

3. [831]

   However, now that I have made findings as to what occurred, I propose to invite Mr Dixon to consider whether it is necessary for Mr Mackinnon and the Group Members to obtain relief in relation to these various other causes of action and, if so, to develop further submissions in relation to them.

Other issues

1. [832]

   There are a number of issues that remain to be resolved and in respect of which I will require further assistance.

2. [833]

   One of them is the question of causation.

3. [834]

   I have found that Mr Foster and Ms Johnson have made representations which were not true. Those representations were thus misleading or deceptive.

4. [835]

   So far as concerns Mr Foster, I am comfortably satisfied that the representations he made have caused all of the loss which Mr Mackinnon and the Group Members complain. Upon production of evidence to show what that current loss is, I will enter judgment against Mr Foster for that amount.

5. [836]

   Other questions arise in relation to Ms Johnson.

6. [837]

   One is the issue Mr Argy has raised as to whether Ms Johnson’s failure to speak out has caused loss in circumstances where from 30 August 2013 Mr de Klerk knew Mr Foster was involved in STC and had been masquerading as “Mark Hughes” and yet did not make public what he knew.

7. [838]

   There is also the question of precisely when Ms Johnson’s silence about Mr Foster’s involvement should be held to have caused damage to Group Members.

8. [839]

   Finally, there is the question of what, if any, findings I should make about the involvement in STC of Mr Holmes and Prof Snyder.

Conclusion

1. [840]

   Once the parties have had an opportunity to consider these reasons, I will invite submissions as to the further steps that should now be taken in these proceedings.