Plutus Payroll Australia Pty Ltd (in liquidation) v Saikali

The First Plaintiff, Plutus Payroll Australia Pty Ltd (in liquidation), operated a payroll services business.

The Second and Third Plaintiffs were appointed as provisional liquidators to Plutus Payroll on 9 June 2017 and as liquidators on 9 October 2017 (the Liquidators).

On 3 June 2021, the Plaintiffs commenced these proceedings by way of a Summons and Commercial List Statement.

On 5 August 2022, the Plaintiffs obtained default judgment against the First Defendant, Mr Glen Saikali.

The remaining defendants are the Second Defendant, Mr Michael Teplitsky, and two corporations of which Mr Teplitsky was, at all material times, the sole director and shareholder: namely, the Third Defendant, Tepcorp Holdings Pty Ltd, and the Fourth Defendant, Tepcorp Investments Pty Ltd (together, the Teplitsky Parties).

The Plaintiffs pleaded, and the Teplitsky Parties admitted, that at all material times:

In addition, the Plaintiffs pleaded, and the Teplitsky Parties admitted, that:

The Second Plaintiff, Mr Timothy Norman, prepared a report into the affairs of Plutus Payroll which was dated 18 February 2022. Mr Norman concluded, based on a review of the records of Plutus Payroll, that:

Each of the Plutus Officers has been convicted of, and imprisoned for, offences relating to this conduct.

It is not necessary, for the purposes of this judgment, to make findings regarding this conduct or its illegality. That is because the focus of these proceedings was not on the conduct of the Plutus Officers, but instead on the blackmail scheme which extorted money from the Plutus Officers by threatening to expose their conduct and, in particular, on various transactions which were entered in respect of the funds which the Plutus Officers caused to be paid from Plutus Payroll as a result of the blackmail scheme.

Mr Rostankovski has been convicted of, and imprisoned for, offences arising from his participation in this blackmail scheme.

The Plaintiffs alleged and, in closing submissions the Teplitsky Parties conceded, that:

The Plaintiffs also alleged that Mr Rostankovski breached his statutory and fiduciary duties to Plutus Payroll by implementing the “Blackmail Plan”, which involved demanding payment by the Plutus Officers in return for not revealing their tax fraud to the media and authorities, and laundering the funds of Plutus Payroll which were received as a result of the blackmail, by transferring them to other persons and entities.

The Plaintiffs pleaded that Mr Teplitsky agreed with Mr Rostankovski and his associate, Mr Daniel Hausman, to “launder” the Plutus Funds which were paid into the Lands Legal Trust Account following the implementation of the Blackmail Plan. (Although the term “launder” was adopted in the pleading, it is important to stress at the outset of this judgment that the Plaintiffs did not allege that Mr Teplitsky engaged in any offence of money laundering, and therefore this judgment does not consider or address any such issue.)

The Plaintiffs alleged that, in furtherance of this agreement, the Teplitsky Parties entered into two transactions involving a company named Luminous Investment Holdings Pty Limited, of which Mr Rostankovski was the sole director and shareholder. Those two transactions were alleged to involve the payment of moneys from the Plutus Funds held in the Lands Legal Trust Account, either to the Teplitsky Parties or to third parties (for the benefit of the Teplitsky Parties), with a commensurate amount then being paid back to Luminous.

First, the Plaintiffs alleged that in around April 2017, Mr Teplitsky and entities related to him, entered into a “purported loan agreement” with Luminous to “borrow” $4.6m (the $4.6m Transaction). This transaction was said to involve some $4.6m of the Plutus Funds in the Lands Legal Trust Account being paid to third parties in order to buy out their rights in respect of a property development in Surry Hills, New South Wales, in which Mr Teplitsky had an interest, with the sum of $4.6m being paid back to Luminous as a fee for alleged services in relation to a different property development in Camperdown, New South Wales.

Secondly, the Plaintiffs alleged that in around May 2017, Tepcorp Holdings entered into a “purported loan agreement” with Luminous to borrow $7m (the $7m Transaction). This transaction was said to involve some $7m of Plutus Funds being paid from the Lands Legal Trust Account, with $6m being used for the repayment of a debt owed by Tepcorp Investments to a third party and $1m being advanced to Mr Teplitsky himself.

The Teplitsky Parties denied the $4.6m Transaction, and denied that the sum of $4.6m was paid from the Lands Legal Trust Account to them or for their benefit.

The Teplitsky Parties admitted the $7m Transaction, but pleaded that they were not aware of the source of the “loan” funds and denied that the arrangements were part of a money laundering scheme. They also pleaded that in around December 2017, Tepcorp Holdings had repaid its outstanding debt to Luminous in the amount of $8.575m, representing the $7m principal together with $1.575m in early repayment interest.

The Plaintiffs alleged that the Teplitsky Parties, when engaging in these transactions, had knowledge that the funds were obtained through improper means, or, alternatively, wilfully shut their eyes to the obvious, or wilfully and recklessly failed to make such inquiries that an honest and reasonable person would make in respect of the source of the funds.

The Plaintiffs brought three sets of claims in relation to the $4.6m Transaction and the $7m Transaction (the Transactions).

First, the Plaintiffs alleged that, by engaging in the pleaded conduct in respect of these Transactions, the Teplitsky Parties:

Secondly, the Plaintiffs alleged that, by engaging in the pleaded conduct in respect of these Transactions in circumstances where they had the knowledge described above, the Teplitsky Parties:

Thirdly, the Plaintiffs alleged that:

The Teplitsky Parties admitted that Plutus Payroll was insolvent within the meaning of s 95A(2) of the Act at the relevant times, and admitted that for the purposes of s 9 of the Act, the relation-back day is taken to be 6 June 2017.

These reasons for judgment are structured as follows:

At the commencement of the hearing, the Teplitsky Parties took a global objection to the tender by the Plaintiffs of records of communications which had been obtained by the AFP under various warrants.

There were, by way of overview, three main categories of such material.

First, there were recordings and transcripts of telephone communications which had been intercepted by the AFP. Secondly, there were recordings and transcripts of conversations which had been obtained by the AFP using surveillance devices. Thirdly, there was material obtained by the AFP under search warrants, including information stored on the mobile phones of various persons (such as, for example, WhatsApp messages).

The Teplitsky Parties contended that:

Much of the first and second days of the hearing was taken up with argument regarding these objections. On the second day of the hearing, I ruled against these global objections. I set out below the reasons for my ruling.

On the voir dire hearing in relation to the admissibility of this material, the Plaintiffs read two affidavits of Constable Isabella Todoroski, who is a Federal Agent employed by the AFP.

Constable Todoroski is the case officer of Operation Elbrus, which is the codename for an AFP investigation relating to the business of Plutus Payroll. She was responsible for responding to a subpoena issued to the AFP in May 2023, which is referred to below.

Constable Todoroski deposed that during the Operation Elbrus investigation, a number of telecommunications services were intercepted by the AFP pursuant to warrants issued under the TIA Act. Those warrants were not in evidence.

Similarly, Constable Todoroski deposed that a number of surveillance device warrants were issued for the installation of surveillance devices with audio recording in an office in the MLC Building in Sydney, and that recordings were made by the AFP using such devices. Those warrants were also not in evidence.

Constable Todoroski also deposed that a number of mobile phones were seized by the AFP pursuant to various search warrants. She provided copies of extraction reports or forensic notes relating to the material downloaded from each of these phones, and attached copies of material extracted from those mobile phones, including a number of WhatsApp messages.

On 18 May 2022, a subpoena was issued by the Plaintiffs to the AFP in these proceedings for production of, among other things, intercepted audio recordings and transcripts of those recordings which had been tendered by the Crown in the prosecution of Mr Sevag Chalabian. Mr Chalabian was a solicitor, and was a director and the secretary of Lands Legal. Mr Chalabian was prosecuted in this Court in proceeding 2018/216206 (the Chalabian Proceeding). Mr Chalabian was convicted on one count, and sentenced to a term of imprisonment of 12 years from 23 June 2022, with a non-parole period of 7 years and 6 months.

Under cover of a series of letters from the Australian Government Solicitor to the Registrar of this Court in June and July 2022, the AFP produced various recordings and transcripts of intercepted telephone calls in response to the subpoena. The letters recorded that each of the recordings or transcripts had “previously been given in evidence in ‘exempt proceedings’ under s 74 of the [TIA Act]”. Similarly, the AGS stated that the audio recording of a meeting held at Clamenz lawyers on 1 February 2017 which was produced by the AFP in response to the subpoena was adduced in evidence in the Chalabian proceeding and had been “disclosed in open court” within the meaning of s 45(4)(a) of the SD Act.

In respect of one recording which was produced by the AFP, the AGS subsequently informed the Registrar by a letter of 5 July 2022 that it had been identified that this recording had not, in fact, been adduced in evidence in the Chalabian Proceeding, such that it may be subject to the restrictions on use in s 63 of the TIA Act.

On 2 May 2023, a further subpoena was issued in these proceedings to the Proper Officer of the AFP. It sought, among other things, various audio recordings referred to in the Crown Case Statement in respect of, among others, Mr Cranston (paragraph 4 of the subpoena). Mr Cranston is one of the Plutus Officers. He was prosecuted in this Court in proceeding 2017/148697 (the Cranston Proceeding). Mr Cranston was convicted on two counts, and sentenced to a term of imprisonment of 9 years from 6 March 2023 on the first count, and a term of imprisonment of 12 years from 6 March 2026 on the second count, with a single non-parole period of 10 years from 6 March 2023.

Constable Todoroski identified, for specific recordings and transcripts, when those materials had been played in Court or admitted into evidence in either the Chalabian Proceeding or the Cranston Proceeding. The Teplitsky Parties objected to the evidence in this form. The Plaintiffs subsequently tendered extracts from the transcript of each of those Proceedings, in order to establish that the material in issue was in fact admitted and disclosed in the course of those Proceedings.

This evidence established that, other than in respect of two recordings, all of the recordings and transcripts in question had been played in Court or admitted into evidence in either the Chalabian Proceeding or the Cranston Proceeding. The remaining two items were tendered in a proceeding brought in this Court by the Commissioner of the AFP against Mr Cranston and others under the Proceeds of Crime Act 2002 (Cth) (the POCA Proceeding).

Subsection 7(1) of the TIA Act prohibits the interception of “a communication passing over a telecommunications system”. This general prohibition is subject to a number of exceptions in s 7(2) of the TIA Act which include, relevantly, “the interception of a communication under a warrant”.

Part 2-5 of the TIA Act contains provisions relating to the issue of warrants to agencies. An “agency” includes, for the purposes of Chapter 2, a “Commonwealth agency” which is, in turn, defined in s 5 of the TIA Act as including the AFP.

Section 63 of the TIA Act contains a general prohibition on giving intercepted information in evidence in a proceeding, whether or not such information was lawfully intercepted. It provides as follows:

The term “lawfully intercepted information” is defined in s 6E(1) of the TIA Act as meaning “information obtained … by intercepting, otherwise than in contravention of s 7(1), a communication passing over a telecommunications system”. Further, s 6E(2) provides that “information obtained … by intercepting a communication under a warrant issued to the agency or authority” is “lawfully intercepted information”.

The term “interception warrant information” is defined in s 6EA of the TIA Act as meaning:

The prohibition in s 63 is expressed to be subject to Part 2-6 of the TIA Act. Section 77 identifies the circumstances in which intercepted information may be given in evidence in a proceeding. It relevantly provides as follows:

The Plaintiffs contended that the recordings of intercepted communications and the transcripts of those recordings were admissible pursuant to s 75A of the TIA Act, which provides as follows:

The term “information” is not defined in the TIA Act. In order to be admissible under s 75A, the relevant “information” must be information that was “given in evidence … in an exempt proceeding under section 74 or 75”.

An “exempt proceeding” is defined, relevantly, as “a proceeding by way of a prosecution for a prescribed offence”: s 5B(1)(a). A “prescribed offence” is defined as including any offence “punishable by imprisonment … for a period, or maximum period, of at least 3 years”: s 5.

Each of the Chalabian Proceeding and the Cranston Proceeding was a prosecution for an offence which was punishable by imprisonment for a period of at least 3 years (since each resulted in a term of imprisonment, for each count, of more than 3 years). Each was therefore an “exempt proceeding”.

In addition, the POCA proceeding was an exempt proceeding within the meaning of s 5B of the TIA Act, being “a proceeding for the confiscation or forfeiture of property, or for the imposition of a pecuniary penalty, in connection with the commission of a prescribed offence”: s 5B(1)(b).

It follows that each of the audio recordings or transcripts of intercepted telephone conversations tendered by the Plaintiffs in this proceeding was a document which was “given in evidence … in an exempt proceeding”.

The critical issue for determination was, therefore, whether this material was given in evidence in the exempt proceeding “under section 74 or section 75”. If it was, then s 75A applies so as to render it admissible in these proceedings.

The Plaintiffs pointed out that, pursuant to the TIA Act, lawfully intercepted information can be admitted into evidence in an exempt proceeding either under s 74 or under s 75. They submitted that the effect of s 75A is that because all of the information in question had, by either of those routes, been admitted into evidence in the Chalabian Proceeding, the Cranston Proceeding or the POCA Proceeding, it had been given in evidence in an exempt proceeding “under section 74 or section 75”, and was therefore admissible in evidence in these proceedings pursuant to s 75A.

The Teplitsky Parties submitted that, in order for the Plaintiffs to establish that the information in question had been given in evidence in an exempt proceeding “under section 74”, the Plaintiffs had to show not only that it was admitted into evidence in such a proceeding, but also to show that it met all of the requirements of “lawfully intercepted information” for the purposes of s 74. Accordingly, the Teplitsky Parties argued that it was necessary to establish not only that the information was, in fact, given in evidence in the exempt proceeding under s 74, but also that it was admissible in the exempt proceeding under that section.

Sections 74, 75 and 75A use different terms to describe the material that is, under each section, admissible in evidence.

Section 74 permits “lawfully intercepted information” to be admitted in an exempt proceeding. It follows that any information which is not “lawfully intercepted information” cannot be admitted under that section. As noted above, information is “lawfully intercepted information” if it is “intercepted otherwise than in contravention of subsection 7(1)”: s 6E.

Pursuant to s 75, “information obtained by the interception” of a “communication … in contravention of subsection 7(1) but purportedly under a warrant” is able to be admitted in evidence in certain circumstances. Those circumstances are, in broad terms, where: (a) there is a defect or irregularity with the issue or execution of a warrant (which is not a substantial defect or irregularity); (b) but for this irregularity, the interception would not have been in contravention of s 7(1); and (c) in all the circumstances, the irregularity should be disregarded.

Pursuant to s 75A, information may be given in evidence in any proceeding if it has already been given in evidence in an exempt proceeding under either s 74 (which applies to information obtained otherwise that in contravention of s 7(1)) or s 75 (which applies to information obtained in contravention of s 7(1)).

Section 75A does not (unlike s 74 or s 75) require any enquiry to be conducted in relation to whether or not the “information” in question was obtained by an interception which was in contravention of s 7(1). Instead, what matters for the purposes of s 75A is whether the “information” has already been “given in evidence” under either of those provisions.

There is a logical reason for this. In order to for the material to have been admitted into evidence in the exempt proceeding, it will already have been necessary to determine whether the information is “lawfully intercepted information”, in which case it is admissible under s 74; or whether it is information obtained in contravention of s 7(1), in which case it is admissible under s 75 if the requirements in that section are satisfied. Once those issues have been considered and determined in the exempt proceeding, and the information (whether obtained in contravention of s 7(1) or not) has been given in evidence in the exempt proceeding either under s 74 or under s 75, it is admissible in a subsequent proceeding under s 75A without any further enquiry into those same issues.

The TIA Act includes a note to s 75A, which states that: “This section was inserted as a response to the decision of the Court of Appeal of New South Wales in Wood v Beves (1997) 92 A Crim R 209.”

Where a statute is amended in deliberate response to a specific judicial decision, the ”mischief” which it is intended to address and thereby the purpose of the amended provision will far more readily be able to be identified than in other circumstances: Doyle’s Farm Produce Pty Ltd v Murray Darling Basin Authority (No 2) (2021) 106 NSWLR 41; [2021] NSWCA 246 at [9] per Bell P.

In Sydney Seaplanes Pty Ltd v Page (2021) 106 NSWLR 1; [2021] NSWCA 204 at [37]–[38], Bell P observed that:

In Wood v Beves (1997) 92 A Crim R 209, Cole JA (with whom Studdert AJA agreed) held that ss 63 and 77 of the TIA Act operated to preclude lawfully obtained information, within the meaning of s 6E of the Act, being admitted into evidence and used by a court in any proceedings after such lawfully obtained information has been given in evidence in exempted proceedings open to the public.

Handley JA, in dissent, referred to the following observations which had been made in relation to the TIA Act by Lindgren J (with whom Jenkinson and Kiefel JJ agreed) in Kizon v Palmer (1997) 72 FCR 409 at 434; [1997] FCA 21:

Handley JA said (at 214-215) that:

Section 75A was inserted in the TIA Act by Item 58 in Sch 3 of the Telecommunications (Interception) Legislation Amendment Act 2000 (Cth). The explanatory memorandum for the relevant bill stated (in relation to item 58) as follows:

The Teplitsky Parties referred to the High Court’s observation in Saaed v Minister for Immigration and Citizenship (2010) 241 CLR 252; [2010] HCA 23 at [31] that: “Statements as to legislative intention made in explanatory memoranda or by Ministers, however clear or emphatic, cannot overcome the need to carefully consider the words of the statute to ascertain its meeting”. In the present case, the language of s 75A makes plain that the legislative intent of s 75A, consistently with the terms of the explanatory memorandum, was to ensure that when material has been given in evidence in exempt proceedings (whether under s 74 or s 75), it becomes, as a result, admissible in any subsequent proceeding. The language of the provision, and the terms of the explanatory memorandum, do not support the Teplitsky Parties’ submission that, in order for such material to be admissible in a subsequent proceeding pursuant to s 75 of the TIA Act, it is necessary to establish in the subsequent proceeding that the material was in fact admissible in the exempt proceeding under either s 74 or s 75.

The Teplitsky Parties referred to a number of authorities regarding the legislative intent of the TIA Act, as follows:

These observations regarding the legislative purpose of the TIA Act do not support the interpretation of s 75A which is advanced by the Teplitsky Parties. In particular, the legislative concern for the maintenance of privacy is a concern about preventing, or controlling the means by which, such material can enter into the public domain. It is not a concern which relates to material that is already in the public domain.

In John Fairfax Publications Pty Ltd v Doe (1995) 37 NSWLR 81 at 87, Gleeson CJ said:

As Handley JA observed in Wood v Beves, once information has been given in evidence in an exempt proceeding (whether under s 74 or s 75), it has “lawfully entered the public domain” and the “privacy of the speakers which the [TIA] Act within limits is concerned to protect” is “totally lost and does not survive in some qualified or mutilated form”.

The Teplitsky Parties submitted that the decision of the Full Court of the Federal Court in Addenbrooke Pty Ltd v Duncan (No 2) [2017] FCAFC 76 (Addenbrooke (No 2)) establishes that, in order for material to be admissible under s 75A, it is necessary to show :

If the Full Court has determined that s 75A is to be interpreted as requiring such steps to be taken, then I should not depart from that decision unless I am convinced that the interpretation is plainly wrong (Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 at [135] per curiam) or, to put the matter another way, unless there is a compelling reason to do so: David William Pallas & Julie Ann Pallas as trustees for the Pallas Family Superannuation Fund v Lendlease Corporation Ltd [2024] NSWCA 83 at [140] per Leeming JA and at [22] per Bell CJ (Gleeson and Stern JJA agreeing).

However, I do not consider that the Full Court in Addenbrooke (No 2) intended to, or did, specify any requirements for admissibility under s 75A along the lines for which the Teplitsky Parties contended. Instead, I consider that the Full Court interpreted s 75A, consistently with the interpretation which I have outlined above, as allowing evidence to be given in a subsequent proceeding where it has been established that it has previously been given in evidence in an exempt proceeding.

The relevant ground of appeal in Addenbrooke (No 2) concerned a ruling by the primary judge (Foster J) on the admissibility of a document which, on its face, was a transcript of an intercepted telephone conversation: Addenbrooke Pty Ltd v Duncan (No 5) [2014] FCA 625. Addenbrooke had contended that the document was admissible under s 75A because it had been given in evidence in a proceeding before the Independent Commission Against Corruption (ICAC), which is, pursuant to s 5B(hb), an “exempt proceeding”. Foster J determined that the requirements for admissibility under s 75A were not satisfied, stating as follows (at [72]-[73], emphasis added):

Paragraph 72 of his Honour’s reasons is, in terms, a statement about what is required to be proved in order to render “a record of intercepted information admissible in an exempt proceeding” (that is, in order for it to be admissible under s 74 or under s 75 in such a proceeding). It does not contain any statement about the requirements of section 75A.

So far as the requirements of s 75A are concerned, the critical finding, which is stated in the first sentence of paragraph 73 of his Honour’s reasons, is that it had not been proved that the document had been given in evidence in a proceeding before ICAC. It necessarily followed that it was inadmissible under s 75A.

The second sentence of paragraph 73 – namely, “The tender of a document which appears to be a record of the intercepted communication does not, of itself, prove that the intercepted information was lawfully intercepted or that that information was given in evidence in an exempt proceeding” – should be read in a context where Foster J had referred to, in the previous paragraph, the requirements for admissibility in an exempt proceeding under s 74 and s 75. I do not read this sentence as a statement that, in order for information to be admissible under s 75A of the TIA Act, it is necessary to show both that the information was “given in evidence in an exempt proceeding” and that the information “was lawfully intercepted”. That is plainly not the case because, as his Honour recognised in paragraph 72 (and as explained above), information which is not “lawfully intercepted” is capable of being admitted under s 75 and therefore under s 75A.

Similarly, I consider that the balance of paragraph 73 of Foster J’s judgment must be read in a context where his Honour had been referring to the requirements for the admissibility of intercepted communications under a number of different provisions of the TIA Act (namely, each of ss 74, 75 and 75A). It is plain that his Honour had those various provisions in mind given that the final sentence of paragraph 73 refers to Addenbrooke’s failure to demonstrate that the transcript was “subject to the exceptions [plural] to the prohibition on admissibility provided for in the [TIA] Act”. Consequently, I do not read his Honour as suggesting that, in order to establish that a document is admissible under s 75A of the TIA Act, it is necessary to prove that “the record is an accurate record of a lawfully intercepted communication”; or to “prove the warrant pursuant to which the communication was accepted”; or to “call as a witness the person who intercepted the communication” or “the person who transcribed the communication”.

In Addenbrooke (No 2) at [560]-[566], Gilmour and White JJ (with whom Dowsett J agreed on this issue: at [288]) set out the relevant provisions of the TIA Act. Their Honours described the requirements under s 74 of the TIA Act for intercepted information to be admitted in an exempt proceeding, and then said as follows (at [564]-[567]):

Those statements are consistent with the interpretation of the TIA Act which I have set out above, namely, that:

Those statements are also consistent with the following description by the Victorian Court of Appeal in Zirilli v The King [2023] VSCA 64 at [77] (Emerton P, Beach and McLeish JJA) of the effect of s 75A of the TIA Act:

Having set out and described the effect of the relevant provisions, Gilmour and White JJ summarised (at [570]-[572]) Foster J’s reasoning in the passage which I have quoted above. Their Honours then made (at [574]-[577]) a number of comments regarding Addenbrooke’s failure to specify, in the ground of appeal or in written submissions in chief on the appeal, any error of law. Ultimately, at the hearing of the appeal, Addenbrooke submitted that “the transcript of the intercept proved, on its face, the existence of the warrant and was admissible by way of ss 6EA(a)(iii) and 77(3)” (at [577]) and that “it had been common ground at trial that the transcript had been ‘in evidence at ICAC’” (at [578]).

Gilmour and White JJ (at [579]) rejected the latter submission, setting out a passage of transcript which showed this was not common ground. Their Honours held as follows (at [581]):

This was sufficient to dispose of this issue. It followed that the material could not be admissible under s 75A of the TIA Act, because it had not been shown that the intercepted communications had been given in evidence in an exempt proceeding.

Their Honours continued as follows (at [582]):

I do not read the first two sentences of this paragraph as stating that, whenever material is tendered under s 75A of the TIA Act, it is necessary to show that it “contained ‘lawfully intercepted information’ for the purposes of s 74 of the [TIA] Act” and that “the record was an accurate record of the intercepted communication”.

Instead, I read their Honours as stating that “in these circumstances” (that is, in circumstances where, as held in [581], it had not been shown that the transcript had been given in evidence in an exempt proceeding), it was not necessary to consider Addenbrooke’s further submission that the transcript itself established the existence of the warrant and that this was lawfully intercepted information, because Addenbrooke could not rely on s 75A of the TIA Act.

Further, as noted above, it cannot be a condition for the application of s 75A that the information is shown to be “lawfully intercepted information” (being information that is “intercepted otherwise than in contravention of subsection 7(1)”), since information can be admitted under s 75A where it has been “given in evidence … under section … 75” and s 75 only applies to information which has been intercepted “in contravention of subsection 7(1)”.

Further, the statement in paragraph 582 that “Addenbrooke had not proved that the record was an accurate record of the intercepted communication” is not phrased as, or intended to be, a statement regarding matters which must be proved in order to establish admissibility under s 75A. Instead, this statement must be read in the context of the specific facts of that case. In particular, Addenbrooke had tendered a transcript of a conversation, where the original recording was not available, and where Addenbrooke had not shown that the transcript had been given in evidence in the ICAC proceeding under s 74 or s 75 of the TIA Act (and therefore there was no basis to conclude that any of the issues arising under those sections had been considered in the ICAC proceeding).

In contrast, in the present case, a recording is available in respect of all but 3 of the 142 recorded conversations, and all of that material has been shown to have been tendered in exempt proceedings. It follows that, in all but 3 cases, the Teplitsky Parties are able to make any submissions about the accuracy of any transcript, which can then be determined by reference to the recordings; and, in all cases, there has already been a process of the material being tendered in a criminal prosecution, in the course of which any issues about the authenticity and admissibility of this material were able to be considered and determined prior to the evidence being admitted.

The interpretation advanced by the Teplitsky Parties would require a party in a subsequent civil proceeding to prove matters which may not have been addressed in a criminal prosecution, in circumstances where the party in a civil proceeding may be prevented, as a matter of law, from leading evidence to establish those matters.

For example, the Teplitsky Parties submitted that any person seeking to have evidence admitted under s 75A of the TIA Act must establish:

The Teplitsky Parties identified, in a supplementary written submission, a number of specific questions which, they argued, must be addressed in dealing with these matters, including:

Many of these questions could only be answered by tendering “interception warrant information” within the meaning of s 6EA of the TIA Act. If that information was not given in evidence in an exempt proceeding under s 74(3), then it cannot be given in evidence in these proceedings under s 75A. Further, s 63(2)(d) would apply to prevent such information being given in evidence in these proceedings.

That would mean that, for example, if the warrants themselves were not given in evidence in the Chalabian Proceeding or the Cranston Proceeding (because, for example, the defence counsel examined the warrants and considered that there was no issue about their validity), then those warrants cannot be tendered in these proceedings. In that regard, some warrants were produced by the AFP pursuant to a subpoena on the first day of the hearing, and at the time of production, the representative of the Australian Government Solicitor who appeared on behalf of the AFP noted that the Commissioner was of the view that those warrants had not been tendered in evidence in an exempt proceeding, and that therefore there may be an issue about the admissibility of those warrants in these proceedings.

The Teplitsky Parties suggested that, where the warrants had not been tendered in the exempt proceeding, but intercepted information had been given in evidence, the intercepted information could not be admitted in a subsequent proceeding, because the party adducing the evidence in that proceeding would not be able to prove the warrant. It is difficult to see any reason, consistently with the legislative purposes which I have identified above, as to why that should be the outcome in such a situation.

Instead, it is consistent with the language and legislative purpose of s 75A that this provision operates to allow information from intercepted telephone calls which has been given in evidence in an exempt proceeding under s 74 or s 75 to be admitted in evidence in a subsequent proceeding, irrespective of whether the warrants were given in evidence in the exempt proceeding.

The Teplitsky Parties’ submission that it is necessary for the party tendering information under s 75A to prove that the warrant complies with all requirements of the TIA Act in order for it to be a valid warrant highlights a further problem with their interpretation of that provision and, in particular, their contention that it is necessary to prove that the relevant information both was admitted, and was admissible, under either s 74 or s 75. Let it be assumed that information was admitted under s 74 in an exempt proceeding and that it emerged, when the information was sought to be tendered under s 75A, that there was some minor irregularity or defect in the relevant warrant which meant that that the information was not “lawfully intercepted information” within the meaning of s 74, but nonetheless would have been admissible under s 75. On the Teplitsky Parties’ interpretation, this information could not be admitted in evidence under s 75A, because it was admitted (but not admissible) under s 74, and was admissible (but not admitted) under s 75. It is difficult to see any justification for such an outcome, particularly in light of the express legislative purpose of s 75A, namely, to ensure, in response to Wood v Beves, that when material had already been admitted in an exempt proceeding, it was admissible in any subsequent proceeding.

The Teplitsky Parties argued that the Plaintiffs’ interpretation of s 75A would give rise to potential injustice if there were some substantial defect or irregularity in the relevant warrant, or some other matter, which meant that information which was in fact admitted in the exempt proceeding under s 74 was not admissible under the TIA Act. The Teplitsky Parties submitted as follows:

It would be expected that, when evidence is tendered in a prosecution for a serious offence which is punishable by (as here) a lengthy term of imprisonment, those appearing in that proceeding would be astute to any potential issue regarding the admissibility of intercepted conversations, and that any such issue would be raised, and determined in that exempt proceeding. Given that is so, it is difficult to see, where information has in fact been admitted under s 74 of the TIA Act, any justification consistent with the language or purpose of s 75A for requiring a party who tenders such information in a subsequent proceeding positively to establish that the material in fact met the requirements for admissibility under s 74.

Further, if it did turn out that the example posited by the Teplitsky Parties were to eventuate, there would be a means for the Court to address any potential injustice to the defendant in the subsequent proceeding. As explained below, s 78 of the TIA Act operates to preserve any other objection that may be taken to the tender of information which satisfies the requirements of s 75A. So, it would, for example, be open to a defendant, in the situation described above, to take an objection under s 135 of the Evidence Act on the basis that there would be unfair prejudice to the defendant in allowing the plaintiff to adduce and rely on material which, although admitted in an exempt proceeding, was not in fact admissible in that proceeding, and would have been excluded if an available objection had been taken. The Court would then have a discretion to exclude this evidence, if it formed the view that its probative value was substantially outweighed by the danger that it might be unfairly prejudicial to the defendant.

In this scenario, it would not be for the plaintiff who tenders information that has previously been admitted in an exempt proceeding positively to establish that this material was in fact admissible in that prior proceeding, but instead it would be for the defendant to raise and establish any issue regarding the admissibility of such material in the prior proceeding. This approach to the issue raised by the Teplitsky Parties gives rise to no unfairness to the defendant, since the defendant and the plaintiff are equally able to issue subpoenas to the relevant agency (here, the AFP) to explore any issue about the admissibility of the material in the exempt proceeding. Further, this approach to the issue is consistent with the language and legislative purpose of ss 75A and 78, in that it recognises that material which has been given in evidence in an exempt proceeding is thereby able to be given in evidence in a subsequent proceeding, but at the same time recognises that the defendant is able to take, at the time of its tender, any other available objection to the material, including by reason of any unfair prejudice occasioned by the tender of such material in the subsequent proceeding.

For those reasons, I ruled that any information which was given in evidence in an exempt proceeding (whether under s 74 or s 75) is thereby able to be given in evidence in these proceedings pursuant to s 75A of the TIA Act.

At the time of giving that ruling, I noted three matters.

First, it followed that it was necessary for the Plaintiffs to prove that each of the recordings and transcripts of intercepted telephone conversations which they tendered in these proceedings had, in fact, previously been admitted in an exempt proceeding. As already noted, the Plaintiffs established that this was the case by tendering extracts of the transcripts of the Chalabian Proceeding, the Cranston Proceeding and the POCA Proceeding.

In those proceedings, each of the recordings and transcripts in question was identified, at the time of the tender, as an intercepted telephone conversation. Each was admitted into evidence. The only means by which such material could be admitted into evidence in an exempt proceeding is under s 74 (where lawfully obtained) or s 75 (where obtained in contravention of s 7(1) of the TIA Act). It follows that all of this material was given in evidence in an exempt proceeding under s 74 or s 75 of the TIA Act.

Secondly, a transcript (or recording) of an intercepted telephone conversation could only be tendered in these proceedings if the transcript (or the recording) was itself previously tendered in an exempt proceeding. In this regard, I indicated that I would follow the decision of Brereton J in A Pty Ltd v Z [2007] NSWSC 999 at [9]-[10], where his Honour held that a transcript of a call was “not the same information” as a recording of the call, with the result that if a transcript (but not the recording) was given in evidence in an exempt proceeding, then only the transcript (and not the recording) was admissible in the subsequent proceeding. In the present case, the extracts of the transcripts from the exempt proceedings which have been tendered by the Plaintiffs establish that each of the transcripts or recordings that they have tendered was in fact a document which was in evidence in an exempt proceeding.

Thirdly, I did not, by rejecting the Teplitsky Parties’ global objection to all of the intercepted call recordings and transcripts thereby determine that all of that material should be admitted. At the time of rejecting this ruling, I stated as follows:

Section 78 of the TIA Act provides as follows:

The Teplitsky Parties took a further global objection to all of the intercepted calls (and to the conversations obtained by surveillance devices and to the contents of the mobile phones seized by search warrants), namely, that all of this material was inadmissible by reason of s 69(3) of the Evidence Act.

For reasons outlined below (at paragraphs [134]-[140]), I also ruled against this objection on the second day of the hearing, but emphasised when doing so that “any objections to specific documents … may still be taken” on any other basis.

When making submissions regarding whether the recordings and transcripts of the intercepted telephone calls were admissible under the TIA Act, the Teplitsky Parties had indicated that, if this issue were decided against them, they would also make objections regarding the admissibility of the recordings and transcripts on the basis that the speakers were not identified (and therefore, presumably, the intercepted calls could not rationally affect any the assessment of the probability of any fact in issue). The submission was foreshadowed by Senior Counsel for the Teplitsky Parties in the following terms:

The Plaintiffs responded to this submission by tendering a paragraph from Mr Teplitsky’s affidavit, in which Mr Teplitsky referred to one of these telephone recordings, and deposed as follows:

The Plaintiffs submitted, and I accept, that this amounted to an admission by Mr Teplitsky that he is the person speaking on the relevant recorded telephone call (since he referred in this passage, twice, to words which “I used” in this recording). Further, this is the sum total of the affidavit evidence that Mr Teplitsky gave in response to the “Telephone intercepts”. In circumstances where Mr Teplitsky referred to, and queried, only one of the statements attributed to him, I accept the Plaintiffs’ submission that Mr Teplitsky impliedly admitted that he engaged in, and said the words recorded in, each of the other intercepted conversations in which he is identified as having participated.

Further, as the Plaintiffs pointed out, there was documentary evidence of the telephone numbers from which and to which intercepted calls were made, and documentary evidence of the names of the subscribers in respect of those telephone numbers; and, in numerous instances, there is evidence in the telephone calls themselves (such as the use of first names) which assist in identifying the speakers.

In any event, the Teplitsky Parties did not ultimately object to any individual recording or transcript on the basis that the speakers involved in that particular conversation could not be identified, and the Teplitsky Parties’ closing submissions proceeded on the basis that Mr Teplitsky did in fact participate in the intercepted telephone calls in which he is recorded as having been a participant. In particular, the Teplitsky Parties relied on the evidence of the intercepted calls in which Mr Teplitsky is recorded as having participated as showing the extent what Mr Teplitsky knew (and did not know) regarding the conduct of Mr Rostankovski and Mr Hausman.

Section 45(3) of the SD Act provides as follows:

“Protected information” is defined as including “any information obtained from the use of a surveillance device under a warrant ”: s 44. A “warrant” is defined as including a “surveillance device warrant”, being “a warrant issued under Division 2 of Part 2 or under subsection 35(4) or (5)”: s 6.

As set out above, the prohibition in s 45(3) on the admissibility of protected information is subject to the exceptions specified in ss 45(4) and (5). The Plaintiffs relied on the exception in s 45(4)(a), which provides, relevantly, that s 45(3) does not apply to:

The Teplitsky Parties advanced three main reasons why the Plaintiffs had failed to satisfy the requirements of s 45(4)(a).

First, the Teplitsky Parties contended that the Plaintiffs could not establish that the recordings in question were “disclosed in proceedings” by relying on Constable Todoroski’s hearsay evidence of the contents of the transcripts of prior proceedings. The Plaintiffs met this objection by tendering extracts from the transcript of the Cranston Proceeding which established that each of the surveillance device recordings in question was played in Court in that proceeding.

Secondly, the Teplitsky Parties submitted that these recordings were not disclosed “in open court” because there appeared to have been orders made under the Court Suppression and Non-publication Orders Act 2010 (NSW) (CSNPO Act) and the Plaintiffs had not adduced evidence of what those orders were.

In response, the Plaintiffs referred to the decision of Johnson J in R v Chalabian (No 2) [2022] NSWSC 63, which established that the order made in the Chalabian Proceeding was an order prohibiting the publication of anything said in the trial of Mr Chalabian until verdicts had been returned in the Cranston Proceeding, or until 5.00pm on 9 December 2022, or until further order of the Court (at [13]). This order was made because the trial in the Chalabian Proceeding was scheduled to commence two months before the start of the Cranston Proceeding (at [7]-[10], [18]-[19]). In making the order, Johnson J emphasised that it was “a temporary order” and that there “will be a capacity to publicise the trial of Mr Chalabian, and the evidence given in it, at a later time and when the risk to the administration of justice in the second trial has passed” (at [20]). A notation on the judgment indicates that the publication restriction was subsequently lifted, and this judgment was published in March 2023.

In any case, as the Plaintiffs submitted, a temporary non-publication order does not mean that the proceedings were not conducted “in open court”. A non-publication order is an order that prohibits or restricts the publication of information, but that does not otherwise prohibit or restrict the disclosure of information: CSNPO Act, s 3.

Thirdly, the Teplitsky Parties argued that the requirement in s 45(4)(a) that the information has been disclosed in open court “lawfully” amounted to a requirement that the information was in fact admissible, and therefore “lawfully” disclosed, in the Cranston Proceeding.

I do not accept this submission. The adverb “lawfully” qualifies the verb “has been disclosed”. The question, therefore, is whether the disclosure of the material was lawful in the proceedings in question. In circumstances where the recordings were admitted into evidence in the Cranston Proceeding (following a contested hearing about their admissibility: R v Cranston (No 6) [2020] NSWSC 1777), and where each of the recordings was then played to the jury, I consider that the information has been “lawfully” disclosed in that proceeding. The fact that the disclosure in court has occurred in accordance with rulings on admissibility made by the trial judge means that the “disclosure” is “lawful” for the purposes of s 45(4)(a) of the SD Act.

For those reasons, I ruled on the second day of the hearing that the surveillance device recordings of various conversations at the offices of Clamenz lawyers had been lawfully disclosed in open court within the meaning of s 45(4)(a), with the result that the prohibition in s 45(3) of SD Act on using such material in evidence did not apply.

At the time of giving this ruling, I made clear that I had not ruled that the individual recordings were, as a whole, admitted into evidence, and it was open to the Teplitsky Parties to take any other objections to the admissibility of any of these recordings. However, besides taking a global objection based on s 69(3) of the Evidence Act, which I address below, the Teplitsky Parties did not ultimately take any other objection to the tender of the Clamenz recordings. As matters transpired, this material – which comprised recorded conversations involving Mr Rostankovski and the Plutus Officers – received little attention in closing submissions, given the concessions by the Teplitsky Parties that the Plutus Officers had paid away more than $24m from Plutus Payroll’s account and had done so, in breach of their duties, because they were being blackmailed.

The Teplitsky Parties contended that, by reason of s 69(3) of the Evidence Act, each of the recordings and transcripts that was made by the AFP, and each of the documents setting out data extracted from mobile phones by the AFP (including WhatsApp conversations) was inadmissible in these proceedings. Section 69(3) provides an exception to the business records exception to the hearsay rule that is contained in s 69(2) of the Evidence Act. It provides as follows:

In Averkin v Insurance Australia (2016) 92 NSWLR 68; [2016] NSWCA 122 at [114], Leeming JA made the following observations about the rationale underlying s 69(3)(a) and (b):

Section 69(3)(a) “will at least ordinarily require an answer to the question why the representation was prepared or obtained”: Averkin v Insurance Australia at [112] per Leeming JA. The reference to the “preparing” of the representation directs attention to the state of mind of the person who formulated or framed the terms in which the relevant representation was made, while the reference to the “obtaining” of the representation directs attention to the state of mind of the person who sought the representation or procured it to be made: Australian Competition and Consumer Commission v Advanced Medical Institute Pty Ltd (No 2) (2005) 147 FCR 235; [2005] FCA 1357 at [25]-[26]; quoted with approval by Campbell JA in Thomas v State of New South Wales (2008) 74 NSWLR 34; [2008] NSWCA 316 at [25].

The relevant “representations” in this case were those made by the participants in the conversations (such as Mr Teplitsky, Mr Rostankovski and the Plutus Officers). It does not matter that the AFP, in intercepting and recording the conversations, had in contemplation that a criminal proceeding might follow as a result of those recordings being made. What matters is the state of mind of the persons who sought, or framed, the representations made in the course of the recorded conversations. None of those individuals was aware, at the time of engaging in the relevant conversations, of any criminal investigation. It follows that s 69(3)(a) does not apply.

For the purposes of s 69(3)(b), the issue is whether the representation was “made in connection with an investigation relating or leading to a criminal proceeding”. In Averkin v Insurance Australia at [113], Leeming JA observed (at [113]) that:

In the present case, I do not consider that any of the representations contained in the recorded conversations, or in the transcripts of those conversations, or in the WhatsApp conversations could be said to be a representation “made in connection with” an investigation relating or leading to a criminal proceeding. In each case the maker of the representation was entirely unaware of the existence of any such investigation. It follows that s 69(3)(b) does not apply.

For those reasons, I rejected the global objection to all of the material produced by the AFP. I made clear at the time of providing this ruling that it was still open to the Teplitsky Parties to take any other objection to the admissibility of individual recordings, transcripts or WhatsApp conversations, “including because it is said that the document is not a business record within s 69(1)”.

In deciding whether I am satisfied that the Plaintiffs’ case has been proved on the balance of probabilities, I must take into account the nature of the cause of action, the nature of the subject-matter of the proceeding, and the gravity of the matters alleged: Evidence Act 1995 (NSW), s 140(2).

In these proceedings, the Plaintiffs make serious allegations that Mr Teplitsky engaged in “money laundering” with actual knowledge that the funds had been obtained through improper means, or alternatively did so in circumstances where he wilfully shut his eyes to the obvious, or wilfully and recklessly failed to make such inquiries that an honest and reasonable person would make in respect of the source of the funds.

In Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34, Dixon J (at 361-362) observed that “when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found”, and continued:

In Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 at 449-450; [1992] HCA 66, Mason CJ, Brennan, Deane and Gaudron JJ referred to this passage from Dixon J’s judgment and explained that:

To similar effect, in Qantas Airways Ltd v Gama (2008) 167 FCR 537; [2008] FCAFC 69 at [126], French, Branson and Jacobson JJ noted that:

In the present case, no witness who was involved in the events in question was called to give evidence. The Plaintiffs’ case against the Teplitsky Parties essentially depended on inferences being drawn from primary documents (including, in particular, the recorded conversations and the WhatsApp messages).

Where an applicant’s case rests on inferences from primary facts, it is not enough for the circumstances to give rise to conflicting inferences of equal degrees of probability: Australian Competition and Consumer Commission (ACCC) v Amcor Printing Papers Group Ltd (2000) 169 ALR 344 at [79] (Sackville J); [2000] FCA 17. In Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 at 5, the High Court (Dixon, Williams, Webb, Fullagar and Kitto JJ) observed as follows (emphasis added):

In considering whether the Plaintiffs’ case has been established, it is necessary to have regard to the inferences available from the evidence as a whole, and not simply those available from individual pieces of evidence. In Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262; [2000] NSWCA 29 at [90], Spigelman CJ observed that:

Similarly, in Australian Broadcasting Corporation v Chau Chak Wing (2019) 271 FCR 632; [2019] FCAFC 125 at [134], the Full Court of the Federal Court (Besanko, Bromwich and Wheelahan JJ) observed that:

The Teplitsky Parties served affidavits from Mr Teplitsky and his business associate, Mr Felix Milgrom, but did not call either of them to give evidence at the hearing. The Teplitsky Parties also did not call Mr Rostankovski, for whom they had served an outline of evidence.

Despite that, the Teplitsky Parties contended that a Jones v Dunkel inference should be drawn against the Plaintiffs, by reason of their failure to call Mr Daniel Hausman as a witness. Mr Hausman was a participant in the blackmail scheme with Mr Rostankovski and, as outlined in Section D of the judgment, was a participant in numerous conversations with Mr Teplitsky upon which the Plaintiffs relied.

The Teplitsky Parties noted that Mr Hausman, who pleaded guilty to offences relating to the blackmail scheme and money laundering, was acknowledged by the AFP to have had a “high value” in the prosecution of his co-offenders: referring to R v Hausman [2021] NSWDC 846 at [112]-[114].

The Teplitsky Parties submitted as follows:

In response, the Plaintiffs referred to the fact that Mr Hausman has been convicted of serious crimes of dishonesty and submitted that, in those circumstances, it was reasonable for them not to call him. As noted in Section F below when dealing with the issue of knowledge, the Teplitsky Parties contended that Mr Hausman concealed the source of the funds used in the transactions from Mr Teplitsky and, if asked about these matters, Mr Hausman would have lied to him. As the Plaintiffs submitted, the Teplitsky Parties were, in effect, seeking to have it both ways, complaining that Mr Hausman was not called by the Plaintiffs to give his version of events and at the same time seeking to brand him as a liar.

In any case, I accept the Plaintiffs’ submission that Mr Hausman was not in their camp. He could just have easily been called by the Teplitsky Parties, either in answer to the Plaintiffs’ allegations or in order to support their various affirmative defences.

For those reasons, I do not draw any adverse inference from the Plaintiffs’ failure to call Mr Hausman.

In contrast, the Court is entitled to draw an adverse inference from Mr Teplitsky’s election not to give evidence in defence of the claims against him and his decision not to call his business associate, Mr Milgrom, who was also involved in a number of the communications (and who swore an affidavit which was served by the Teplitsky Parties). In particular, the Court is entitled to draw an inference against the Teplitsky Parties that the evidence of Mr Teplitsky and Mr Milgrom would not have assisted the Teplitsky Parties’ case; and to draw, with greater confidence, inferences against them that are open on the evidence. As Kitto J put it in Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 at 308:

In Ling v Pang [2023] NSWCA 112 at [27], Kirk JA said (Leeming and Mitchelmore JJA agreeing) that:

As Rich J observed in Insurance Commissioner v Joyce (1948) 77 CLR 39 at 49; [1948] HCA 17, “when circumstances are proved indicating a conclusion and the only party who can give direct evidence of the matter prefers the well of the court to the witness box a court is entitled to be bold”.

A Jones v Dunkel inference is not a substitute for evidence. If there is no evidence of a matter, the inference cannot fill the void: Bellevarde Constructions Pty Ltd v L’Officina by Vincenzo Australia Pty Ltd [2022] NSWCA 246 at [37] per Brereton JA (White JA and Simpson AJA agreeing). Nonetheless, while the silence of one party cannot “fill the place of actual evidence on an issue”, it may “serve to resolve a doubt or an ambiguity, especially where the facts are peculiarly within the knowledge of the silent party”: Tozer Kemsley & Millbourn (Australasia) Pty Ltd v Collier’s Interstate Transport Service Ltd (1956) 94 CLR 384 at 403; [1956] HCA 6 per Fullagar J.

The Plaintiffs’ case against the Teplitsky Parties is essentially documentary, and depends on inferences being drawn from the whole of the available evidence.

Given that is so, and given that there is extensive overlap in the evidence relevant to the different issues which arise, I have set out below a chronological summary of the documentary evidence to which the Plaintiffs and the Teplitsky Parties referred in their submissions. Sections E and F of the reasons for judgment then proceed to address the inferences to be drawn from this material regarding, respectively, the transactions in issue and Mr Teplitsky’s knowledge at the time of those transactions.

For almost all of the conversations set out below, there was both an audio recording and a transcript available. A significant number of those audio recordings were played in full in the course of the proceedings.

I indicated at the hearing that, if there was an issue about the accuracy of any of the transcripts, I would listen to the corresponding recording to resolve any such issue.

The Teplitsky Parties did not, in closing submissions, raise any issue about the accuracy of any of the transcripts which were in evidence. Nor did they raise any issue about the accuracy of the transcript of the surveillance device recordings of various conversations at the offices of Clamenz lawyers, which was prepared by the Plaintiffs’ solicitors and which was provided to the Court as an aide memoire and marked for identification.

In those circumstances, although I have listened to a number of the audio recordings, I have set out the contents of the recorded conversations solely by reference to the transcripts which were in evidence (or, in the case of the Clamenz recordings, the transcripts which were provided as an aide memoire).

On 1 November 2016, there was a telephone call between Mr Rostankovski and Mr Hausman. In the course of their conversation, Mr Rostankovski referred to “research” which he had done on “monthly movement” of funds. He said that this had revealed “really great news”, namely, that the flow of moneys was much higher than he had expected: “I was looking at it, like eight or whatever it was, six, eight, whatever, but now it’s crested to about twenty”. He told Mr Hausman that he would monitor funds in December, January and February to “make sure it’s the same”, and then “that’s enough research”. Given subsequent events, it is likely that Mr Rostankovski was referring to his monitoring of the amount of the payments that were moving in and out of Plutus Payroll’s bank account, which had “crested” to around $20m, and conveying his intention to use this “research” to put into effect the Blackmail Plan early in the following year.

On around 16 November 2016, two deeds were entered into relation to a development at 47-53 Wentworth Avenue, Surry Hills (the Wentworth Development). (The date of entry into the two deeds is referred to in two later documents which were prepared for the rescission of, respectively, each of those deeds.) They are entitled “Deed No 1” and “Deed No 2”.

In each of Deed No 1 and Deed No 2, the “Developer” is defined as referring to two entities: Wentworth Prime Pty Limited (Wentworth Prime) in its own capacity and as trustee of the Wentworth Prime Trust and Wentworth Units Pty Limited (Wentworth Units) in its own capacity and as trustee of the Wentworth Trust. Mr Teplitsky was a director and shareholder of Wentworth Units, and Mr Milgrom was a director and shareholder of Wentworth Prime. Mr Teplitsky and Mr Milgrom are parties to each of Deed No 1 and Deed No 2 as “Guarantors”.

Wentworth Prime and Wentworth Units held units in Mrs Wentworth Pty Ltd as trustee for the Mrs Wentworth Unit Trust, which was the owner of the Wentworth Development (Owner).

The “Buyer” under Deed No 1 is a company called H2O Pty Limited as trustee for H2O Trust. H2O was a company associated with Mr Tristan Waters (hence its name).

The “Buyer” under Deed No 2 is Syd Asset Pty Limited. Mr Rohan Arnold was a director and shareholder of Syd Asset.

Each of Deed No 1 and Deed No 2 is in a similar form. The recitals stated that the Buyer wished to buy units in the Wentworth Development from the Owner, but that this could not occur until the development application had been approved. Pursuant to clause 1.2, the Buyer agreed to purchase units, with the selection of units to be made no later than six months after notice was given by the Developer that development consent had been issued for the Wentworth Development.

Clause 1.2 also stipulated the means by which the purchase price for those units would be determined. Relevantly, under the terms of Deed No 1 and Deed No 2 respectively, H2O was to receive a discount of $4.55m on the market price of the units in the Wentworth Development, and Syd Asset was to receive a discount of $4.05m. Mr Teplitsky and Mr Milgrom guaranteed the Developer’s obligations under each of Deed No 1 and Deed No 2.

There is no evidence to explain why Mr Teplitsky and Mr Milgrom agreed to provide discounts on the market price of units in the Wentworth Development, totalling some $8.6m, in favour of these entities.

On 7 December 2016 at 3.41pm, there was a telephone call between Mr Hausman and Mr Teplitsky.

This is the first recorded conversation involving Mr Teplitsky. However, it is apparent that there had been previous discussions between Mr Hausman and Mr Teplitsky regarding the subject matter of this conversation, since the conversation commences with Mr Teplitsky proposing “two fifty”, “one for one”, without any preamble or any explanation of what is being discussed.

There followed discussion about money being put through an entity called Cedar Capital, which Mr Hausman had used in the past “when I bought my house”. Mr Teplitsky pointed out that “Cedar Capital will end up paying tax”. The conversation then continued as follows (emphasis added):

Given that Mr Hausman reported back to Mr Rostankovski shortly after this call (see below), I infer that “my guy who wants to wash it” was a reference to Mr Rostankovski. From the terms of this conversation, it does not appear that, at this stage, Mr Hausman had revealed Mr Rostankovski’s name to Mr Teplitsky. The term “wash” was used three times in this short conversation. Mr Teplitsky indicated his agreement to assist in getting the money “washed” (“all right, that’s fine”).

The conversation concluded with Mr Teplitsky asking Mr Hausman to tell him “who to … give a cheque to”, and telling Mr Hausman that he would let him know “which company to invoice”, and Mr Hausman stating: “then, we’ll work out what the wording is on the invoice”. It can be inferred that the plan was for documentation (in the form of a “cheque” or an “invoice”) to be created once the substance of the “washing” deal had been agreed.

On the same day at 6.56pm, there was a telephone call between Mr Hausman and Mr Rostankovski. Their conversation included the following exchanges (emphasis added):

Having regard to the terms of the conversation which took place between Mr Hausman and Mr Teplitsky shortly before this call, it is evident that “MT” is Mr Teplitsky, and “he can do it” is a reference to Mr Teplitsky’s willingness to assist in the proposal to “wash” money for Mr Rostankovski’s benefit, so that it “comes back … squeaky clean”. The plan to use a “lawyer’s trust account” to get the Plutus Funds “out that way” was subsequently put into effect, with the Lands Legal Trust Account being used for this purpose. This call reveals that Mr Hausman and Mr Rostankovski were taking steps to ensure, prior to putting the Blackmail Plan into effect, that they had the means available to “clean” the funds which they expected to receive.

On 25 January 2017, Mr Rostankovski had a telephone discussion with Mr Menon regarding a “garnishee order on all the accounts” which had been served on the BOT entities by the ATO. Mr Rostankovski read the contents of the letter from the ATO to Mr Menon, who said: “the GST and PAYG yeah, we’re cooked” and “we’re fucked with a capital F”.

On 30 January 2017, Mr Rostankovski and Mr Hausman had a telephone call during which they discussed when the Blackmail Plan would be executed and what Mr Rostankovski would say to the Plutus Officers.

Mr Rostankovski said he “wanted to know are we still gunna aim for Wednesday or should we do it Thursday”, explaining he was “fine either way”. As set out below, Mr Rostankovski’s meeting with the Plutus Officers, at which he put the blackmail scheme into effect, occurred on the following Wednesday, 1 February 2017. Mr Rostankovski told Mr Hausman that “there’s key words to say to ‘em [the Plutus Officers] and the skeleton of the whole thing, is enough to just send them into panic mode”.

On 30 and 31 January 2017, Mr Chalabian sent WhatsApp messages to Mr Hausman, providing him with the bank details for the Lands Legal Trust Account. Mr Hausman forwarded these details on to Mr Rostankovski.

On 1 February 2017 at 3:41am, Mr Hausman sent a WhatsApp message to Mr Chalabian in the following terms:

Mr Palumberi was a director of one of the BOT entities. Mr Hausman was indicating to Mr Chalabian that although the funds which were to be paid into the Lands Legal Trust Account as a result of the Blackmail Plan were to be notionally put into the name of Mr Palumberi, those funds would in fact be subject to the control of Mr Hausman and Mr Rostankovski (“once it hits [the Lands Legal Trust Account] – we take it from there”).

At 4:16am the same morning, Mr Hausman sent another WhatsApp message to Mr Chalabian, in which he said: “If transaction successful, please do not accept calls from Dev Menon / Adam Cranston”. At 8:26am, Mr Chalabian responded: “Dan fully understand….”.

On 1 February 2017, there was a meeting at the offices of Clamenz lawyers that was attended by Mr Rostankovski, Mr Menon, Mr Cranston and, for parts of the meeting, various other persons. It was at this meeting that Mr Rostankovski put the Blackmail Plan into action.

The recordings of this meeting were around 3 hours in length.

It is unnecessary to address the detail of how the Blackmail Plan unfolded in the course of this meeting, given the concessions that have been made by the Teplitsky Parties that the Plutus Officers, in breach of their duties, caused more than $24m to be paid into the Lands Legal Trust Account as a result of the Blackmail Plan. Some key events in the course of the meeting are summarised below.

At the start of the meeting, Mr Rostankovski introduced a Mr Steve Barrett. (The Plaintiffs did not suggest that Mr Barrett was privy to the Blackmail Plan.) Mr Barrett stated that he was a journalist, had been contacted by Mr Palumberi, and had heard serious allegations that “Plutus holds certain things that should’ve been gone back to tax [and] didn’t, such as holding tax debts, payroll tax dues, GST, superannuation stuff like that”. Mr Barrett indicated that he was planning on investigating these allegations. He referred to discussions with Mr Palumberi and another director of one of the BOT entities, Mr Alex Nappa, and had the following exchange with Mr Cranston and Mr Menon:

Mr Barrett indicated that he could “only go to air with a story … when if somebody wants to give me documents”. He continued as follows:

After Mr Barrett left, Mr Rostankovski said that there was “over $25 million missing” and that “there’s only one way to fix this”. He referred to extensive documentary evidence to support the allegations and said that he had contacted those who might talk and asked “how much do you want to shut your mouth”.

When asked by Mr Cranston what sum was involved, Mr Rostankovski replied: “The total comes to 5 mill. It’s got to come to that trust account. But now this is honestly bro this is the only thing it’s 5 mil to this trust account.”

The “trust account” referred to is the Lands Legal Trust Account. Mr Rostankovski had been provided with the details of that account shortly prior to this meeting, and the first payment of Plutus Funds was made into that account shortly after the meeting.

Mr Rostankovski said the amount of $5m had to be paid “today”, “otherwise we’re going to go in”.

Later, the other Plutus Officers (namely, Mr Anquetil and Mr Onley) joined the meeting with Mr Cranston, Mr Menon and Mr Rostankovski. Mr Rostankovski again stated that the directors of the BOT entities would “shut their mouth” because “they know the money that comes into the … trust account which is already organised”, and that “they’ve structured it in a way where everyone stays tight lipped and it’s pretty much pay to get full safety”. He stated that he had come “with all the evidence” and that he knew “people will get locked up”.

Mr Menon indicated that “everyone’s saying we’ll meet the demands”. He said that it would be necessary “to ensure that the paperwork’s done properly”, and that he would “do that with the other lawyer”, stating: “we’ll do a proper settlement, we’ll get everything signed”.

The following exchange then occurred:

It was agreed that Mr Menon would speak to Mr Chalabian about these matters.

On 1 February 2017 at 12.07pm, Mr Rostankovski reported to Mr Hausman that “they’ll pay a million dollars today”. Mr Hausman said that the money had to “go straight into … Sevag’s [Mr Chalabian’s] trust account”. Mr Rostankovski confirmed that “the money is going to come from PLUTUS, it is going to Sev”. Mr Hausman commented that the “way they document it” was “important”, “because when it hits the account, what we don’t want is any blow back”.

On 1 February 2017 at 10.29pm, Mr Menon sent Mr Chalabian a draft deed “that I believe reflects the position outlined by your clients in the meeting”. He also noted that his client “has arranged for the $250,000 discussed in the meeting to be sent to your trust account on the understanding that this payment was a payment made by the direction of your clients on the understanding contained within the attached Deed”.

As Mr Menon foreshadowed, the sum of $250,000 was paid from Plutus Payroll’s bank account into the Lands Legal Trust Account on 1 February 2017.

On 2 February 2017, Mr Rostankovski and Mr Menon had three telephone calls during which they discussed the structure of the “settlement deed”. During these calls, Mr Menon confirmed that moneys would be paid from Plutus Payroll to the Lands Legal Trust Account on a regular basis in response to the blackmail threats. For example, Mr Menon made the following statements to Mr Rostankovski (emphasis added):

There is little doubt that, despite his professed reluctance to use the word “extortion” (which he proceeded to use three times), Mr Menon well understood the substance of the deal being discussed with Mr Rostankovski. The Plutus Officers would cause money to be transferred from Plutus Payroll to the Lands Legal Trust Account (“we’ll transfer it to the trust account”), with payments continuing to be made on a regular basis (“everyday you’ll be getting money if you know what I mean”), in return for being “protected” from “the risk” of having the “tax fraud” exposed.

On 3 February 2017 at 9.27am, Mr Hausman called Mr Chalabian, and they discussed the proposed blackmail deed. Mr Chalabian explained that he wanted the deed to contain an acknowledgement that “these sub-contractors have got creditors … and we’re giving you this five million dollars to settle those creditors”. He explained that: “It’s not naming what the creditors are, what we can do internally is engineer it so that those creditors are for example, director’s fees, internal consulting fees, we can put any sort of creditors in line”. Mr Chalabian also stated that “the five [million] comes out first, once we get our five we almost don’t care what these guys do”.

On 3 February 2017 at 10.22am, Mr Hausman sent Mr Chalabian the following WhatsApp message:

Mr Menon executed a “Deed of Acknowledgement” which was dated 3 February 2017 (the First Blackmail Deed). The parties to this deed were named as Plutus Payroll, seven BOT entities, and directors of those BOT entities, including Mr Palumberi, Mr Nappa and Mr Ashley Mills.

The Plaintiffs submitted, and the Teplitsky Parties did not dispute, that the First Blackmail Deed made no logical or commercial sense, was internally inconsistent, and did not record a genuine or legitimate transaction.

The recitals to the First Blackmail Deed refer to an arrangement in about July 2014 between Plutus Payroll and a company called Dumonde Holdings Pty Ltd trading as Omni Payroll, whereby Dumonde would engage employees on behalf of Plutus Payroll to provide “IT Labour Contracting services to various other clients of [Plutus Payroll]”. The director of Dumonde was said to be Mr Peter Larcombe. The recitals stated that, as of 1 July 2016, the only companies providing employees to Plutus Payroll were the BOT entities. They also stated that in around July 2016, the directors of the BOT entities had become aware that “other companies associated with Mr Larcombe (‘Other Companies’)” were significantly behind in their obligations to creditors, including the ATO, and that the directors of the BOT entities had been “asked to assist the Other Companies from the funds of the [BOT entities]”. There was no explanation as to why the Plutus Group would pay funds to unrelated companies, which were associated with Mr Larcombe, in order to assist with meeting their obligations to creditors, or on what basis those moneys would be paid. The recitals continued that on around 24 January 2017, the BOT entities had informed Plutus Payroll that the ATO had garnished their bank accounts for default assessments for PAYG tax and “that as a result of this the [BOT entities] were unable to continue to comply with their obligations to [Plutus Payroll].” The recitals concluded with a statement that the parties to the deed were “keen to ensure” that the BOT entities could meet their obligations to employees, the ATO and “any other creditors”.

Clause 2 of the First Blackmail Deed provided as follows:

Clause 4 of the First Blackmail Deed provided as follows:

As the Plaintiffs submitted, the substantive terms of the First Blackmail Deed are not consistent with any “loan” arrangement to Mr Larcombe’s companies and are disconnected from the matters set out in the preamble. There is no explanation as to why Plutus Payroll is paying amounts totalling $5m to the BOT entities under clause 2. Nor is there any provision securing Plutus Payroll’s rights in the event that the BOT entities did not perform their obligations under clause 4.

In truth, the First Blackmail Deed was a ruse to explain the payment of $5m of Plutus Funds into the “Solicitors Trust Account” (clause 2(a)), which were then available to be disbursed to third parties.

On the date of the First Blackmail Deed, a further $750,000 was paid from Plutus Payroll’s account into the Lands Legal Trust Account. This, together with the initial payment of $250,000, made up the $1m payment which Mr Rostankovski had referred to in his call with Mr Hausman on 1 February 2017.

Further payments were subsequently made by Plutus Payroll into that account. On 15 February 2017, Mr Menon sent an email to Mr Chalabian, confirming that “the balance of the deed was paid today” (that is, the full amount of $5m specified in clause 2(a) of the First Blackmail Deed). However, as set out below, Mr Hausman and Mr Rostankovski decided to extract a further $20m from the Plutus Officers.

On 10 February 2017, Mr Hausman sent a WhatsApp message to Mr Chalabian, in which he said: “In 7 days, they have paid $3.7m and the $5m will be done by next week. We then need to go to town on them for the a[d]ditional $20 for their obligations under 2(b) (c) (d) etc”. This is a reference to clauses 2(b)-(d) of the First Blackmail Deed and an intention, subsequently put into effect, to extort a further $20m from the Plutus Officers.

On 16 February 2017 at 9.27pm, Mr Hausman sent a further WhatsApp message to Mr Chalabian, which included the following statements:

Mr Chalabian responded via WhatsApp several minutes later: “Dan your a super gentleman bud! Absolutely no prob … I will ensure this gets done!”

Mr Hausman sent a further WhatsApp message to Mr Chalabian at 11.35pm on the same day, stating as follows:

On 20 February 2017 at 12:21pm, Mr Chalabian sent an email to Mr Menon, which responded to Mr Menon’s email on 15 February that the balance of the amount due under the First Blackmail Deed had been paid. Mr Chalabian stated that: “Although payments pursuant to clause 2(a) have been made, the amounts pursuant to clauses 2(b) and (c) are still outstanding.” Mr Chalabian indicated that he was meeting with his clients that evening and would provide an update.

Later that day, at 4:31pm, Mr Chalabian sent a WhatsApp message to Mr Hausman that read: “I need to get $5m out of AP file into DR file so it’s safe!” “AP” is a reference to Mr Anthony Palumberi, in whose name the moneys were notionally held in the Lands Legal Trust Account, on being received from Plutus Payroll. “DR” is a reference to Mr Rostankovski.

Not surprisingly, Mr Rostankovski did not want the moneys held in a file in his own name. Shortly afterwards, at 4.40pm, Mr Hausman sent a WhatsApp message to Mr Chalabian, which read as follows:

On 22 February 2017, Mr Chalabian sent an email to Mr Menon, in which Mr Chalabian reported that he had met his clients on 20 February, and stated:

Following this, Mr Chalabian and Mr Menon exchanged emails regarding amendments to the First Blackmail Deed.

A further deed appears to have been executed by the parties to the First Blackmail Deed and witnessed by Mr Chalabian (the Second Blackmail Deed). The recitals referred to the parties’ entry into the First Blackmail Deed (described as the “Old Deed”). Clause 2 of the Second Blackmail Deed was in the following terms:

The Second Blackmail Deed was, like the First Blackmail Deed, a sham, created for the purpose of providing a pretext for the payment of $25m from Plutus Payroll’s bank account into the Lands Legal Trust Account (which was, in fact, paid as a result of the blackmailing of the Plutus Officers by Mr Rostankovski).

During March and April 2017, regular payments continued to be made by Plutus Payroll into the Lands Legal Trust Account.

Between 1 February 2017 and 28 April 2017, a total amount of $24,244,740.64 was paid. As noted above, it is common ground that the Plutus Officers, in breach of their duties, caused this amount to be paid in response to the blackmail threats made by Mr Rostankovski.

The moneys in the Lands Legal Trust Account were initially paid into that account in the name of Mr Palumberi, but were subsequently transferred into the Lands Legal client file in the name of Mr Mills, who was named in the Blackmail Deeds as the director of one of the “Subcontractors” (the BOT entities).

As set out above, on 20 February 2017, Mr Hausman had sent Mr Chalabian a WhatsApp message in which he instructed him to “create another file being one of the head subbies who takes orders from DR [Mr Rostankovski]”.

In accordance with this direction, Mr Chalabian prepared a “Deed of Agreement” between the Subcontractors and the directors who were named in the Blackmail Deeds, which was dated 3 February 2017, by which those parties irrevocably assigned their interest in the amounts paid under the Blackmail Deeds to Mr Mills, in return for certain payments being made.

In addition, there is a document apparently signed by Mr Palumberi and also dated 3 February 2017 by which he authorised the transfer of funds from the Lands Legal Trust Account in his name to the Ashley Mills Trust Account “in accordance with Deed of Agreement between myself and Ashley Mills and others dated 3 February 2017”.

The Lands Legal Trust Account statement for Ashely Mills shows payments being made into the account from 23 February 2017 onwards, with the description “A Palumberi / Plutus Payroll”, “Plutus Payroll Proceeds re Deed of Agreement” or “Plutus Payroll Proceeds pursuant to Deed of Agreement”. (The evidence set out below makes plain that, although the Plutus Funds paid into the Lands Legal Trust Account were notionally held in the name of Mr Palumberi or Mr Mills, it was Mr Hausman and Mr Rostankovski who gave instructions to Mr Chalabian regarding the payment of those funds out of that account.)

On 17 February 2017, Mr Hausman and Mr Rostankovski had a telephone conversation, in which Mr Hausman recounted a meeting with “Michael”, at which they had discussed his development in Surry Hills. This is likely a reference to Mr Teplitsky. Mr Hausman reported that “Michael” had suggested that “maybe if you guys come in and give me 5 or 6, you know, you can, we can do a deal”. Mr Hausman told Mr Rostankovski that: “Mate, I’ve said to him, he thinks some of our stuff is, you know, investors chucking in. And I said, ‘mate, it ain’t investors’ and I said, ‘we ain’t passive’.” He continued:

On 20 February 2017 at 11.21pm, Mr Hausman sent a WhatsApp message to Mr Chalabian, which stated as follows:

The Teplitsky Parties accepted that “MT” was a reference to Mr Teplitsky. They relied on this message as establishing that Mr Hausman and Mr Chalabian hid “the source” of the funds in the Lands Legal Trust Account from Mr Teplitsky. This submission is addressed in Section F below.

On 24 February 2017 at 3.17pm, Mr Chalabian informed Mr Hausman by a WhatsApp message that “Another 1.3m came in today”. Mr Hausman responded:

“D and MT” is a reference to Mr Rostankovski and Mr Teplitsky (these initials being regularly used in the messages between Mr Hausman and Mr Chalabian to refer to those two persons).

Mr Chalabian replied that he would be “seeing mt [Mr Teplitsky] later in the day”. As a result, Mr Hausman suggested that they meet some time in the afternoon of Saturday, 25 February 2017: “We need to meet all 4 of us”. Having regard to the preceding messages, the “4 of us” are likely to be Mr Hausman, Mr Chalabian, Mr Rostankovski and Mr Teplitsky.

After a number of further messages, including one on 25 February 2017 at 2.21pm from Mr Hausman stating “MT confirmed 4pm Phoenix Hotel”, a meeting was arranged for that venue.

This meeting proceeded, as shown by the fact that Mr Chalabian confirmed by WhatsApp when he arrived at the venue at 4.10pm (“Just got here”) and Mr Hausman responded at 4.11pm: “Mt [Mr Teplitsky] just arrived. I’m 3 away”.

There is no evidence from Mr Teplitsky as to what was discussed at this meeting.

On 28 February 2017 at 8.26pm, there was a telephone call between Mr Hausman and Mr Teplitsky. The entire conversation, which was played in Court, is set out below (emphasis added):

It is plain from Mr Hausman’s final statement (“it’s a deal, we’re going to do it”) that by this time a “deal” of some sort had been arranged, likely at the Woollahra meeting three days earlier. This “deal” involved “a paper for 7”, that is, a $7m transaction. There was an issue regarding the “documentation” or “paper” which would be prepared in relation to this “deal”. In that regard, Mr Teplitsky had been speaking directly to Mr Chalabian to understand “what he was trying to do”.

Mr Teplitsky was keen to ensure that the “documentation” was “clean”, emphasising “it’s clean that’s the main thing”. This was a topic which each of Mr Hausman and Mr Teplitsky agreed should not be discussed on the phone.

On the following day at 11.46am, there was a further telephone call between Mr Hausman and Mr Teplitsky.

The conversation included the following exchanges (emphasis added):

It is likely, given events which followed, that “Tristan” is a reference to Mr Waters, and that “getting his mate and him out of Wentworth” is a reference to buying out the rights in respect of the Wentworth Development which were held by H2O (associated with Mr Waters) under Deed No 1 and by Syd Asset (associated with Mr Arnold) under Deed No 2. The “8 or 10 million dollar bonus” is likely a reference to the combined total of the discounts on the purchase price of units in the Wentworth Development (around $8.5m) to which H2O and Syd Asset were respectively entitled under Deed No 1 and Deed No 2.

In addition, there was discussion about another transaction (“the other one”), with Mr Rostankovski (“Dan”) being willing to pay $2m-3m to Mr Teplitsky (“get 2 or 3 over to you”) which would be “put … towards what we are doing … on Surry Hills … next week”. This appears a reference to the payment of funds pursuant to a planned $7m “loan” transaction, secured by a mortgage over a property in Surry Hills. As outlined below, this “loan” transaction was put in shortly after this conversation.

On 6 March 2017, between 10.28am and 10.53am, Mr Chalabian and Mr Rostankovski exchanged the following WhatsApp messages:

Luminous was incorporated on 6 March 2017. Mr Rostankovski was the sole director and shareholder. As foreshadowed in Mr Chalabian’s message set out above, Luminous was used as the vehicle to advance a “loan” of $7m to Mr Teplitsky’s entities (“Loan to Michael”), which was secured by a mortgage “on short st” (that is, a property located at 2 Short Street in Surry Hills, New South Wales).

An undated and unexecuted “loan” agreement between Tepcorp Holdings as Borrower, Luminous as trustee for Luminous Investment Holdings Discretionary Trust as Lender, and Mr Teplitsky as Guarantor was produced by Mr Teplitsky in response to orders for production made by this Court on 7 February 2020. Clause 2.1 provides that the Lender agrees to make available to the Borrower a cash advance facility. The Facility Limit is defined as “the lesser of $6,000,000 or 65% of the Value of the Secured Property, as is reduced, cancelled or terminated from time to time in accordance with this agreement”. Clause 6.1 provided that the Borrower must pay the Total Amount Outstanding on the Repayment Date, being 3 years from the first Drawdown Date or such later date as the Lender may agree. However, clause 6.2 provided that the Borrower could, on 30 days’ prior notice, prepay all or any part of the outstanding principal, with such payment to include a payment of interest for a minimum period of 18 months on the date that the principal is repaid. Pursuant to clause 12, Mr Teplitsky unconditionally and irrevocably guaranteed all amounts payable by Tepcorp Holdings under the terms of the agreement.

In response to the order for production, Mr Teplitsky also produced an unsigned and unexecuted “Side Deed to Loan Agreement” between the same parties. Clauses 1.1 and 1.2 of this Side Deed provided as follows:

A mortgage over the Short St property dated 15 March 2017 was executed by Mr Teplitsky on behalf of Tepcorp Holdings and by Mr Rostankovski on behalf of Luminous. In addition, Mr Teplitsky signed an “Irrevocable Undertaking” dated 15 March 2017, by which Tepcorp Holdings gave an irrevocable undertaking “to remit from net rental proceeds it receives from its tenant … at 2 Short Street … $87,500 per month to you being interest payable on the Loan Agreement dated the date of this Irrevocable Undertaking”. This material indicates that the “loan” agreement with Luminous was likely entered on or around 15 March 2017.

On 6 March 2017 at 5.39pm, Mr Hausman sent a WhatsApp message to Mr Chalabian stating as follows:

Having regard to the transactions outlined above, I infer that the reference to “michael” is a reference to Mr Teplitsky, and the reference to “7 out to him” is a reference to the “loan” of $7m to Tepcorp Holdings, which was guaranteed by Mr Teplitsky. The “potentially another 4.5-5m” is likely a reference to the transaction which Mr Hausman had discussed with Mr Teplitsky on 1 March 2017, involving “2 and a half” being paid to “Tristan” (Mr Waters) and “his mate” (Mr Arnold) to get them “out of Wentworth” (that is, to rescind Deed No 1 and Deed No 2).

Mr Chalabian replied several minutes later: “I know exactly what you mean! He’s placing massive pressure on everyone”. Given the terms of the message to which Mr Chalabian was responding, “He” is plainly a reference to Mr Teplitsky. It is apparent from these messages that Mr Teplitsky was keen to see that the deals which had been discussed were put into effect, and was putting pressure on Mr Hausman and Mr Chalabian to ensure this occurred.

Later on 6 March 2017 at 10.05pm, Mr Hausman sent a further WhatsApp message to Mr Chalabian, as follows:

At 10.40pm, Mr Hausman added, by way of another WhatsApp:

In this message, Mr Hausman reports that he has negotiated a “deal” for Syd Asset to give up its rights under Deed No 2 in relation to the Wentworth Development in return for a payment of $3m (“now I’ve got him”). It is likely that the persons referred to in the third person (“the deal they wanted”, the “guys” and “the boys”), who have been eager for the “deal”, and for whom the “deal” is “great” are Mr Milgrom and Mr Teplitsky. Mr Chalabian responded to Mr Hausman at 10.11am the following day that he had spoken to “Felix” (Mr Milgrom), and “he will speak to you this am”.

On 7 March 2017 at 1:28pm, Mr Hausman sent an email to Mr Ben Aulich, who was solicitor for Syd Asset. This email stated as follows:

On 8 March 2017 at 12.46pm, Mr Hausman sent the following WhatsApp message to Mr Chalabian:

“FLX” is a reference to Mr Milgrom, and “Mt” is a reference to Mr Teplitsky. The statement that Mr Teplitsky and Mr Milgrom were “seperate [sic] for” the deal with Syd Asset is likely a typographical error for “desperate”, given the terms of the remainder of the message.

On 8 March 2017 at 1.21pm, Ms Harders of Aulich Civil Law sent an email to Mr Chalabian, which relevantly stated as follows:

As set out above, Ms Harders asked for confirmation that Mr Chalabian was acting for Mr Teplitsky, Mr Milgrom, Wentworth Prime and Wentworth Units, and sought confirmation that Mr Hausman’s offer that Syd Asset’s rights in respect of the Wentworth Development under Deed No 2 be voided in return for a payment of $3m was an offer made on behalf of those clients.

Around an hour later, at 2.40pm, Mr Chalabian, by reply email to Ms Harders, confirmed those instructions, stating:

On the basis of these emails, I infer that, by this time, Mr Teplitsky had agreed to a deal with Syd Asset for Deed No 2 to be rescinded in return for a payment of $3m.

On the morning of 8 March 2017, Mr Chalabian and Mr Rostankovski had the following exchange on WhatsApp (emphasis added):

The “loan” with “MT” which was “good to go” is a reference to the $7m “loan documents” between Luminous (which Mr Rostankovski referred to as “my company”), Tepcorp Holdings and Mr Teplitsky. Mr Rostankovski was not going to give approval for this “loan” until Mr Teplitsky “knows it’s me” who is providing the funds.

On 8 March 2017 at 3.14pm, Mr Chalabian sent a WhatsApp message to Mr Rostankovski, stating:

Mr Chalabian and Mr Rostankovski exchanged messages regarding making arrangements for a meeting with Mr Teplitsky on the following day at Double Bay. However, at 6.25pm and 6.41pm, Mr Rostankovski sent messages to Mr Chalabian stating that he was “Going to see MT [Mr Teplitsky] as he has asked me to go past his place” and that he would “have a chat with him now and then arrange things regarding payment with you tomorrow”.

This meeting between Mr Rostankovski and Mr Teplitsky went ahead, since Mr Teplitsky referred to it in a discussion with Mr Hausman on the following day (see below). There is no evidence from Mr Teplitsky regarding what occurred at this meeting.

At 9.04pm, Mr Chalabian and Mr Rostankovski exchanged further messages, arranging to go ahead with their meeting at Double Bay the next day, so that Mr Chalabian could “walk you through loan structure make sure you ok with it”. I infer from this message that, following his meeting with Mr Teplitsky, Mr Rostankovski had agreed to go ahead with the $7m “loan”.

On 9 March 2017 at 1.30pm, there was a telephone call between Mr Hausman and Mr Teplitsky. This conversation was played in Court, and a transcript is also in evidence.

The call commenced with Mr Hausman stating that he had spoken to “Dan” (Mr Rostankovski) and that “we’ll do the one eight today”. This is a reference to an agreement to pay $1.8m to Mr Teplitsky, as recorded in a WhatsApp message sent by Mr Hausman to Mr Chalabian immediately after this call: “Just got off phone to MT [Mr Teplitsky]. Both Dan and I have agreed release [o]f $1.8m today.”

The call then continued as follows (emphasis added):

In this call, Mr Teplitsky proposed that a corporate vehicle be set up by Mr Rostankovski and Mr Hausman for the purpose of “loaning” funds, “wherever that money is coming from”. Mr Hausman responded that this was already planned, no doubt referring to Luminous, which had already been established by Mr Rostankovski.

Mr Teplitsky’s statement that “Dan ... was pretty up front” is likely a reference to the discussion which he had with Mr Rostankovski the previous day. There is no indication in this conversation as to the respects in which Mr Rostankovski had been “pretty up front” with Mr Teplitsky. Mr Teplitsky emphasised in his call with Mr Hausman that he did not want “any problems”: “I don’t want to have any issues”.

Later in the same conversation, the following exchange occurred:

Mr Hausman added: “let me tell you; we’re waiting and Sevag [Mr Chalabian] has spoken to the other lawyer, we’re waiting to hear on Thursday or Friday, if we get what we think we’re getting; which will be another two, we’ll give that to you straightaway”.

During the telephone call, Mr Teplitsky does not ask the identity of the persons (“they”) who were making the payments or of “the other lawyer” who was acting for them.

The call also included the following exchange (emphasis added):

The reference to the “Wentworth stuff” is a reference to the deal being negotiated to rescind Deed No 1 and Deed No 2, which “Felix” (Mr Milgrom) was chasing up with Mr Hausman (“in my ear”). Mr Hausman indicated that he and Mr Rostankovski would be “lending you the money” for the Wentworth transaction, but that this would be done “in a different way” and “secured in a different way” (that is, different from the structure being used for the $7m “loan”).

On 9 March 2017 at 2.01pm, Mr Hausman forwarded to Mr Chalabian, via WhatsApp, a message that he had sent Mr Teplitsky (“FYI to MT”), which was as follows:

Later on 9 March 2017, at 5.49pm, Mr Chalabian sent a WhatsApp message to Mr Hausman, in the following terms (which he forwarded to Mr Rostankovski at 5.50pm): (emphasis added)

The reference to the “DR entity” which would be “lender to MT” is a reference to Luminous. The arrangement that profits be shared “50/50 between DH and DR” is a reference to a deed which Mr Hausman and Mr Rostankovski subsequently entered, which is described below. Mr Teplitsky was “all settled now” with this arrangement.

On 13 March 2017, Mr Rostankovski and Mr Hausman entered into a Deed of Agreement. The Recitals stated as follows:

The $25m of “Capital” to which Mr Rostankovski had “access” was the $25m of Plutus Funds which was expected to be paid into the Lands Legal Trust Account as a result of the implementation of his Blackmail Plan. Clause 1.1 of the Deed provided that, for any “Opportunities” which were presented by Mr Hausman to Mr Rostankovski, in which Mr Rostankovski decided to invest this “Capital”, Mr Rostankovski would pay Mr Hausman a fee equal to 50% of the net profits or revenue.

On 13 March 2017 at 5.59pm, Mr Hausman had a telephone call with Mr Teplitsky. Mr Teplitsky indicated that he had not received the $1.8m payment yet, and that he had not yet signed the “paperwork”. It is not clear which paperwork is being referred to, but this may be the mortgage over the Short St property which was subsequently signed by Mr Teplitsky and Mr Rostankovski and dated 15 March 2017. In this call, Mr Hausman told Mr Teplitsky that (as shown in the extract quoted above) the deed which Mr Hausman had entered with Mr Rostankovski specifically referred to Mr Teplitsky and Mr Milgrom: “I’ve put you in there and also Felix as, um, the only place I’m going to go”. Mr Hausman explained that this meant that “when he [Mr Rostankovski] says or we say let’s invest, the only place I’m going … to, is you”. He said that he wanted to let Mr Teplitsky know “out of courtesy”. Mr Teplitsky responded: “And obviously, I’ll do the right thing as well, out of courtesy”.

Mr Hausman then stated: “well Michael, I’ve worked out while I’m over here all my wealth has been made through you, so it’s the least I can do”. Mr Hausman concluded by saying to Mr Teplitsky “I just want to be honest with you”, and “talk to me whenever you want”.

On 10 March 2017, Ms Harders provided Mr Chalabian with a draft deed, which Mr Chalabian forwarded to Mr Milgrom shortly afterwards. The draft deed was headed “Deed No 3 – Deed of Agreement” (Deed No 3). This draft deed required Wentworth Prime and Wentworth Units to pay $3m to Syd Asset on or before 24 March 2017 to rescind Deed No 2. Mr Chalabian stated as follows in his email to Mr Milgrom:

On 17 March 2017, Mr Chalabian responded by email to Ms Harders with his instructions on the draft of Deed No 3, as follows:

Given that Mr Chalabian was acting for Mr Teplitsky and Mr Milgrom in relation to the negotiation of this deed, I infer that Mr Teplitsky gave, or agreed with Mr Milgrom giving, the instructions set out above.

On 20 March 2017, Mr Chalabian followed up by email with Ms Harders, asking for a revised draft of Deed No 3 “as soon as possible”, stating: “We are aiming to make the payment this Friday 24th”. Further emails followed that day. Ms Harders indicated that her client was not prepared to remove the payment date, and proposed a payment date of 31 March 2017. Mr Chalabian indicated that a date could be added, since “we propose to exchange and pay at the same time”.

Ms Harders sent a revised draft of Deed No 3 to Mr Chalabian in the evening of 20 March 2017, which Mr Chalabian forwarded to Mr Milgrom on the morning of 21 March 2017 at 7.39am, stating: “Ready to execute. I[‘]ll get you to sign at same time as loan documents.” Mr Milgrom replied at 8.23am: “Loan agreements are wrong”. It is evident from the terms of Mr Chalabian’s email that the “loan agreements” which are described by Mr Milgrom as “wrong” are different from the draft of Deed No 3 (by which Deed No 2 was to be rescinded).

The Teplitsky Parties submitted that Mr Milgrom’s email indicated that the proposed deal did not proceed. However, a few hours after this email, at 12.34pm on 21 March 2017, Mr Chalabian sent Mr Milgrom a further email which stated as follows (emphasis added):

This email indicates that, following Mr Milgrom’s email raising an issue about the “loan” agreements, there was a discussion between Mr Milgrom and Mr Chalabian about this issue, which led to updated documents. The attached documents included two draft “loan” agreements which provided that Luminous would advance $2.5m to each of Wentworth Prime and Wentworth Units ($5m in total). The draft “loan” documents provided that the Borrower would pay interest at the Specified Rate (being 10% per annum) and that the Borrower must, on the Drawdown Date, pay to the Lender interest for a period of 6 months in advance.

The attachments to Mr Chalabian’s email also included security agreements which provided for:

Mr Milgrom was the sole director and shareholder of FM Camperdown. Mr Teplitsky was the sole director and shareholder of MT Camperdown. Each of those entities owned 225 units in the Camperdown Prime Unit Trust, and 225 shares in Camperdown Prime Pty Limited, which was the trustee of the Camperdown Prime Unit Trust. Mr Hausman was a director of a company called CREI Camperdown Pty Limited, which owned 450 units in the Camperdown Prime Unit Trust and 450 shares in Camperdown Prime.

The directors of Camperdown Prime were Mr Hausman and Mr Milgrom. Camperdown Prime had entered into a Put and Call Option Deed dated 22 March 2016, pursuant to which it was granted an option to purchase a property at 122-128 Pyrmont Bridge Road, 130 Pyrmont Bridge Road and 206 Parramatta Road in Camperdown, New South Wales (the Camperdown Development). Mr Teplitsky entered the Put and Call Option Deed as “Guarantor”, and guaranteed Camperdown Prime’s obligations under that deed (clause 13).

On 21 March 2017 at 5.35pm, Mr Hausman sent a WhatsApp message to Mr Chalabian, stating: “Please don’t send any emails to bridie [Ms Harders of Aulich Law] re Wentworth before speaking to me as I’m dealing direct with the client.” At 7.00pm, Mr Hausman sent a further message to Mr Chalabian, which included the following statements (emphasis added):

Having regard to these messages, I infer that, by this date, Mr Hausman had “negotiated” a “deal” with Mr Waters and Mr Arnold to rescind Deed No 1 and Deed No 2 (“to get deeds 1 and 2 out – at cost”), and had agreed with Mr Teplitsky and Mr Milgrom that he and Mr Rostankovski would provide the moneys required for this purpose (“we are funding it”). Further, Mr Milgrom and Mr Teplitsky were keen to see this deal put into effect, which was in their interests as guarantors under Deed No 1 and Deed No 2 (“felix doesn’t want to lose opportunity to get this guy our and clean Wentworth”).

Later that evening, Mr Hausman sent further WhatsApp messages to Mr Chalabian indicating that he had spoken to Mr Teplitsky. He appears to have forwarded to Mr Chalabian, at 11.51pm, a message from Mr Teplitsky (as shown by commencing the message with “MT-”), which was in the following terms:

This message indicates that Mr Teplitsky had been discussing a “big picture concept” with Mr Rostankovski and Mr Hausman, and was keen to arrange a meeting with Mr Rostankovski, Mr Hausman, Mr Chalabian and Mr Milgrom to discuss his idea.

Mr Chalabian sent a message to Mr Hausman at 10.33am on the following day, 22 March 2017, regarding the proposed meeting:

These messages suggest that, at around this time, Mr Teplitsky had proposed a new structure for, or transaction to, each of Mr Rostankovski and Mr Hausman (“big picture concept”), which needed to be explained to Mr Chalabian. A meeting was arranged to discuss this new structure and to make a decision as to how to proceed (“decision to be made and auctioned [sic]”). It is evident from further messages exchanged later in the day that this meeting on Wednesday, 22 March 2017 at 4.30pm went ahead: for example, Mr Chalabian sent a message at 4.24pm that he was having trouble getting a taxi, and Mr Hausman replied “Ok we will wait”.

There is no evidence from Mr Teplitsky regarding what was discussed at this meeting.

After the meeting, at 11.25pm on 22 March 2017, Mr Hausman sent a WhatsApp message to Mr Chalabian, which he also copied to Mr Milgrom and Mr Rostankovski. It included the following statements:

As outlined below, a payment to an entity associated with Mr Waters was subsequently made from the Lands Legal Trust Account to a company registered in the United Arab Emirates (“T can take all his $ through dubai”) and a payment to an entity associated with Mr Arnold was subsequently made from the Lands Legal Trust Account to a company registered in Hong Kong (“the syd Ass guy has already provided me in the buy out docs … a HK bank”).

On the following morning, 23 March 2017 at 10.44am, there was a telephone call between Mr Hausman and Mr Chalabian. The call commenced with Mr Hausman saying that he had received a message overnight that the “guy in Syd 2” (Mr Arnold) would “do ah, the full, ah ah Deed 3” (that is, Syd Asset would enter into Deed No 3, to rescind Deed No 2). Mr Hausman indicated that he and the Syd Asset “guy” were “now talking about … how we sort out … the other guy … being ‘T’”. Mr Chalabian replied: “Being ‘T, T W’” (Mr Waters of H2O). Mr Chalabian discussed the arrangement “to get him out [of Wentworth], and it would just look, it would just window dress, like MT’s doing it you know”. The term “window dress” refers to creating documentation to make it appear as though Mr Teplitsky (“MT”) was paying the moneys to buy out the interests of Syd Asset and H2O in the Wentworth Development, when in fact those moneys were being paid from the Lands Legal Trust Account.

In this call, Mr Chalabian said to Mr Hausman that “last night was good because it cleared the air”. This is likely a reference to the meeting between Mr Chalabian, Mr Hausman, Mr Rostankovski and Mr Teplitsky which had occurred the previous evening. Mr Chalabian added that “we’ve got Michael’s ideas now thank you very much”. Mr Chalabian also said that it was now just a matter for him, Mr Hausman and Mr Rostankovski to “map it through” and then Mr Chalabian could “work out what I need to do in terms of documentation”. Mr Chalabian emphasised that “it’s all got to be documented … Before money leaves”, and that this was “for everyone’s sake”.

The discussion then continued as follows (emphasis added):

“Camperdown” is a reference to the Camperdown Development. This was regarded as a “handy vehicle” provided by “Michael” Teplitsky, which could be used by Mr Hausman and Mr Rostankovski to launder “the money” in the Lands Legal Trust Account (“making it kosher”).

Mr Hausman was concerned to move quickly: “I’ve got a bite that we can get the whole lot off shore right”. There was then a discussion between Mr Hausman and Mr Chalabian regarding who was giving instructions to Mr Chalabian (emphasis added):

In this conversation, Mr Chalabian acknowledged that, despite notionally acting “on the Plutus matter” for “the seven individuals” (apparently a reference to the directors of the seven BOT entities named in the Blackmail Deeds), he was in fact taking his instructions from Mr Rostankovski (“I’ve been retained … by default, by Dan”). However, “on that loan”, Mr Chalabian had been “acting for Michael [Teplitsky] clearly”. Given that Mr Chalabian had sent draft “loan” documents to Mr Teplitsky’s associate, Mr Milgrom, which related to the Wentworth entities, and had discussed those documents with Mr Milgrom just two days earlier (21 March 2017), and given that Mr Chalabian had described Mr Teplitsky and Mr Milgrom as his clients in negotiations with Aulich Law regarding Deed No 2, the reference to “that loan” on which Mr Chalabian was “acting for Michael” appears to be a reference to the proposed Wentworth transaction.

Later on 23 March 2017, at 6.09pm, Mr Hausman sent a WhatsApp message to Mr Chalabian, copied to Mr Rostankovski, in the following terms (emphasis added):

The message indicates that Mr Hausman had agreed to pay Mr Arnold (the “syd Asset guy”), via an entity in Hong Kong which Mr Arnold controlled (“company in HK … he controls”), an amount of $3m to rescind Deed No 2 (“3 for Wentworth Deed”). In addition, Mr Hausman had agreed to pay Mr Waters $1.6m to rescind Deed No 1 (“T will take 1.6 for Deed 1”) via an entity in the United Arab Emirates (“into Dubai”). Mr Hausman calculated that, when the sums paid pursuant to those transactions were added to some other payments, such as the $7m “loan” to Tepcorp Holdings which was guaranteed by Mr Teplitsky (“MTs 7m loan”), the result would be that some two-thirds of the Plutus Funds in the Lands Legal Trust Account would be paid out (“gone/absorbed – almost 2 thirds”).

On 24 March 2017 at 4.19pm, Mr Chalabian sent the following WhatsApp message to Mr Hausman:

The “consulting arrangement” is not identified. There is in evidence an unexecuted “Camperdown Prime Unit Trust Security Holders Agreement” (Camperdown Unitholders Agreement), between Camperdown Prime and the unitholders in the Camperdown Prime Trust, being MT Camperdown, FM Camperdown, CREI and a further entity, RM Camperdown Pty Limited as trustee for RM Camperdown Discretionary Trust (which owned 100 shares in Camperdown Prime and 100 units in the Camperdown Unit Trust). This document was produced to the Court by Mr Milgrom.

The Camperdown Unitholders Agreement is undated, although it bears (alongside a blank space left for the insertion of a date) the printed date “2017”.

Clause 12 of the Camperdown Unitholders Agreement, headed “Project Management”, provides as follows:

Clause 18.2 of the Camperdown Unitholders Agreement provides as follows:

The Teplitsky Parties submitted that the WhatsApp message set out in paragraph [321] above indicated that this proposed Camperdown Unitholders Agreement did not proceed. However, it is not known when the Camperdown Unitholders Agreement was drafted and, in particular, whether it was drafted some time before or after the message indicating that either Mr Teplitsky or Mr Rostankovski was unable to “do consulting agreements”.

It appears that, shortly after Mr Chalabian sent the message set out at paragraph [321] above (on 24 March 2017 at 4.19pm), Mr Hausman met with Mr Teplitsky. On the same day at 7.39pm, Mr Hausman sent the following WhatsApp message to Mr Chalabian:

The following day was Saturday, 25 March 2017. It appears from messages sent on the days which followed that this meeting went ahead, and that an agreement was reached at this meeting. Mr Teplitsky did not give any evidence about this meeting.

On 27 March 2017, Mr Chalabian left a voice message with Ms Harders and then followed up by an email, copied to Mr Hausman, informing her that there “has been a change to the structure of this transaction”. He referred to a “Deed attached”. The copy of this email which is in evidence does not include the attachment. However, one minute after his email to Ms Harders, Mr Chalabian forwarded this email to Mr Hausman, stating he included “the Deed of Rescission for Deed 1 which needs to be executed and sent to me before any further steps are taken”.

On 27 March 2017 at 5.41pm, Mr Hausman sent a message to Mr Chalabian, reporting as follows:

The messages set out above indicate that Mr Hausman and Mr Chalabian understood that a deal had already been “agreed” with Mr Teplitsky. The “agreement” being referred to is one that was apparently reached at the meeting with Mr Teplitsky on the previous Saturday (25 March 2017), having regard to the terms of a WhatsApp message which Mr Hausman sent to Mr Milgrom on 28 March 2017 at 11.47am (emphasis added):

The “$7m deal at 15% per annum” refers to the $7m “loan” arrangement between Luminous and Tepcorp Holdings, with interest payable at a rate of 15% per annum (which the Teplitsky Parties admit). This message indicates that, at the meeting on 25 March 2017, it was also agreed that, in addition to the $7m “loan”, there would be “the 3m / 1.6 (interest free) for deeds [Deed No 1 and Deed No 2] secured by Camperdown”. I address the significance of this message in Section E below.

Later that day, at 5:58pm, Mr Hausman sent a WhatsApp message to Mr Chalabian that read as follows:

This message indicates that Mr Chalabian and Mr Hausman expected “all docs” for the transactions being discussed to be “finalised” by “thurs am” (that is, by the morning of Thursday, 30 March 2017). There is, in evidence, an email from Mr Chalabian to Mr Hausman and Mr Milgrom which does not include a time and date, but which appears in an email chain between two emails dated, respectively, 27 March 2017 at 3.02pm and 29 March 2017 at 8.36am.

In this email, which I infer to have been sent around 28 March 2017, Mr Chalabian states as follows:

Mr Hausman’s message of 23 March 2017 at 6.09pm (set out in paragraph [319] above) had referred to the “syd Asset guy” agreeing “to take 8m overseas”, via a “company in HK” which “he controls”, with some $3m of this payment being to rescind Deed No 2 (“3 for Wentworth Deed”). On 29 March 2017, Mr Chalabian sent an email to Mr Hausman and Mr Rostankovski attaching a “Trust Account Release Authority”, to be signed by Mr Mills, authorising Lands Legal to distribute $8m from the Lands Legal Trust Account to an account with HSBC Hong Kong in the name of S4 Steel Co Limited (S4 Steel).

S4 Steel was a company registered in Hong Kong. Mr Arnold, who was director and shareholder of Syd Asset, was also a shareholder of S4 Steel. In light of those matters, it is evident that the payment to S4 Steel represented the payment of $8m which had been foreshadowed in Mr Hausman’s message of 23 March 2017.

On 30 March 2017, a payment of $8m was made from the Lands Legal Trust Account to S4 Steel. Mr Chalabian confirmed this payment by a WhatsApp message sent to Mr Hausman at 3.19pm on that day.

Mr Arnold executed a “Deed of Rescission of Deed No 2”. The parties to the agreement were Syd Asset, Wentworth Prime, Wentworth Units, Mr Milgrom and Mr Teplitsky. The recitals to this deed stated that Deed No 2 (defined as the “Deed”) had been entered on 16 November 2016, and clause 1.1 provided as follows:

On 30 March 2017 at 3.34pm, Mr Hausman sent Mr Chalabian a WhatsApp message, which stated as follows (emphasis added):

On 31 March 2017 at 10.57am and 10.59am, Mr Chalabian and Mr Hausman exchanged the following WhatsApp messages (emphasis added):

These messages indicate that the payment of $1.6m to Mr Waters for the rescission of Deed No 1 (“1.6 on deed”) was held back until the around the middle of April, because an “adjustment” needed to be made in respect of the amount of the payment. The nature of this adjustment is set out in a WhatsApp message sent by Mr Hausman to Mr Chalabian and copied to Mr Rostankovski on 10 April 2017 at 9.26am, which stated as follows (emphasis added):

Mr Chalabian and Mr Hausman exchanged the following further WhatsApp messages later on 10 April 2017, at 1.24pm and 1.36pm:

These messages establish that it was agreed between Mr Hausman and Mr Waters that Mr Waters was to receive the $1.6m for the rescission of Deed No 1 (“$1.6 … and the Deed falls away”) by two separate transactions, the one being the payment of $1.3m to an account in the United Arab Emirates in the name of “Bridgeport” and the other being a $300,000 reduction in an amount owed by Mr Waters to Mr Hausman. This did not affect “the price payout of the deed for MT [Mr Teplitsky]”, which remained $1.6m.

“Bridgeport” is a reference to an entity called Bridgeport Advisory FZ LLE, which is registered in Fujairah, in the United Arab Emirates. Mr Waters was the managing director, general manager and sole shareholder of this entity.

The bank statements of the Lands Legal Trust Account record a payment of $1.3m being made to Bridgeport from that account on 11 April 2017.

There is in evidence an unsigned and undated “Deed of Rescission of Deed No 1”, which was produced to the Liquidators by Mr Hausman in response to orders for production which had been issued to him. The parties to this Deed of Rescission are named as H2O, Wentworth Prime, Wentworth Units, Mr Milgrom and Mr Teplitsky (being the same persons who are parties to Deed No 1). The recitals to this deed refer to Deed No 1 (defined as the “Deed”) as having been entered on 16 November 2016, and clause 1.1 provides as follows:

Various messages were also exchanged during this period regarding the advancing of moneys pursuant to the $7m Transaction. For example, on 30 March 2017 at 4.02pm, Mr Hausman wrote to Mr Chalabian, stating as follows:

This message envisaged that, after a further planned payment, Mr Teplitsky would have received $600,000, with further moneys of $400,000 being paid to him (representing $1m of the moneys to be advanced under the $7m “loan” at an interest rate of 15% per annum). The other $6m was, as outlined below, used to pay a debt of Tepcorp Investments.

On 12 April 2017, there was a telephone call between Mr Hausman and Mr Teplitsky. The recording of this conversation was played in Court. It included the following exchange (emphasis added):

Mr Teplitsky did not ask in the conversation anything about the source from which the money was “pouring in” or about the “files” between which the money was being moved.

On 16 April 2017, there was a further telephone call between Mr Hausman and Mr Teplitsky. The recording of this call was played in Court. Mr Teplitsky stated that he was “just trying to work out payment schedule for ah, for the first lot”. He asked: “by the end of the month, we should be able to do six, is that correct?” Mr Hausman replied that Mr Chalabian, who was away at the time, “sends me a WhatsApp; WhatsApp message every day just letting me [know] what hits” (“what hits” referring to the amount deposited each day into the Lands Legal Trust Account).

Mr Hausman and Mr Teplitsky than had the following exchange (emphasis added):

The same topic was again discussed in the following exchange (emphasis added):

Having regard to the terms of this discussion, Mr Teplitsky was interested in understanding the detail of when money would be coming into, and going out of, the Lands Legal Trust Account and in what amounts. As shown by the following exchange, which occurred in the course of the same conversation, Mr Teplitsky wanted these details in order to know how much he had to “clear out” of this account, and “convert” in order to “get the cash back here” to Mr Hausman and Mr Rostankovski, and in what time frame (emphasis added):

As set out above, there were multiple references in the course of this conversation to the persons who were paying millions in the Lands Legal Trust Account, who were only referred to as “they”. Mr Teplitsky did not, at any stage in this call, ask who “they” were, or why they were “pumping” money into the Lands Legal Trust Account, or from what source the payments were being received.

On 27 April 2017, there was a further telephone call between Mr Hausman and Mr Teplitsky, the recording of which was played in Court. Mr Hausman reported to Mr Teplitsky that “we’ll be done in the next four weeks the way they’re going”. Mr Teplitsky offered that if Mr Hausman “wanted to clear the accounts; ah this week I could probably do that”, adding “if you feel like that’s a necessity then let me know”. Mr Teplitsky said: “I know sometimes, the pressure you want to clear all the accounts, so I have no problem with that”. The following exchange occurred (emphasis added):

Mr Teplitsky referred to the statements quoted above in a section of his affidavit which was tendered by the Plaintiffs. Mr Teplitsky stated that he had listened to the recording of this conversation. He did not dispute that he participated in this conversation or that he spoke the words attributed to him. Instead, he stated that “it is recorded that I used the phrase ‘clean it up through for you here’”. He deposed that he did not know in what context he was using the word “clean”, which he uses “sometimes in different ways”, stating: “At no time was I talking about laundering money”. (I address the issue of Mr Teplitsky’s knowledge in Section F below.)

The terms “clean” and “kosher” are used by Mr Teplitsky on other occasions in the same telephone conversation, including in the following statements:

Mr Hausman and Mr Teplitsky also had the following exchange:

This statement “we’re doing seven” with “six up, one down” appears to be a reference to the $7m “loan” arrangement, of which $1m was to be paid to Mr Teplitsky. By the time of this call, it appears that Mr Teplitsky had received $600,000, so that some $400,000 was still to be paid to him (“you’ve got four hundred today”). The remaining $6m was used to partially repay a loan which Moshav Financial Wholesale Pty Limited had advanced to Milgrom Holdings Pty Limited as trustee for Milgrom Holdings Family Trust, Tepcorp Investments as trustee for Tepcorp Investments Family Trust, ACN 117 688 356 Pty Limited as trustee for the TOE Trust and Markovsky Property Pty Ltd as trustee for The Markovsky Family Trust, under a loan agreement executed on 29 June 2015. (Tepcorp Investments is incorrectly named as Tepcorp Holdings in this loan agreement.) Mr Teplitsky was named in this agreement as the “Borrower’s Guarantor” in respect of the loan to Tepcorp Investments.

Moshav is a company incorporated in Australia, with a registered office in Double Bay. In the $6m Moshav loan agreement, each of Milgrom Holdings, Tepcorp Investments, the TOE Trust, Markovsky Property and Mr Teplitsky was also said to have a business address in Double Bay.

Under an undated “Deed of Repayment of Loan” between Moshav, Milgrom Holdings, Tepcorp Investments, TOE Trust and Markovsky Property, the borrowers under the Moshav loan agreed to repay, and Moshav agreed to accept repayment of, the principal sum set out in the deed. Clause 1, headed “Repayment of Principal Sum”, provided as follows:

On 1 May 2017, Mr Hausman and Mr Teplitsky had a telephone conversation, which included the following exchange (emphasis added):

Towards the end of the call, Mr Teplitsky said: “you need to instruct Sevag [Mr Chalabian], and Sevag’s got to make sure there’s a contract on my side of things which he will”.

The reference to a “contract” on Mr Teplitsky’s “side of things” is likely a reference to the “Deed of Repayment of Loan” referred to above.

In accordance with the conversation set out above, the sum of $6m was paid to Moshav via an entity in Hong Kong. On 1 May 2017, Moshav as lender and Moshav Financial Limited (Moshav Financial) as borrower entered into a loan agreement to “govern the repayment of loans by [Moshav] to [Moshav Financial]”. Moshav Financial was a company registered in Hong Kong. Mr Tal Silberman was a director of each of Moshav and Moshav Financial.

On 4 May 2017, $6m was paid from the Lands Legal Trust Account to Moshav Financial. The Teplitsky Parties have not sought to give any explanation for why a loan to a number of entities (including Teplitsky Investments) with a business address in Double Bay, which was made by a company with headquarters in Double Bay (Moshav), was repaid via an entity in Hong Kong.

Meanwhile, on 26 April 2017, the ATO issued garnishee notices to St George Bank and the Commonwealth Bank of Australia over accounts in the name of Plutus Payroll. Mr Menon sent an “urgent” email about this order to Mr Chalabian on 30 April 2017.

On 2 May 2017, there was a telephone call between Mr Hausman and Mr Teplitsky. The recording of this call was played in Court. This call included the following exchange (emphasis added):

Again, Mr Teplitsky did not ask who “they” were and did not ask anything about the garnishee order. He did not ask why Mr Hausman and Mr Rostankovski “thought at some point in time” this might happen, but he did express admiration for their achievements in getting $25m out of the $30m that they were hoping to achieve (“you’ve done well”).

Subsequently, further payments were made in respect of the $1m of the $7m “loan” which was to be paid to Mr Teplitsky. On 16 May 2017, Mr Hausman sent a WhatsApp message to Mr Chalabian, stating as follows:

On 29 June 2017, Moshav sent a letter to Tepcorp Investments which recorded that “6,000,000 has been received on or about 4 May 2017”.

In response to an order for production, Camperdown Prime produced to the Court minutes of a meeting held on 17 January 2018. These minutes, which are unsigned, are headed “Camperdown Prime Pty Ltd as Trustee for Camperdown Prime Unit Trust – Minutes of PCG Meeting”. “PCG” is presumably an acronym for Project Control Group.

The minutes record that the meeting was attended by Mr Hausman and Mr Milgrom (who were the directors of Camperdown Prime). The minutes include, relevantly, the following statements that are attributed to Mr Hausman and Mr Milgrom:

It is apparent from this document that each of Mr Hausman and Mr Milgrom was of the view that there was a “$4.6 million loan”. It also appears that the Camperdown Unitholders Agreement, which was headed “Camperdown Prime Unit Trust Security Holders Agreement” (and by which Luminous was to receive a $4.6m fee for “services” in relation to the Camperdown Development) was not executed.

The Teplitsky Parties argued that these draft minutes had no probative value. They referred to s 251A(2) of the Act, which provides that a company must ensure that minutes of a meeting are signed within a reasonable time after the meeting by either the chair of the meeting or the chair of the next meeting; and s 251A(6) which provides that: “A minute that is so recorded and signed is evidence of the proceeding, resolution or declaration to which it relates, unless the contrary is proved”.

This provision does not have the effect that, as the Teplitsky Parties submitted, a draft minute “cannot be tendered even as rebuttable proof of the proceeding, resolution or declaration to which it relates”. Instead, the effect of non-compliance with s 251A(6) is that the minute is not accorded the “special evidentiary value” described in that section: Australian Securities and Investments Commission (ASIC) v Macdonald (No 11) [2009] NSWSC 287 at [71]-[72] per Gzell J (this finding not being challenged on appeal: see Morley v Australian Securities and Investments Commission (ASIC) [2010] NSWCA 331 at [468], and Australian Securities and Investments Commission (ASIC) v Hellicar (2012) 247 CLR 345; [2012] HCA 17 at [68]). This passage of Gzell J’s judgment was quoted, with approval, by the Full Court of the Federal Court in Advanced Holdings Pty Ltd atf Demian Trust v Commissioner of Taxation [2021] FCAFC 135 at [161] (Logan, McKerracher and Perram JJ).

The draft minute is a business record of Camperdown Prime, which is admissible under s 69(2) of the Evidence Act. The Teplitsky Parties relied on the following observation by Jordan CJ in Potts v Miller (1940) 40 SR (NSW) 351 at 363: “Statements of fact contained in the minute book are not evidence of the facts, but a record in the minute book of the fact that a particular proceeding took place at a meeting is, if the minute is properly authenticated, evidence that it did take place”. However, that observation was made before s 69 of the Evidence Act was passed.

The fact that a minute is not signed may go to the question of weight and may support an application for a limitation under s 136 of the Evidence Act. However, no such application was made.

The Plaintiffs pleaded as follows (Amended Commercial List Statement (ACLS), [46]-[47]):

It is important to note, before addressing the detail of these allegations, that although the expression “launder funds” was used in the pleading, it was not part of the Plaintiffs’ case that Mr Teplitsky engaged in conduct which constituted an offence of money laundering. They did not plead, or seek to establish, the elements of any such offence. Accordingly, I am not required to make, and I do not make, any findings in that regard.

Instead, the issue for determination is whether the Plaintiffs have established that the Teplitsky Parties, by entering into and giving effect to the $7m Transaction and the $4.6m Transaction, knowingly assisted, or were knowingly involved in, any breach by the Plutus Officers or Mr Rostankovski of their duties to Plutus Payroll, or knowingly received any property of Plutus Payroll as a result of such breach. This claim does not require any determination as to whether Mr Teplitsky engaged in “money laundering”. Instead, it requires findings regarding whether the $7m Transaction and the $4.6m Transaction occurred in the manner pleaded, and the extent of the Teplitsky Parties’ involvement in the $7m Transaction and the $4.6m Transaction (which I address in this section of the judgment); and the extent of Mr Teplitsky’s knowledge in respect of any breach of duty by the Plutus Officers or Mr Rostankovski at the time that those Transactions were put into effect (which I address in Section F below).

The Teplitsky Parties conceded that the $7m Transaction occurred. In particular, they admitted that Tepcorp Holdings entered into a $7m “loan” agreement with Luminous; that this “loan” was secured by way of an unregistered mortgage against Tepcorp Holdings’ property at 2 Short Street, Surry Hills in New South Wales (the Short Street Property); that Mr Teplitsky gave a personal guarantee in respect of this “loan”; that an interest rate of 15% was payable on the $7 million “loan” pursuant to the terms of a side deed; that $6m of the funds advanced pursuant to this arrangement were paid to Moshav; and that “a portion” of the funds advanced in accordance with this arrangement were paid in cash (Amended Commercial List Response (ACLR), [47(d)]).

However, the Teplitsky Parties denied that the $7m Transaction was entered into, or carried out, in furtherance of an agreement to “launder” the Plutus Funds which had been paid into the Lands Legal Trust Account.

The Teplitsky Parties did not dispute that the payments made in respect of the $7m Transaction were paid using the Plutus Funds in the Lands Legal Trust Account. The evidence set out in Section D above establishes that:

In Section F of this judgment, I address the issue of the extent of Mr Teplitsky’s knowledge regarding the source of those funds. In Section H below, I address the Teplitsky Parties’ submission that the amount of the $7m Transaction was subsequently repaid in full, together with all interest due under the terms of the “loan”.

The Teplitsky Parties deny that the pleaded $4.6m Transaction occurred.

The Teplitsky Parties conceded, in closing submissions, that “during March 2017 there was discussion of various transactions in relation to the alleged $4.6 million loan”, but submitted that “on analysis no relevant transaction was entered into and no amount of $4.6 million was loaned to the Teplitsky parties”.

The Teplitsky Parties did not dispute that an amount of $4.6m of the Plutus Funds was paid from the Lands Legal Trust Account to entities associated with, respectively, Mr Waters (as to $1.6m) and Mr Arnold (as to $3m). However, they submitted that neither Mr Teplitsky nor any entity associated with him was responsible for, or involved in, the transactions by which those moneys were paid. In closing address, the position was put as follows:

As a starting point, it is plain from the evidence set out in Section D above that, as the Teplitsky Parties conceded, a payment of $3m was made to an entity associated with Mr Arnold and that a payment of $1.6m was made to Mr Waters. The former payment was effected by a transfer of moneys from the Plutus Funds held in the Lands Legal Trust Account to S4 Steel, a company registered in Hong Kong of which Mr Arnold is a shareholder (see paragraphs [336]-[338] above); and the latter payment was made by an amount of $1.3m being made from the Plutus Funds held in the Lands Legal Trust Account to Bridgeport, a company registered in the United Arab Emirates of which Mr Waters was the sole shareholder, with the balance of $300,000 being paid by way of a set off against a debt which Mr Waters owed to Mr Hausman (see paragraphs [340]-[346] above).

The documents set out in Section D above establish that these payments were made to entities associated with Mr Arnold and Mr Waters in return for their agreement to rescind respectively, Deed No 2 and Deed No 1, which had been entered in relation to the Wentworth Development. It was consistently stated in negotiations, and in reports of those negotiations, that the payments were made on this basis (see, for example, paragraphs [319]-[320] and [341]-[344] above)

There is in evidence a copy of the deed rescinding Deed No 2 which is executed by Mr Arnold. Although there is not in evidence an executed copy of the deed rescinding Deed No 1, it was stipulated, as set out above, that payment of $1.6m would only be made to Mr Waters’ interests if he agreed to rescind that deed; and, in circumstances where such payment was made, it can be inferred that this agreement was forthcoming.

The key issues are whether Mr Teplitsky or entities associated with him facilitated these payments of $4.6m being made, and whether there was any agreement that Mr Teplitsky or entities associated with him would pay $4.6m to Luminous as a result of those payments being made.

As regards the first issue, I find that Mr Teplitsky did facilitate the making of the payments of $4.6m to interests associated with Mr Waters and Mr Arnold.

As set out above, those payments were made in return for the agreement by Mr Waters and Mr Arnold to rescind, respectively, Deed No 1 and Deed No 2. Mr Teplitsky, Mr Milgrom and entities associated with them were parties to each of Deed No 1 and Deed No 2. There could be no agreement to rescind those deeds without the agreement of Mr Teplitsky.

The evidence establishes that this agreement was given.

Mr Teplitsky was consulted about, and gave instructions about, the payments being made to Mr Waters and Mr Arnold in return for the rescission of, respectively, Deed No 1 and Deed No 2. For example:

I turn next to the issue whether there was any arrangement for Mr Teplitsky (or entities associated with him) to pay $4.6m back to Luminous as a result of the payments being made for the rescission of Deed No 1 and Deed No 2.

Mr Teplitsky had an evident commercial interest in the rescission of Deed No 1 and Deed No 2. That was because, pursuant to those Deeds, he was obliged to guarantee the obligations of Wentworth Units (which he controlled) and Wentworth Prime (which Mr Milgrom controlled) to sell units in the Wentworth Development to entities associated with, respectively, Mr Waters and Mr Arnold at a total discount of $8.6m to the market price (see paragraphs [168]-[174] above).

There are numerous contemporaneous acknowledgements of the benefits to Mr Teplitsky in being removed from the burden of those obligations. In particular:

In contrast, the persons who caused the payments to be made from the Lands Legal Trust Account to the entities associated with, respectively, Mr Waters and Mr Arnold (namely, Mr Hausman and Mr Rostankovski) did not have any rights or obligations in respect of the Wentworth Development. Their only interest in payments of $4.6m being made to entities located in Dubai and Hong Kong which were associated with, respectively, Mr Waters and Mr Arnold was as a step in furtherance of their aim of getting the sum of $4.6m returned to them in Sydney in a “clean” state. In order for that aim to be achieved, it was necessary to ensure that the money be paid back to them by an entity unrelated to the overseas entities which received those payments.

The evidence establishes that this was the intention of Mr Hausman and Mr Rostankovski in putting the $4.6m Transaction into effect. In particular:

In closing submissions, the Teplitsky Parties highlighted the statement by Mr Milgrom on 21 March 2017 that the loan agreements were “wrong” (see paragraph [298] above). They submitted that:

However, the evidence set out in Section D above establishes the following matters.

The Teplitsky Parties submitted that the agreement in relation to the Camperdown Development is “unsigned and it doesn’t seem to have been entered into in any relevant ways”.

There is not, in evidence, a signed copy of the deed to rescind Deed No 1, or a signed copy of the Camperdown Unitholders Agreement. However, given the terms of Mr Chalabian’s email of around 28 March 2017, recording the terms of the agreed position likely reached on 25 March 2017, and his previous insistence that it was in all parties’ interests that the documentation be agreed “for everyone’s sake”, before the payments to Mr Arnold and Mr Waters were made, it is likely, and I find, that Mr Teplitsky conveyed his agreement to the terms of those documents, prior to the payment to Mr Waters being made for the rescission of Deed No 1.

In any case, I do not consider it critical that there is no signed copy of the Camperdown Unitholders Agreement in evidence.

This agreement was a sham. Luminous had not performed any services in relation to the Camperdown Development in the past; there is no evidence that Luminous had any staff, resources or intention to provide any such services in the future; and the amount of $4.6m was not calculated by reference to the value of any such services. Luminous was established very shortly before the payments of $4.6m were made from the Lands Legal Trust Account. There is no evidence that Luminous ever engaged in any business other than the Transactions. Having regard to those matters, the promise to pay the amount of $4.6m to Luminous in respect of “services” was no more than a ruse for returning, to Mr Rostankovski and Mr Hausman, the moneys which they had caused to be paid to Mr Arnold and Mr Waters for the benefit of Mr Teplitsky and Mr Milgrom.

Any failure to execute sham documentation does not mean that there was a failure to agree on the underlying transaction. The underlying transaction was that Mr Rostankovski and Mr Hausman would cause $4.6m to be paid to interests associated with Mr Arnold and Mr Waters, via entities overseas (those payments being for the benefit of Mr Teplitsky and Mr Milgrom), on the basis that Mr Teplitsky and Mr Milgrom would, via the Camperdown Development, pay back that amount to Mr Rostankovski and Mr Hausman via Luminous. The evidence summarised above establishes that this was the basis on which the payments were made to Mr Arnold and Mr Waters.

In that regard, there are minutes produced by Camperdown Prime of a meeting held on 17 January 2018, which was attended by Mr Hausman and Mr Milgrom. At this meeting, each of Mr Hausman and Mr Milgrom, who were the directors of Camperdown Prime, referred to the existence of a “$4.6m loan” (see paragraphs [374]-[376] above):

Mr Hausman and Mr Milgrom were both involved in the negotiations in relation to the $4.6m Transaction. Each was, in these minutes, acknowledging that there was a “$4.6m loan” which needed to be “dealt with”. Those matters provide evidence of a common assumption as to the existence and terms of an agreement that the amount of $4.6m (which had been paid from the Lands Legal Trust Account for the benefit of Mr Teplitsky and Mr Milgrom) was to be repaid to Mr Hausman and Mr Rostankovski (by means of a payment made to Luminous via the Camperdown Development).

The Teplitsky Parties tendered a letter which was signed by Mr Hausman and dated 24 September 2020, and which was addressed to Mr Milgrom, Mr Teplitsky and Mr Ruvin Morrison. Mr Hausman stated that he wanted “to set the record straight” and continued as follows:

The Teplitsky Parties relied on this statement as providing evidence that the $4.6m Transaction did not proceed.

Several points should be noted. First, this statement was made in a context where legal proceedings were already on foot. Mr Hausman referred, at the start of the letter, to a “draft commercial list statement” and to “the Federal Police investigation”. Secondly, Mr Hausman has engaged, in relation to the transactions that are the subject of these proceedings, in serious dishonest conduct. Little, if any weight, can be given to a statement made by him in correspondence in relation to those events which has not been able to be tested in Court. Thirdly, there is evidence that Mr Hausman repeatedly made, particularly in exchanges with Mr Milgrom, statements to the contrary of what is said in this letter. For example:

In any case, I do not read Mr Hausman’s letter as stating that Mr Teplitsky and Mr Milgrom did not enter into any arrangement to pay $4.6m to Luminous. Instead, he states that two particular loan agreements, which are attached and marked A and B, were not entered, and that moneys were not advanced under those particular agreements. The attachments to the letter are not in evidence. It is likely, from the description of the attachments which is contained in the letter, that Mr Hausman was referring to the draft loan agreements which Mr Chalabian had sent Mr Milgrom on 21 March 2017 at 12.34pm (see paragraphs [299]-[301] above). Those agreements envisaged a loan in the amount of $2.5m to be made to each of Wentworth Prime and Wentworth Units at an interest rate of 10% per annum, which were to be secured by, respectively, charges given by each of FM Camperdown and MT Camperdown over their units in the Camperdown Prime Unit Trust.

The Plaintiffs did not contend that these loan agreements were entered, or that they represented the deal which was agreed. Instead, it was their case that the Camperdown Unitholders Agreement, and in particular clause 12 of that agreement, represented the deal that was agreed between Mr Teplitsky, Mr Hausman and Mr Rostankovski, namely, that the amount of $4.6m would be paid back to them, within a year, by a payment being made to Luminous from the entities involved in the Camperdown Development. In the passage from Mr Hausman’s letter which is quoted above, Mr Hausman refers to clause 12.4 of this agreement (by which Luminous was to receive a $4.6m payment) in terms which suggest that Mr Hausman had expected a payment to be made pursuant to the arrangement described in this clause, although, as things turned out, Luminous “failed miserably in this regard”.

For those reasons, even if any weight could be afforded the statements made in Mr Hausman’s letter which was sent well after the relevant events, those statements do not support the Teplitsky Parties’ contention that the $4.6m Transaction did not proceed.

The Teplitsky Parties submitted that “the better view of the evidence … is that the $4.6 million was paid directly by the Chalabian and Hausman parties and Luminous to enable those parties to acquire an interest in the trust” (that is, the trust established in respect of the Camperdown Development). However, the Teplitsky Parties did not explain how the payment of amounts totalling $4.6m from the Lands Legal Trust Account, which was made to entities associated with Mr Waters and Mr Arnold in, respectively, the United Arab Emirates and Hong Kong, was made to achieve the outcome of acquiring an interest for Luminous in the Camperdown Trust.

Instead, what Mr Teplitsky, Mr Rostankovski and Mr Hausman had in mind was an arrangement whereby the amount of $4.6m would be subsequently paid back to Luminous via the Camperdown Development and would be characterised as a payment in return for services which had not in fact been provided.

The figure of $4.6m was selected because it represented the amount that had been paid to interests associated with Mr Arnold and Mr Waters for the rescission of Deeds No 1 and No 2. Mr Teplitsky directly benefited from the payment of those moneys, by being relieved of onerous commercial obligations. By the device of this payment to Luminous for non-existent “services”, Mr Teplitsky was agreeing to return to Mr Hausman and Mr Rostankovski the amount which had been paid out of the Lands Legal Trust Account for the benefit of him and Mr Milgrom.

Accordingly, it does not matter that, as the Teplitsky parties submitted, that there is “no evidence that that money [the $4.6m] came back into the hands of Mr Teplitsky”. It was not any part of the Plaintiffs’ case that Mr Teplitsky personally handled the $4.6m or any part of it. Instead, their case was that the amount of $4.6m was paid from the Lands Legal Trust Account to interests associated with Mr Waters and Mr Arnold; that Mr Teplitsky received a substantial commercial benefit from that payment so far as the Wentworth Development was concerned (the rescission of Deed No 1 and Deed No 2); and, as a consequence, Mr Teplitsky agreed to pay a $4.6m “fee” to Luminous via the Camperdown Development. I find that those matters have been established.

The Plaintiffs pleaded, and the Teplitsky Parties admitted, that at all material times each of the Plutus Officers:

In addition, the Plaintiffs pleaded, and the Teplitsky Parties admitted, that at all material times Mr Rostankovski:

In closing submissions, the Teplitsky Parties conceded that each of the Plutus Officers breached his duties to Plutus Payroll under ss 181(1) and 182(1) of the Act, and breached his fiduciary duties to Plutus Payroll, by causing the Plutus Funds to be paid into the Lands Legal Trust Account in response to the Blackmail Plan and the threats made against them.

Having regard to Mr Rostankovski’s role as prime mover and beneficiary of the Blackmail Plan, he also contravened his duties to Plutus Payroll under s 182(1) of the Act. He improperly used his position as an employee of Plutus Payroll, and in particular knowledge of the manner in which the Plutus Officers had dealt with amounts referrable to PAYG, to blackmail the Plutus Officers into paying the Plutus Funds in excess of $24m into the Lands Legal Trust Account, so as to gain an advantage for himself and Mr Hausman, thereby causing detriment to Plutus Payroll.

Similarly, Mr Rostankovski breached his fiduciary obligation as an employee of Plutus Payroll not to be in a position where his personal interest conflicted with his duty to Plutus Payroll as an employee of the company.

The relationship of employee and employee is an accepted category of fiduciary relationship: Anderson v Canaccord Genuity Financial Ltd [2023] NSWCA 294 at [125]-[151] (Gleeson, Leeming and White JJA). For any particular employee, it is necessary to determine the scope of the area within which the fiduciary is not free to act self-interestedly or, to put it another way, the subject matter over which the fiduciary obligation extends: ibid at [152].

The Plaintiffs pleaded that Mr Rostankovski breached his fiduciary duties to Plutus Payroll by putting into effect the “Blackmail Plan” which involved demanding that the Plutus Officers pay the Plutus Funds into the Lands Legal Trust Account, in return for not revealing their tax fraud to the media and authorities, and laundering the Plutus Funds which were received as a result of the blackmail, by transferring them out of the Lands Legal Trust Account to other persons and entities (ACLS, [30]). The Teplitsky Parties did not dispute that the evidence established that Mr Rostankovski engaged in this conduct.

This conduct amounted to a breach of the fiduciary obligations which Mr Rostankovski, as an employee, owed to Plutus Payroll. Whatever Mr Rostankovski’s particular role or responsibilities for Plutus Payroll (regarding which there was limited evidence), it is plain that he was not free to act self-interestedly by using information which he obtained regarding a potential tax fraud being perpetrated by officers of the company in order to blackmail those officers into causing more than $24m of company funds to be paid for the benefit of himself and Mr Hausman, in return for not revealing their fraud to the relevant authorities.

Similarly, whatever the scope of Mr Rostankovski’s responsibilities for Plutus Payroll, he was not free to act self-interestedly by causing moneys of Plutus Payroll, which had been paid into the Lands Legal Trust Account, to be paid out of that account to third parties, pursuant to a series of transactions designed to ensure that those moneys were ultimately received by Mr Rostankovski and his associate, Mr Hausman.

The Plaintiffs pleaded (ACLS, [50]) that, by engaging in the $7m Transaction and $4.6m Transaction, the Teplitsky Parties:

One oddity of the Plaintiffs’ pleading, which may have been an oversight, is that although there is an allegation that Mr Rostankovski contravened s182(1) of the Act (ACLS, [32(b)(iii)]), there is no allegation that the Teplitsky Parties were involved in Mr Rostankovski’s contraventions of s 182(1). Nor was any such claim referred to in their opening submissions. Given that is so, no such claim arises for determination.

Instead, the issue for determination, so far as the statutory breaches are concerned, is whether Mr Teplitsky was “involved” in the Plutus Officers’ contraventions of ss 181(1) and 182(1) of the Act (ACLS, [50]).

Section 79 of the Act provides as follows:

The Plaintiffs pleaded that the Teplitsky Parties were “involved” in the Plutus Officers’ contraventions of s 181(1) and s 182(1) on the basis that:

There are four difficulties with this claim.

First, any conduct of Mr Teplitsky cannot establish, of itself, “involvement” by each of Tepcorp Holdings and Tepcorp Investments in any contravention. Although (as addressed below) the knowledge of Mr Teplitsky can be attributed to each of those other entities, Tepcorp Holdings and Tepcorp Investments are separate persons from Mr Teplitsky and neither can be liable for involvement in the Plutus Officers’ contraventions of the Act (whatever the knowledge of Mr Teplitsky) unless the entity itself engaged in conduct of the type specified in s 79 of the Act. However, as set out above, the pleading refers only to Mr Teplitsky’s own conduct.

Secondly, the evidence does not establish that Mr Teplitsky was knowingly concerned in, or party to, the contraventions of the Plutus Officers. The relevant contravening conduct by the Plutus Officers was causing the Plutus Funds to be paid into the Lands Legal Trust Account pursuant to the Blackmail Plan. Mr Teplitsky did not have any dealings with any of the Plutus Officers, and did not take any step to cause them to pay moneys into the Lands Legal Trust Account or to assist in the transfer of money into that account. Instead, he dealt with Mr Rostankovski, Mr Hausman and Mr Chalabian (none of whom is a Plutus Officer), and was involved in transactions which took place after the Plutus Funds were received into the Lands Legal Trust Account.

Thirdly, the evidence does not establish that Mr Teplitsky conspired with Mr Hausman and Mr Rostankovski to put into effect the Blackmail Plan which led to or resulted in the Plutus Officers contravening their duties under the Act. There is only limited evidence of dealings between Mr Teplitsky and Mr Hausman prior to the Blackmail Plan being put into effect by Mr Rostankovski. There is no evidence that the Blackmail Plan was discussed with Mr Teplitsky before it was put into effect.

Fourthly, in order to establish that the Teplitsky Parties were “involved” in a contravention of s 181(1) or s 182(1) by the Plutus Officers, it is necessary to show that Mr Teplitsky had actual knowledge of all of the essential material factual ingredients of the contravention: Yorke v Lucas (1985) 158 CLR 661 at 668-670 per Mason ACJ, Wilson, Deane and Dawson JJ; [1985] HCA 65.

Although knowledge may be inferred from the fact of exposure to the obvious, that does not obviate the need for actual knowledge of the essential facts constituting the contravention: Giorgianni v The Queen (1985) 156 CLR 473 at 507-508 per Wilson, Deane and Dawson JJ; [1985] HCA 29. It is, however, not necessary to establish knowledge that the facts constituted a contravention; that is, “knowledge of the legal characterisation of the conduct as contravening conduct is not required”: Anchorage Capital Master Offshore Ltd v Sparkes (2023) 111 NSWLR 304; [2023] NSWCA 88 at [338] (Ward P, Brereton JA, Griffiths AJA). In Productivity Partners Pty Ltd v Australian Competition and Consumer Commission [2024] HCA 27 at [82], Gageler CJ and Jagot J observed that:

For the reasons set out below when addressing the Barnes v Addy Claims, I do not consider that the evidence establishes that Mr Teplitsky had actual knowledge of the facts constituting the contraventions by the Plutus Officers. The Plaintiffs pleaded (and the Teplitsky Parties conceded) that those officers breached their duties to Plutus Payroll, and thereby contravened each of ss 181(1) and 182(1) of the Act, by causing the Plutus Funds to be paid into the Lands Legal Trust Account in response to the Blackmail Plan and the threats made against them. The evidence does not establish that Mr Teplitsky had actual knowledge of the matters constituting those contraventions: in particular, the evidence does not establish that he had actual knowledge that moneys were being paid into the Lands Legal Trust Account from the account of Plutus Payroll; or that threats were made against the Plutus Officers (or the nature of such threats); or that the Plutus Officers caused the Plutus Funds to be paid into the Lands Legal Trust Account as a result of any such threats. The evidence does not establish that Mr Teplitsky had actual knowledge of the source of the funds being paid into the Lands Legal Trust Account, or the basis on which those funds were being paid, or that he was even aware of the existence of Plutus Payroll.

Accordingly, the claims that the Teplitsky Parties were “involved” in the contraventions by the Plutus Officers of either s 181(1) or s 182(1) are not established.

The Plaintiffs pleaded, further or in the alternative to their Statutory Claims, that by engaging in the $7m Transaction and the $4.6m Transaction, the Teplitsky Parties knowingly assisted in the breach by the Plutus Officers and Mr Rostankovski of their fiduciary obligations to Plutus Payroll, and are therefore liable under the second limb of Barnes v Addy (ACLS, [51]).

In order to establish liability under the second limb of Barnes v Addy, the Plaintiffs must establish that the Teplitsky Parties assisted the Plutus Officers or Mr Rostankovski in such a breach, in circumstances where the Teplitsky Parties had knowledge of a dishonest and fraudulent design on their part: Farah Constructions v Say-Dee at [160] per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ.

A dishonest and fraudulent design includes a dishonest and fraudulent breach of fiduciary duty: Farah Constructions v Say-Dee at [179]. Nothing falling short of dishonest conduct is sufficient to engage the second limb of Barnes v Addy: Hasler v Singtel Optus Pty Ltd; Curtis v Singtel Optus Pty Ltd; Singtel Optus Pty Ltd v Almad Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266 at [9] per Gleeson JA and at [125] per Leeming JA. “Dishonesty” amounts to a transgression of the ordinary standards of honest behaviour; it is not necessary to show that the defendant thought about what those standards were: ibid at [124].

I do not consider that the Plaintiffs’ claim that the Teplitsky Parties knowingly assisted in the Plutus Officers’ breach of their fiduciary obligations is established, for reasons similar to those already outlined above in respect of the Statutory Claims.

However, the claim that the Teplitsky Parties knowingly assisted in Mr Rostankovski’s breach of his fiduciary obligations requires separate consideration.

So far as Mr Rostankovski is concerned, the Plaintiffs pleaded that he breached his fiduciary duties by implementing the “Blackmail Plan” (ACLS, [30]):

The evidence establishes that Mr Rostankovski implemented the Blackmail Plan, which plainly meets the description of a dishonest and fraudulent design. Mr Rostankovski breached his fiduciary duties both by blackmailing the Plutus Officers into paying the Plutus Funds into the Lands Legal Trust Account, and by causing the Plutus Funds to be transferred from that account to other persons and entities (including by means of the $7m Transaction and the $4.6m Transaction). Those breaches were dishonest, and were in furtherance of Mr Rostankovski’s dishonest and fraudulent design.

Having regard to the findings which I have made in Section E above, the Teplitsky Parties assisted Mr Rostankovski in the implementation of his dishonest and fraudulent design, by negotiating, entering and implementing each of the $7m Transaction and the $4.6m Transaction. Pursuant to those Transactions, more than $11m of Plutus Funds, which had been paid into the Lands Legal Trust Account as a result of the Blackmail Plan, was paid out of that account to third parties, with the intention that those moneys would later be paid back to Mr Rostankovski and his associate, Mr Hausman, via other unrelated entities. The critical issue for determination is whether the Teplitsky Parties entered into and implemented those Transactions, in circumstances where they had knowledge, in the requisite sense, of Mr Rostankovski’s dishonest and fraudulent design.

There are four categories of knowledge sufficient to impose liability on a third party (Farah Constructions v Say-Dee at [174]-[177]), namely:

As regards the first category, actual knowledge need not be established by direct evidence of a person’s state of mind, but may be inferred. In particular, a combination of suspicious circumstances and the failure to make inquiry may sustain an inference of knowledge of the actual or likely existence of the relevant matter: Pereira v Director of Public Prosecutions (DPP) (1988) 82 ALR 217 at 220 (per Mason CJ, Deane, Dawson, Toohey and Gaudron JJ); [1988] HCA 57; Lifeplan Australia Friendly Society Ltd v Woff [2016] FCA 248 at [356] (per Besanko J, not relevantly overturned on appeal); and Fair Work Ombudsman v South Jin Pty Ltd [2015] FCA 1456 at [231] (White J).

The second category, wilful blindness, is treated as equivalent to actual knowledge; neither negligence nor recklessness is sufficient: Giorgianni v The Queen at 482 per Gibbs CJ. In Anchorage at [345], the Court of Appeal (Ward P, Brereton JA and Griffiths AJA) referred with approval to the discussion by White J in Australian Securities and Investments Commission (ASIC) v ActiveSuper Pty Ltd (in liq) (2015) 235 FCR 181; [2015] FCA 342 at [403] of the difficulties of proving an allegation of wilful blindness:

The third category involves “such a calculated abstention from inquiry as would disentitle the third party to rely upon lack of actual knowledge of the trustee’s or fiduciary’s wrongdoing”: Grimaldi v Chameleon Mining (No 2); Chameleon Mining NL v Murchison Metals Ltd (2012) 200 FCR 296; [2012] FCAFC 6 at [261].

The fourth category “is, in essence, an understandable, objective, default rule designed to prevent a third party setting up his or her own ‘moral obtuseness’ as the reason for not recognising an impropriety that would have been apparent to an ordinary person”: ibid.

These categories of knowledge are neither exclusive nor rigid: Grimaldi v Chameleon Mining at [260].

Where an alleged accessory is a corporation, it is necessary to establish that the corporation had the requisite knowledge in order to establish liability under the second limb of Barnes v Addy. That can generally be done by showing that a specific person or persons associated with the corporation, and with sufficient seniority within the corporation, had knowledge that can be imputed to the corporation: Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 582 per Brennan, Deane, Gaudron and McHugh JJ; [1995] HCA 68. In the context of a claim for knowing assistance, “what matters is the states of minds of the persons who directly controlled the conduct which is said to have involved the giving of assistance”: Anderson v Canaccord at [247].

Because Mr Teplitsky was the controller, sole director and sole shareholder of each of Tepcorp Holdings and Tepcorp Investments, the critical issue is what was known to Mr Teplitsky at the time of the transactions in issue.

Finally, and importantly, the requisite knowledge must be satisfied having regard to the seriousness of the finding of an allegation of knowing participation in a dishonest breach of fiduciary duty, in accordance with s 140 of the Evidence Act: Farah Constructions v Say-Dee at [170]; Anderson v Canaccord at [209]-[210].

The Plaintiffs’ pleading regarding knowledge is as follows (ACLS [48]-[49]):

The Teplitsky Parties submitted as follows:

I do not accept this submission. The contemporaneous conversations and documents set out in Section D above establish the following matters.

In the first intercepted conversation between Mr Hausman and Mr Teplitsky, on 7 December 2016, they discussed a transaction involving the “washing” of money. Mr Hausman stated that “my guy who wants to wash it will have to pay a fee which I can probably get him to do because he wants to wash it”. Mr Teplitsky responded that he was “okay” with this, but emphasised that he wanted to ensure that there was “an invoice” and “you know, no problems”. Mr Teplitsky told Mr Hausman that he would let him know “which company to invoice” and agreed to work with Mr Hausman on “the wording … on the invoice” (see paragraphs [178]-[179] above). In this conversation, Mr Teplitsky communicated his willingness both to engage in transactions which involved “washing” money for a fee and also to create paperwork, in conjunction with Mr Hausman, to ensure that there were “no problems” (that is, to ensure that the relevant transactions have the appearance of legitimacy).

Mr Hausman’s reference to “my guy who wants to wash it” was a reference to Mr Rostankovski, who at this stage was not identified by name. Mr Hausman reported back to Mr Rostankovski just a few hours after his call with Mr Teplitsky, referring to “the swap” which Mr Hausman and Mr Rostankovski had previously discussed and confirming that “he can do it” (see paragraphs [181]-[182] above). The reference to “he” is a reference to Mr Teplitsky, and the “swap” is likely a reference to participation in the “washing” of money for Mr Rostankovski, since Mr Hausman went on to report that Mr Teplitsky had agreed to the proposal discussed with him earlier that day: “MT’s happy to pay my mate … the same fee I paid … 5 percent”. Mr Hausman referred to the money coming back “nice and fucking squeaky clean” as a result of the proposed transactions. He also referred to a method (which was later adopted) of achieving this aim, namely, paying the money into and out of a lawyer’s trust account: “I might even whack it into lawyer’s trust account and then it comes out that way. … It’s nice and fucking easy.”

On 25 February 2017, there was a meeting between Mr Teplitsky, Mr Hausman, Mr Rostankovski and Mr Chalabian in Woollahra, for the purpose of “getting out 3 asap” (see paragraphs [240]-[244] above). It is likely, given the events which followed, that this was a meeting to discuss the means of getting $3m of the Plutus Funds out of the Lands Legal Trust Account as soon as possible and back into the hands of Mr Rostankovski and Mr Hausman and, in particular, to discuss the role that Mr Teplitsky would play in achieving this result.

In a follow up discussion with Mr Hausman a few days later, on 28 February 2017, Mr Teplitsky referred to the importance of “the documentation” for the “deal” that had been agreed being “clean”, stating: “it’s fine, it’s clean that’s the main thing” (see paragraphs [246]-[248] above). Mr Teplitsky was thereby expressing his understanding that there was a need for documentation to be created, which gave an appearance of legitimacy to the transactions which were to be effected.

On 22 March 2017, Mr Teplitsky had a further meeting with Mr Hausman, Mr Rostankovski and Mr Chalabian. Given the terms of Mr Hausman’s conversation with Mr Chalabian on the following day, it can be inferred that Mr Teplitsky proposed using the Camperdown Development to return the amount of $4.6m to Luminous. Mr Hausman told Mr Rostankovski: “The only way you can make [the money] kosher is through me, with my relationship with Michael [Teplitsky] and that, and those, those vehicles”: see paragraphs [315]-[316] above.

On 12 April 2017, Mr Teplitsky discussed with Mr Hausman what would be done with the moneys “pouring in” to the Lands Legal Trust Account (see paragraph [350] above). On 16 April 2017, Mr Hausman indicated that they “were sending it away, like you [Mr Teplitsky] told me”. Mr Teplitsky responded that he was “just trying to clear your account at the same time to get that secured”, in order to “make sure there’s no issue”. Mr Teplitsky also stated that he was offering to “clear it out so that you can get the cash back here”, “getting it out and then converting it back to you” (see paragraphs [353]-[356] above). I infer from this exchange that Mr Teplitsky was not only aware that the money paid into the Lands Legal Trust Account was to be transferred overseas, but that he had proposed this course (“clear[ing] your account”, “sending it away” and “getting it out”), as a means of “converting” that cash and then returning it to Mr Hausman and Mr Rostankovski in Australia (“securing” it for them, “getting the cash back here”, “converting it back to you”, and “making sure there’s no issue”).

Similarly, in a subsequent conversation on 27 April 2017 (see paragraph [357] above), Mr Teplitsky said that if Mr Hausman “wanted to clear the accounts … this week I could probably do that”, stating that it would be “all kosher” and “all sweet”, adding:

Mr Teplitsky admitted that he had stated the words quoted above, but said that he “sometimes” used the word “clean” in different ways, and was not talking about money laundering. Given the evidence summarised above, with multiple references to “cleaning” money for Mr Hausman and Mr Rostankovski, “converting” it for them and making it “kosher”, I find that Mr Teplitsky was offering to assist Mr Hausman and Mr Rostankovski in setting up and effecting a series of transactions, which involving the Plutus Funds held in the Lands Legal Trust Account being paid, at the direction of Mr Hausman and Mr Rostankovski, to entities located overseas (taking “as much as you want up there”), and then being returned to Mr Hausman and Mr Rostankovski in Australia via other unrelated third parties, pursuant to apparently legitimate transactions (“clean it up through for you here” and “have it all for you, back straightaway”).

Mr Teplitsky was aware that arrangements were made for payments totalling $4.6m to be made overseas to entities associated with Mr Arnold and Mr Waters in order to procure their agreement to rescind Deed No 1 and Deed No 2. Those deeds had been entered by two Australian companies, Syd Asset and H2O, in respect of the Wentworth Development in Surry Hills. The reason for effecting these payments through entities registered in the United Arab Emirates and Hong Kong was to ensure that the moneys paid out of the Lands Legal Trust Account were transferred overseas. Likewise, the only apparent reason for Mr Teplitsky agreeing to pay an amount of $4.6m to Luminous for fictional services rendered in respect of the Camperdown Development was to ensure that that a sum commensurate with the payments that had been made to Mr Arnold and Mr Waters (for Mr Teplitsky’s benefit) was received by Mr Hausman and Mr Rostankovski in Sydney, on an apparently legitimate basis, via a property development which had no connection to Mr Arnold or Mr Waters. The obvious reason for structuring the transaction in this way was to disguise any connection between the payment of the funds from the Lands Legal Trust Account and the receipt of the same amount by Mr Hausman and Mr Rostankovski. I find that Mr Teplitsky was aware of those matters. That inference may be more confidently drawn in circumstances where the structure which was ultimately adopted for the $4.6m Transaction appears to have been proposed by Mr Teplitsky at a meeting with Mr Hausman and Mr Rostankovski in late March 2017, and Mr Teplitsky chose to give no evidence about that meeting or about his role in, or understanding of, the $4.6m Transaction.

Similarly, Mr Teplitsky was aware that the payment of $6m which was made from the Lands Legal Trust Account to Moshav, in respect of a debt owed by Tepcorp Investments, was effected via a payment to an entity located in Hong Kong, with Tepcorp Holdings agreeing to pay back those moneys to Luminous by a “loan” which was secured by a mortgage over the Short St property in Surry Hills and guaranteed by Mr Teplitsky. Mr Teplitsky told Mr Hausman that they were “going to Hong Kong” and that the transaction was “all kosher so there’s no problems” (see paragraph [364] above). I find that Mr Teplitsky was aware that the effect of the $7m Transaction was that, by a series of payments, the amount which was transferred, at the direction of Mr Hausman and Mr Rostankovski, out of the Lands Legal Trust Account to an entity located overseas, would make its way back into the hands of Mr Hausman and Mr Rostankovski, via an unrelated third party in Australia pursuant to an apparently legitimate “loan” transaction. It must have been obvious to Mr Teplitsky, and I find he was aware, that the reason for structuring the $7m Transaction in this way was to disguise any connection between the payment of moneys out of the Lands Legal Trust Account to the Moshav entity in Hong Kong and the subsequent receipt of moneys by Luminous.

In closing address, Senior Counsel for Mr Teplitsky acknowledged, somewhat elliptically, that “there’s no doubt if one has regard to the facts that what was being done by Mr Teplitsky was not the type of conduct your Honour and I would engage [in]”. He continued as follows:

In this regard, the Teplitsky Parties submitted as follows:

Two points should be noted. First, it is a significant understatement to say that Mr Teplitsky engaged in transaction where money “seems to have gone around in a circle in some respects”. He engaged in transactions which had the effect of disguising any connection between the funds being paid out to overseas entities from the Lands Legal Trust Account and the equivalent sums being paid to Luminous by the Teplitsky Parties.

Secondly, the submission outlined above, which focuses on whether Mr Teplitsky was aware of or assisted in the Plutus Officers’ breach of their fiduciary duties, ignores that there is also an allegation that the Teplitsky Parties knowingly assisted in a fraudulent and dishonest design by an employee of Plutus Payroll, Mr Rostankovski. In particular, the Plaintiffs alleged that the Teplitsky Parties knowingly assisted Mr Rostankovski to put into effect his Blackmail Plan, which (as pleaded) involved both blackmailing the Plutus Officers into paying the Plutus Funds into the Lands Legal Trust Account and transferring the Plutus Funds out of that account to other persons and entities.

The evidence summarised above establishes that Mr Teplitsky agreed to “wash” the moneys in the Lands Legal Trust Account for the benefit of Mr Rostankovski and his associate, Mr Hausman. Mr Teplitsky was aware that Mr Rostankovski was the source of those moneys. In the first recorded conversation between Mr Hausman and Mr Teplitsky, Mr Hausman had referred (without name) to “my guy who wants to wash” moneys (see paragraph [178] above). On 8 March 2017, Mr Rostankovski said in a WhatsApp message to Mr Chalabian that “nothing will happen” (that is, no moneys would be paid to Mr Teplitsky) “till MT knows it’s me” (see paragraph [271] above). Mr Teplitsky had, by this time, already met Mr Rostankovski face to face. So, the reference to the need for Mr Teplitsky to “know it’s me” was not a reference to the need for the two of them to meet, but was instead likely a reference for Mr Rostankovski being keen to ensure that Mr Teplitsky knew that Mr Rostankovski was the person who had obtained the funds that were going to be “washed”. Mr Rostankovski met Mr Teplitsky later that evening. Given the terms of Mr Rostankovski’s WhatsApp message, it is likely that this was one of the matters conveyed to Mr Teplitsky at that meeting.

Mr Teplitsky was also aware that there was an urgent imperative to transfer the funds which had been paid into the Lands Legal Trust Account, and which Mr Rostankovski and Mr Hausman controlled, out of this trust account to overseas entities, and then to ensure that those moneys found their way back into the hands of Mr Rostankovski and Mr Hausman (see, for example, paragraphs [353]-[358] above).

It must have been obvious to Mr Teplitsky, and would have been obvious to any honest and reasonable person in his position, that the reason why Mr Rostankovski and Mr Hausman wanted to ensure that those funds were “washed”, “converted” and “cleaned” before being received by them, was to disguise any connection between the funds which had been paid into the Lands Legal Trust Account and the funds which were received by Mr Rostankovski and Mr Hausman. The Plaintiffs did not allege, and I make no finding, that Mr Teplitsky was aware that the funds which were paid into the Lands Legal Trust Account had been obtained by illegal means. The question for determination is whether Mr Teplitsky had knowledge, in one of the senses described above, that Mr Rostankovski was engaging in the Transactions in furtherance of a dishonest and fraudulent design (with dishonesty being used in the sense of a transgression of the ordinary standards of honest behaviour). I am satisfied that it would have been obvious to any honest and reasonable person in Mr Teplitsky’s position that Mr Rostankovski’s conduct in seeking to ensure that the funds in the Lands Legal Trust Account were paid out to various third parties and returned to him via a series of transactions which disguised their source, was a transgression of the ordinary standards of honest behaviour; and that Mr Rostankovski was engaging in this conduct because the funds in question had been obtained by some dishonest means.

The Teplitsky Parties focused on a different proposition, namely, that the Plaintiffs had not established that Mr Teplitsky was aware of the precise means by which the funds were obtained. They submitted that if the Court concluded that Mr Teplitsky had no knowledge of, or involvement in, the Plutus Officers’ conduct or the Blackmail Plan, then he could not be liable for his assistance in respect of the transactions which were subsequently effected using the funds paid into the Lands Legal Trust Account as a result of the Blackmail Plan. In this regard, they contended that:

For their part, the Plaintiffs contended that I should conclude, from the fact that Mr Hausman, Mr Rostankovski and Mr Chalabian spoke freely and openly with Mr Teplitsky, that Mr Teplitsky was informed about these matters.

As shown in Section D above, Mr Teplitsky spoke directly to each of Mr Rostankovski, Mr Hausman and Mr Chalabian about the funds held in the Lands Legal Trust Account (each of whom was aware of the source of those funds). Further, Mr Hausman was plainly appreciative of Mr Teplitsky’s assistance in the past, and stated to him that: “I just want to be honest with you” (see paragraphs [292]-[293] above). In addition, Mr Teplitsky reported to Mr Hausman that Mr Rostankovski had, when they met face-to-face, been “up front” with him (see paragraphs [279]-[285] above).

However, despite there being numerous intercepted conversations involving Mr Teplitsky, and numerous reports of conversations with him, there is no direct evidence that any of Mr Hausman, Mr Rostankovski or Mr Chalabian revealed that Plutus Payroll was the source of the funds being used for the $7m Transaction and the $4.6m Transaction, or revealed any information about the threats that had been made to the Plutus Officers in order to cause those funds to be paid.

The contemporaneous documents and conversations establish the following matters:

In short, Mr Teplitsky failed to ask any questions in these calls about the identity of the persons who were paying the funds into the Lands Legal Trust Account in millions of dollars each week, or the basis on which they were doing so, or why those funds were being moved between files in the trust account, or why there was urgency in clearing the account.

This failure leads to two alternative inferences.

First, it is open to infer that Mr Teplitsky had actual knowledge about each of those matters: namely, he knew that the moneys were being paid by Plutus Payroll, as a result of the blackmail of the Plutus Officers, and that there was a need to move the funds between files in the Lands Legal Trust Account and get them out of the country as quickly as possible, before these matters were discovered. In other words, his failure to ask questions about these matters provides a basis for inferring that he knew the answers to these questions, as a result of prior discussions with Mr Hausman or Mr Rostankovski, who were “honest” and “up front” with him.

Secondly, it is open to infer that Mr Teplitsky wilfully refrained from asking any such questions because he did not wish to know the answers. Mr Teplitsky was aware that Mr Hausman and Mr Rostankovski were seeking his assistance in “washing” those funds, “converting” them and thereby receiving them back by an apparently “kosher” transaction. However, Mr Teplitsky deliberately refrained from asking any questions which might reveal the source of those funds, or the means by which they had been obtained, or why they needed to be “washed” and “converted” before being paid back to Mr Hausman and Mr Rostankovski, because he was keen to avoid any “problems” or “issues” (to adopt the terms he frequently used).

In light of the evidence summarised above, I find that the latter inference is more likely than the former. Further, in the light of the evidence set out above, I find that Mr Teplitsky’s failure to ask questions was a wilful and calculated failure.

For those reasons, I find that Mr Teplitsky was wilfully blind as to Mr Rostankovski’s dishonest conduct, and wilfully and recklessly failed to make such inquiries that an honest and reasonable person would have made. He engaged in “such a calculated abstention from inquiry as would disentitle [him] to rely upon lack of actual knowledge of the trustee’s or fiduciary’s wrongdoing”: Grimaldi v Chameleon Mining at [261].

The Teplitsky Parties referred to Nicholson v Morgan (No 3) [2013] WASC 110 at [84]-[90] where there was some obiter discussion by Edelman J, in the context of a strike out application, as to whether (in the context of Baden category 3) equity assumes that a truthful answer will be given to a query when there is a duty to enquire. The Teplitsky Parties submitted that, in the present case, there was no need to resort to any presumption because it is likely that, if Mr Teplitsky had made inquiries of Mr Hausman regarding the source of the funds, he would not have been given a truthful answer. I do not accept this submission. Mr Hausman spoke freely with Mr Teplitsky about the need to “wash” or “clean” the moneys in the Lands Legal Trust Account on numerous occasions, regarded himself as indebted to Mr Teplitsky for his past assistance, and was conscious of Mr Teplitsky’s importance for further transactions. It is likely that if Mr Teplitsky sought further information from Mr Hausman before proceeding with the Transactions, it would have been provided to him.

In any case, the question of whether an accessory wilfully and recklessly failed to make such inquiries as an honest and reasonable person would have made is a question which goes to the culpability of the accessory’s conduct and, in particular, whether the extent of the accessory’s knowledge of the fiduciary’s dishonest and fraudulent design is such as to fix the accessory with liability for assisting in that design. In that context, it does not matter whether or not Mr Hausman would have made full and frank disclosure to Mr Teplitsky regarding Mr Rostankovski’s blackmailing of the Plutus Officers. Instead, what matters is that Mr Teplitsky (and the other Teplitsky Parties) assisted in Mr Rostankovski’s dishonest and fraudulent design and did so in circumstances where he was wilfully blind as to the dishonest conduct of Mr Rostankovski, and wilfully and recklessly failed to make the inquiries which any honest and reasonable person in his position would have made.

These matters constitute sufficient knowledge on the part of the Teplitsky Parties to give rise to liability for knowing assistance in Mr Rostankovski’s dishonest breach of his fiduciary obligations to Plutus Payroll, and therefore to give rise to liability under the second limb of Barnes v Addy.

In particular, I am satisfied that Mr Teplitsky knowingly assisted in Mr Rostankovski’s dishonest breach of his fiduciary duties, by negotiating, entering into and implementing the $7m Transaction and the $4.6m Transaction, which had the purpose and effect of (to use Mr Teplitsky’s own words) “cleaning” the Plutus Funds which had been paid into the Lands Legal Trust Account, “converting” them, making them “kosher”, and “getting them back” to Mr Rostankovski and Mr Hausman via apparently legitimate transactions involving Luminous.

In the alternative to the claim for knowing assistance under the second limb of Barnes v Addy, the Plaintiffs pleaded a claim under the first limb for knowing receipt. In particular, the Plaintiffs pleaded that the Teplitsky Parties, in engaging in the $7m Transaction and the $4.6m Transaction in circumstances where they had the knowledge pleaded in paragraphs 48 or 49 of the ACLS, “knowingly received or knowingly caused to be received the Laundered Plutus Funds”.

Again, it is important to note that although the pleading uses the shorthand phrase “the Laundered Plutus Funds”, the Plaintiffs did not allege, or seek to establish, that the Teplitsky Parties committed any offence of money laundering. In the present context, the issue is instead whether any of the Teplitsky Parties received any property of Plutus Payroll that was transferred by Mr Rostankovski as a result of his breach of fiduciary duty in furtherance of a dishonest and fraudulent design, in circumstances where they had knowledge, of one of the types sufficient to give rise to liability, of this dishonest design.

No point was taken by the Teplitsky Parties that liability under the first limb of Barnes v Addy for “knowing receipt” can arise only where the defaulting fiduciary is a trustee, and it is difficult to see why it should be so confined: Pittmore Pty Ltd v Chan; Chan v Tan (2020) 104 NSWLR 62; [2020] NSWCA 344 at [155] per Leeming JA (Bell P and Brereton JA agreeing), referring to the note of caution expressed in Farah Constructions v Say-Dee at [113].

The Plaintiffs submitted (and the Teplitsky Parties did not dispute) that liability can arise under the first limb of Barnes v Addy where a person receives company property as a result of a breach of fiduciary duty by an officer or employee of the company, where that person has knowledge of the essential matters that go to make up the relevant breach: see In the matter of Sunnya Pty Ltd [2024] NSWSC 403 at [488]-[491] (Williams J). The knowledge that will suffice for these purposes is knowledge within one of the four categories of knowledge which are set out in paragraph [453] above.

I have found, for the reasons set out above, that Mr Teplitsky (and therefore each of Tepcorp Holdings and Tepcorp Investments) had knowledge in the requisite sense.

In order to establish liability under the first limb of Barnes v Addy, it is necessary to identify some property of Plutus Payroll that has been received by the Teplitsky Parties as a result of Mr Rostankovski’s dishonest breach of his fiduciary duties.

As outlined above, the Plaintiffs pleaded that the Teplitsky Parties “knowingly received or caused to be received” the Plutus Funds (emphasis added).

I do not consider that a person can be liable under the first limb of Barnes v Addy who does not receive any trust property (or, here, property of the company), but who instead “causes” such property “to be received” by another person. Of course, such a person may be liable under the second limb of Barnes v Addy, for knowing assistance in the fiduciary’s dishonest and fraudulent design.

In Quince v Varga [2009] 1 Qd R 359; [2008] QCA 376, the Queensland Court of Appeal considered whether payments which were not made to a person, but were instead made for that person’s benefit, could be said to have been “received” by that person for the purposes of the first limb of Barnes v Addy. Ms Varga had been found at first instance to have received some $129,355.83, which comprised amounts paid directly to her, as well as other sums paid on her behalf, such as mortgage payments on the house, money paid to help pay for a car for her, school fees, electrical goods, repairs to air conditioning, energy bills, a third share of the family living expenses, body corporate fees and a third share of legal fees.

Douglas J, with whom Holmes JA and Mackenzie AJA agreed, made the following observations (omitting footnotes):

The Teplitsky Parties conceded that they received the benefit of the moneys paid from the Lands Legal Trust Account pursuant to the $7m Transaction. As set out in Sections D and E above, Luminous agreed to advance the amount of $7m to Teplitsky Holdings, secured by a mortgage over the Short St Property, and guaranteed by Mr Teplitsky. Pursuant to this arrangement, some $6m of the Plutus Funds was used to fund a payment which was required to be made by Teplitsky Investments to a related entity of Moshav in Hong Kong pursuant to the terms of a “Deed of Repayment of Loan”. The loan in question had been advanced to Tepcorp Investments, and had been guaranteed by Mr Teplitsky (see paragraphs [363]-[368] above). In addition, some $852,000 in cash was paid to Mr Teplitsky pursuant to the $7m Transaction (see paragraph [372] above).

As a result of the findings I have made regarding Mr Teplitsky’s knowledge, it follows that each of the Teplitsky Parties is liable under the first limb of Barnes v Addy in respect of the amounts received by them pursuant to the $7m Transaction (as well as each of the Teplitsky Parties being liable under the second limb of Barnes v Addy for their knowing assistance in the $7m Transaction).

The Teplitsky Parties disputed that they received any funds, or the benefit of any funds, from the Lands Legal Trust Account pursuant to the $4.6m Transaction. They submitted as follows:

As set out in Section E above, I have determined that moneys were paid from the Lands Legal Trust Account to overseas entities related to, respectively, Mr Arnold and Mr Waters, and that those payments were made:

Having regard to the reasoning in Quince v Varga set out above, I do not consider that those matters are sufficient to establish a claim of knowing receipt against Mr Teplitsky in respect of the $4.6m Transaction. Although the payments which were made to Mr Arnold and Mr Waters from the Plutus Funds held in the Lands Legal Trust Account were made for the benefit of Mr Teplitsky, and were made with his knowledge and acquiescence, those matters do not mean that Mr Teplitsky himself received any property of Plutus Payroll, or any traceable proceeds of such property, as a result of the payment of $4.6m to Mr Arnold or Mr Waters, such as to give rise to liability under the first limb of Barnes v Addy.

However, this is of little consequence. The matters set out above, together with the findings I have made regarding Mr Teplitsky’s knowledge, are (as I have already found above) sufficient to give rise to liability under the second limb of Barnes v Addy in respect of the $4.6m Transaction.

The Plaintiffs pleaded (ACLS [52]-[53]) that the $7m Transaction and the $4.6m Transaction:

The Plaintiffs sought orders, pursuant to s 588FF(1)(a) and/or (c) of the Act, that the Teplitsky Parties pay to Plutus Payroll an amount equal to some or all of the money which they were paid, or the financial benefit which they received, under the $7m Transaction and the $4.6m Transaction (ACLS, [54]).

A number of elements of this claim were not in dispute.

The Teplitsky Parties admitted that Plutus Payroll was insolvent within the meaning of s 95A(2) of the Act at relevant times (ACLR, [53]).

In addition, they admitted that the relation-back day is taken to be 6 June 2017 (ACLR, [22]). It follows that the Transactions, which occurred in around March to May 2017, occurred within two years of the relation-back day.

The Teplitsky Parties also admitted that, by an order of this Court, the time for making an application pursuant to s 588FF(1) of the Act was extended to 6 June 2021 (ACLR, [23]). This application was brought by Summons on 3 June 2021 and was therefore within time.

The Teplitsky Parties did not provide any consideration to Plutus Payroll in respect of the benefit they received as a consequence of the $7m Transaction and the $4.6m Transaction. Further, it is self-evident that there was considerable detriment, and no benefit, to Plutus Payroll from those Transactions, which involved the payment of more than $11m of Plutus Funds to third parties.

In addition, the Teplitsky Parties confirmed in closing address that they did not advance any defence under s 588FG of the Act.

The two main contentions raised by the Teplitsky Parties in defence of the Uncommercial Transaction Claims were as follows:

The second contention is dealt with in Section H of this judgment, which addresses the question of relief. The first contention is addressed below.

The Plaintiffs’ application is brought pursuant to s 588FF(1) of the Act. That section applies where, on the application of a company’s liquidator, “a court is satisfied that a transaction of the company is voidable because of section 588FE” (emphasis added).

Section 588FE identifies various circumstances in which a “transaction of the company” is voidable. In particular, the Plaintiffs relied on s 588FE(3), which provides that a transaction is voidable if “it is an insolvent transaction, and also an uncommercial transaction, of the company” (emphasis added).

Section 588FB specifies the circumstances in which a “transaction of a company is an uncommercial transaction of the company”; and s 588FC specifies the circumstances in which a “transaction of a company is an insolvent transaction of the company” (emphasis added, in each case).

Each of ss 588FB, 588FC, 588FE and 588FF is found in Part 5.7B of the Act. Section 9 of the Act provides as follows (emphasis added):

Accordingly, in order to show that either of the Transactions in issue was “a transaction of [Plutus Payroll]” for the purposes of the relevant provisions, it is necessary to show that it was “a transaction to which [Plutus Payroll] is a party”.

In Fortress Credit Corp (Australia) II Pty Ltd v Fletcher (2015) 254 CLR 489; [2015] HCA 10 at [18], the High Court (French CJ, Hayne, Kiefel, Gageler and Keane JJ) made the following observations regarding the definition of “transaction” in s 9 of the Act:

Their Honours continued as follows (at [20], emphasis added):

The Teplitsky Parties drew attention to these observations, and made the following submissions:

However, this submission fails to take account of the fact that, as pleaded by the Plaintiffs, as conceded by the Teplitsky Parties and as shown by the contemporaneous documents summarised in Section D above, the reason why the Plutus Officers transferred substantial funds of Plutus Payroll into the Lands Legal Trust Account was because “threats were made to the Plutus Officers to the effect that unless substantial funds were paid in response to the threats, the Tax Fraud would be exposed to the media and/or the authorities” (ACLS, [31(a)]).

Accordingly, in causing the Plutus Funds to be paid into the Lands Legal Trust Account, the Plutus Officers knew and intended that those moneys would, via that account, come into the hands of the person making threats against them.

In closing address, the Teplitsky Parties conceded that, given this was the case, the submission set out above might need to be modified. After referring to the submission set out above that the conduct of Plutus Payroll “began and ended” with the payment of money from the bank account of Plutus Payroll to the Lands Legal Trust Account, Senior Counsel for the Teplitsky Parties continued as follows:

The modification to the submission is important. The Plutus Officers caused the Plutus Funds to be paid into the Lands Legal Trust Account in response to the threats being made to expose their conduct to the media and the authorities. Given that is so, the Plutus Officers must have known and intended that, as a result of making those payments, the Plutus Funds would come under the control of the person blackmailing them. After the Plutus Funds were paid into the Lands Legal Trust Account, the person who was blackmailing the Plutus Officers (Mr Rostankovski) implemented the $7m Transaction and the $4.6m Transaction as a means of getting the funds out of the trust account and back into the hands of himself and Mr Hausman. These Transactions were, therefore, a means of achieving the outcome that the Plutus Officers intended when causing the Plutus Funds to be paid into the Lands Legal Trust Account (namely, that the moneys would come into the hands of their blackmailer).

The Teplitsky Parties referred to the decision of the Full Court of the Federal Court (O’Loughlin, Branson and Finn JJ) in Re Emanuel (No 14) Pty Ltd (in liq); Macks v Blacklaw & Shadforth Pty Ltd (1997) 147 ALR 281 at 306; [1997] FCA 667. In that case, A had sold its business to B, in consideration for B making payments both to A and, at A’s direction, to C (who was A’s creditor). The question in issue was whether, when payment was made to and accepted by C, it could properly be said that A and C were parties to a “transaction” which was deemed an unfair preference under s 588FA of the Act.

The Full Court said (at 288) that:

The Full Court did not consider it necessary, for the purposes of the appeal, “to determine in any exhaustive fashion when a composite of dealings can together be said to constitute a s 9 transaction notwithstanding that not all of its component parts considered in isolation could rightly be said individually to be transactions” (ibid). The Full Court noted that common to the examples of a “transaction” in s 9 is “the characteristic that the conduct or dealing engaged in by the debtor company has the consequence of effecting a change in the rights, liabilities or property of the company itself” (ibid). Their Honours continued as follows (at 288-289, emphasis added):

In Sydney Recycling Park Pty Ltd v Cardinal Group Pty Ltd (in liq) (2016) 93 NSWLR 251; [2016] NSWCA 329 at [69], Bathurst CJ and Payne JA (with whom Beazley P, Ward JA and Bergin CJ in Eq agreed) referred to Emanuel and observed as follows:

Being a transaction “of” a particular company can be said to involve something more than the concept of a company being “party to” a transaction: Kalls Enterprises Pty Ltd (in liq) v Baloglow [2007] NSWCA 191 at [236] per Basten JA (Ipp JA agreeing). In Kalls Enterprises at [211]-[212], Ipp JA observed that:

Relevant matters can include whether the company played a critical role in the transaction; whether the transaction involved a disposition of company assets; and whether the officers of the company were aware and intended that payments be made from the assets of the company to the recipient: see, for example, Kalls Enterprises at [239]-[240] per Basten JA. In Kalls Enterprises at [213], Ipp JA concluded that the relevant transaction, which comprised a series of events, constituted one transaction because each of those events had a common element, namely, the achievement of the purpose of paying a substantial sum of money from company assets to the ultimate recipient.

Having referred to Re Emanuel, the Teplitsky Parties submitted as follows:

However, in the present case, the Plaintiffs did not argue that the $7m Transaction and the $4.6m Transaction were “transactions of the company” simply because the transactions were entered subsequently to, and using funds obtained by, a payment made by Plutus Payroll.

Rather, the Plaintiffs contended that Plutus Payroll paid the Plutus Funds into the Lands Legal Trust Account in order that they would come into the hands of their blackmailer, Mr Rostankovski, and that the $7m and $4.6m Transactions were the means by which this outcome was effected.

By those Transactions, the Plutus Funds which had been paid by Plutus Payroll into the Lands Legal Trust Account were paid out of that account, for the benefit of the Teplitsky Parties, in return for a promise by the Teplitsky Parties to pay the same amount back to Mr Rostankovski and Mr Hausman. Accordingly, those Transactions formed part of a series of events initiated by the Plutus Officers, each of which had a common element, namely, the achievement of the purpose of the Plutus Officers, which was to transfer assets of Plutus Payroll (the Plutus Funds) into the hands of their blackmailer, thereby bringing about a change in the property of Plutus Payroll.

Further, by causing the Plutus Funds to be paid into the Lands Legal Trust Account in response to the threats of blackmail, the Plutus Officers gave an employee of the company (Mr Rostankovski) control over the funds of the company which were held in that trust account.

The Teplitsky Parties accepted that those moneys, while held by Lands Legal, were held on trust for Plutus Payroll.

The Plutus Funds were notionally held in the Lands Legal Trust Account in the name of Mr Palumberi or Mr Mills (who was described by Mr Hausman as a person “who takes orders from DR [Mr Rostankovski]”). However, because those funds had been obtained from Plutus Payroll by means of extortion (as Mr Menon repeatedly acknowledged, see paragraph [206] above) and because Lands Legal, through Mr Chalabian, knew that those funds had been obtained by extortion, Lands Legal held them on trust for Plutus Payroll: Black v S Freedman & Co (1910) 12 CLR 105; [1910] HCA 58; Sze Tu v Lowe (2014) 89 NSWLR 317; [2014] NSWCA 462 at [141]-[150] per Gleeson JA (with whom Meagher and Barrett JJA agreed).

Any transaction which was effected using the funds of Plutus Payroll in that trust account, and which was entered into at the direction of an employee of Plutus Payroll (Mr Rostankovski), who had been given control of those funds by the officers of Plutus Payroll, was a transaction of Plutus Payroll. This includes both the $7m Transaction and the $4.6m Transaction, each of which was entered using Plutus Funds, at Mr Rostankovski’s direction, and for his benefit.

In summary, each of the $7m Transaction and the $4.6m Transaction involved a disposition of the Plutus Funds, which the Plutus Officers had caused to be paid by Plutus Payroll into the Lands Legal Trust Account, and was effected by an employee of Plutus Payroll, Mr Rostankovski, who was given control of those Plutus Funds by the Plutus Officers.

For those reasons, I am satisfied that each of the $7m Transaction and the $4.6m Transaction was a transaction of Plutus Payroll, within the meaning of s 9 of the Act.

Section 588FB(1) of the Act provides as follows:

In Crowe-Maxwell v Frost (2016) 91 NSWLR 414; [2016] NSWCA 46 at [89]-[90], Beazley P (with Macfarlan and Gleeson JJA agreeing) said that:

A reasonable person in Plutus Payroll’s circumstances would not have entered into either the $7m Transaction or the $4.6m Transaction, having regard to:

It follows that each of the $7m Transaction and the $4.6m Transaction is an uncommercial transaction of Plutus Payroll within the meaning of s 588FB of the Act.

By reason that:

Finally, because:

I deal with the question of relief below.

In respect of the Barnes v Addy Claims, the Plaintiffs sought equitable compensation from the Teplitsky Parties for the loss suffered as a result of the $4.6m Transaction and the $7m Transaction. The amount claimed was the amount of the Plutus Funds which were paid out of the Lands Legal Trust Account pursuant to those Transactions.

Equitable compensation is a remedy available to the victim of a breach of fiduciary duty against both the fiduciary and any other person who knowingly participated in that breach and has thereby become subject to a personal liability as a “constructive trustee” by application of the principles derived from Barnes v Addy: Greater Pacific Investments Pty Ltd (in liq) v Australian National Industries Ltd (1996) 39 NSWLR 143 at 153 per McLelland AJA (Priestley and Meagher JJA agreeing).

The object of equitable compensation is to restore persons who have suffered loss to the position in which they would have been if there had been no breach of the equitable obligation: O’Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262 at 272 per Spigelman CJ (Priestley and Meagher JJA agreeing).

In order to obtain equitable compensation for breach of a fiduciary duty, it is necessary for the plaintiff to establish “a sufficient connection (or ‘causation’) between breach of duty and … the loss sustained”: Maguire v Makaronis (1997) 188 CLR 449 at 468 per Brennan CJ, Gaudron, McHugh and Gummow JJ; [1997] HCA 23. When assessing causation for the purposes of equitable compensation, the “true inquiry is whether the loss would have happened had there been no breach, not whether the loss was caused by or flowed from the breach”: O’Halloran at 276 per Spigelman CJ (with whom Priestley and Meagher JJA agreed).

In respect of the Uncommercial Transaction Claims, the Plaintiffs sought an order pursuant to s 588FF(1)(a) or (c) of the Act that the Teplitsky Parties pay Plutus Payroll an amount equal to some or all of the money that they were paid or the financial benefit they received as a result of the $4.6m Transaction and the $7m Transaction.

Section 588FF(1) relevantly provides as follows:

The Teplitsky Parties did not advance any reason as to why, if the Plaintiffs’ claims in respect of the $4.6m Transaction were established, the Plaintiffs should not be awarded equitable compensation for the loss suffered by reason of that Transaction, or as to why an order under s 588FF should not be made in respect of that Transaction.

Plutus Payroll suffered a loss of $4.3m as a result of the $4.6m Transaction, comprising the amounts of $3m and $1.3m paid to entities associated with, respectively, Mr Arnold and Mr Waters. The reason for the difference between the figures of $4.3m and $4.6m is that some $300,000 of the total amount of $1.6m paid to Mr Waters was effected by way of a set-off, reducing a debt owed by Mr Waters to Mr Hausman. Accordingly, of the $1.6m paid to Mr Waters, only $1.3m was paid out of the Plutus Funds in the Lands Legal Trust Account.

It follows that, in respect of the $4.6m Transaction, Plutus Payroll is entitled to an order for equitable compensation against Mr Teplitsky in the amount of $4.3m, together with interest. (The remaining Teplitsky Parties, Tepcorp Holdings and Tepcorp Investments, did not play any role in respect of the $4.6m Transaction.)

Further, although Mr Teplitsky did not receive any part of the $4.3m of Plutus Funds which were paid from the Lands Legal Trust Account, he did receive a benefit as a result of the payment, namely, the rescission of Deed No 1 and Deed No 2. Mr Teplitsky was a guarantor under each of those Deeds. Those Deeds were rescinded in consideration for, and as a consequence of, the payments made to Mr Arnold and Mr Waters out of the Plutus Funds. The benefit received by Mr Teplitsky was that $4.3m of the agreed price for the rescission of those Deeds was paid using Plutus Payroll’s money (with the other $300,000 being funded by Mr Hausman’s set-off arrangement).

It follows that Plutus Payroll is entitled to an order under s 588FF(1)(c) that Mr Teplitsky pay $4.3m to Plutus Payroll.

The Teplitsky Parties submitted that, even if the Barnes v Addy Claims and the Uncommercial Transaction Claims were established in respect of the $7m Transaction (as I have found to be the case), no equitable compensation should be ordered and no order should be made under s 588FF(1)(a) or (c) of the Act.

The basis for this submission was that the full amount of the $7m “loan”, together with interest due under that “loan”, was “repaid” by Tepcorp Holdings, and those moneys, totalling $8.575m, were received by the Commonwealth of Australia under the Proceeds of Crime Act. The Teplitsky Parties submitted that:

Before addressing each of these submissions, I set out below the relevant events upon which the Teplitsky Parties relied as constituting repayment of the $7m “loan”.

As set out above (at paragraphs [254]-[257]), the documentation relating to the $7m Transaction included a loan agreement, whereby Luminous agreed to advance the amount of $7m to Tepcorp Holdings, with Mr Teplitsky guaranteeing the repayment of that sum, and a mortgage given by Tepcorp Holdings in favour of Luminous over the Short Street Property.

During the relevant period, the Short Street Property was subject to a registered first mortgage in favour of St George Bank Ltd (St George).

On 16 May 2017, Justice Fullerton made restraining orders in the POCA Proceeding, which included the following:

Schedule 100 to these Orders was in the following terms:

Tepcorp Holdings was the 57th Defendant in the POCA Proceeding.

On 9 October 2017, the Official Trustee lodged a caveat, claiming an “Estate in Fee Simple” over the Short Street Property.

On 1 November 2017, solicitors for Tepcorp Holdings sent a letter to the AFP and the solicitors for the Official Trustee, stating that Tepcorp Holdings had received notice of the caveat over the Short Street Property, and continuing as follows:

On 6 November 2017, the AFP sent a “without prejudice” letter to the solicitors for the Tepcorp Holdings, which noted that Tepcorp Holdings was “eager to repay all moneys owing pursuant to the Loan”, referred to the amount said to be owing under the terms of the “Loan”, and indicated that, if Tepcorp Holdings was willing to pay this amount, the AFP “would likely need to seek the consent of Luminous to seek orders from the Court varying the restraining orders made on 16 May 2017 to reflect the change in the nature of the property restrained”.

On 9 November 2017, the solicitors for the Official Trustee sent an email to the solicitors for Tepcorp Holdings, stating that the existing caveat would be withdrawn, and that a “fresh caveat” was being lodged that same day, which instead specified the interest as being a “charge” by virtue of “a Court Order”, rather than an estate in fee simple.

Between 10 and 13 November 2017, letters were exchanged between the solicitors for the Official Trustee and the solicitors for Tepcorp Holdings regarding whether or not the Official Trustee was entitled to lodge a caveat over the Short Street Property.

On 15 November 2019, Tepcorp Holdings filed a Notice of Motion in the POCA Proceeding. Relevantly, Tepcorp Holdings sought the following orders:

On 24 November 2017, Fullerton J heard directions in relation to the Motion. Relevantly, transcript of the proceedings recorded the following exchange:

Counsel for Luminous indicated that his clients did not oppose the proposed orders.

On 29 November 2017, Justice Fullerton made orders by consent in the POCA Proceeding. These orders included the following:

On 5 December 2017, a cheque for the sum of $8.575 million was drawn from the account of Tepcorp Holdings as trustee for the Tepcorp Holding Trust in favour of the Australian Financial Security Australia Official Trustee Proceeds of Crime Restrained Monies Account (the $8.575m Payment).

On or around 21 September 2018, Tepcorp Holdings sold the Short Street Property to AMA International Pty Ltd for $44.895 million.

On 23 April 2021, the AFP sent a letter to the solicitors for Tepcorp Holdings, enclosing two notices which had been issued pursuant to s 92A of the Proceeds of Crime Act, in respect of the convictions of each of Mr Hausman and Mr Rostankovski.

Section 92A(1) of the Proceeds of Crime Act provides as follows:

Each notice advised that the property subject to the s 18 orders of Fullerton J of 16 May 2017 would be forfeited by 1 October 2021 unless the Court made further orders. Table A of each notice specified that the relevant property to be forfeited included:

On 3 June 2021, the current proceedings were commenced by the Plaintiffs.

On 24 August 2021, the solicitors for the Teplitsky Parties sent an email to the solicitors for the AFP referring to the Orders made in the POCA Proceeding on 29 November 2017 and asking the solicitors for the AFP to “please advise whether there has been an application by any party, including liquidators on behalf of Plutus Payroll Australia Pty Ltd, for exclusion from forfeiture or restraint or any similar application”.

On 25 August 2021, the solicitors for the AFP replied to confirm that they were not aware of any such application. On 26 August 2021, the Teplitsky parties filed a Commercial List Response in these proceedings which stated that Tepcorp Holdings had repaid the $7m “loan” to Luminous, the proceeds of which were sitting with the Official Trustee to abide the outcome of the POCA Proceedings, and pleaded that, in those circumstances, it would not be just and equitable to require that Tepcorp Holdings pay any compensation to Plutus Payroll in respect of the $7m “loan”.

On 15 September 2021, the solicitors for the Teplitsky Parties sent a letter to the solicitors for the Plaintiffs. The letter set out the procedure for making an application for an exclusion order, referred to the $8.575m Payment, and continued as follows:

On 30 September 2021, Rothman J made orders in the POCA Proceeding which extended the period of statutory forfeiture of the property restrained by the orders of Fullerton J (including the $8.575m Payment) by a further six months, to 1 July 2022: see The Commissioner of Australian Federal Police v Cranston (No 15) [2021] NSWSC 1332.

Neither the Plaintiffs nor the Teplitsky Parties made any application for an exclusion order in respect of the $8.575m Payment. This sum was accordingly forfeited pursuant to the Proceeds of Crime Act.

There is an evident artificiality in describing what occurred as involving the “repayment” by Tepcorp Holdings of a “loan” made by Luminous. The documentation recording such a loan was a sham, designed to hide the true position, namely, that an amount of $7m was paid out of the Plutus Funds held in the Lands Legal Trust Account to third parties, so that those moneys could be (to use Mr Teplitsky’s words) “cleaned” and “converted”, before being paid back to Mr Rostankovski and Mr Hausman via a corporate entity that was set up for this purpose (this being the substance of what I have described as the “$7m Transaction”).

Since there was, in truth, no “loan” by Luminous of $7m to Tepcorp Holdings, there was no obligation on Tepcorp Holdings to “repay” the amount of any such “loan”, or to pay “interest” on any such loan.

Further, the evidence summarised above shows that the Official Trustee took custody and control of Luminous’ interest as second mortgagee in the Short Street Property, and that Tepcorp Holdings negotiated consent orders with the AFP and the Official Trustee, whereby the $8.575m Payment was made to the Official Trustee, with the May 2017 orders being amended to remove the reference to Luminous’ interest in the Short Street Property and the Official Trustee being required to withdraw the caveat over that property. Tepcorp Holdings made the $8.575m Payment because the caveat was causing it to be in breach of its lending covenant with its major financier, St George, and presumably also in order to facilitate a sale of the Short Street Property (which subsequently occurred some months afterwards for an amount in excess of $44m).

In summary, in making the $8.575m Payment, Tepcorp Holdings was not performing any obligation to pay that amount pursuant to the terms of the $7m “loan” agreement with Luminous (which was in fact a sham). Instead, Tepcorp Holdings was choosing, for its own commercial purposes, to substitute the $8.575m Payment for the interest which Luminous held pursuant to its mortgage over the Short Street Property (and which was subject to the regime put in place in the POCA Proceeding), in order to secure the release of the caveat over the Short Street Property. The $8.575m Payment was then treated as property of Luminous which was subject to the regime in the POCA Proceeding.

The subsequent forfeiture of the $8.575m Payment did not represent a payment of money by Tepcorp Holdings to the Commonwealth. Instead, it represented the forfeiture of Luminous’ property interest, now constituted by the sum of money which had been paid by Tepcorp Holdings in substitution for Luminous’ interest as second mortgagee in the Short Street Property.

For those reasons, any submission that proceeds on the basis that a “loan” was made to Tepcorp Holdings which was subsequently “repaid” in full, or that Tepcorp Holdings has made any payment to the Commonwealth in respect of the moneys received under the $7m Transaction, is proceeding on a false basis. Nonetheless, I have considered the submissions made by the Teplitsky Parties regarding the $8.575m Payment on the basis that, in broad terms, moneys have flowed from the Teplitsky Parties to the Commonwealth which are greater than the amount of the Plutus Funds which had been paid out to the Teplitsky Parties pursuant to the $7m Transaction.

The Teplitsky Parties submitted as follows:

On the basis of those matters, the Teplitsky Parties contended as follows in closing address:

There are three problems with the starting premise of this submission, namely, that the Plutus Funds which were paid into the Lands Legal Trust Account (and, so far as the $7m Transaction is concerned, were paid out from there to the Teplitsky Parties) represented moneys which had been paid by employers and were held by Plutus Payroll on a bare trust for the taxation authority.

First, the Plutus Funds were paid from the bank account of Plutus Payroll into the Lands Legal Trust Account. There has been no financial analysis undertaken as to the source of those funds held in the Plutus Payroll bank account and, in particular, the extent to which the funds paid into the Lands Legal Trust Account comprised moneys which had been paid by employers to Plutus Payroll and which were referable to PAYG.

Secondly, this trust argument was raised by the Teplitsky Parties by way of an amendment made on the second day of the hearing. The Plaintiffs opposed the amendment on the basis that such an argument depended “on the intentions of the payer”, and there had been no investigation of “who the actual payer is”, “what the circumstances of the payment are”, or “how they paid the money, or why”, adding: “We don’t know if the arrangements were contractual, that is to say, confined to remedies in contract, or whether the parties intended that some trust arrangement be entered into”.

The only evidence regarding such matters to which the Teplitsky Parties referred, when advancing their proposed amendment, was the following statement in a report by one of the Liquidators:

In this passage of his report, the Liquidator addressed only “one scenario” by which Plutus Payroll operated, and outlined this scenario in very general terms. There was no identification of any other scenario by which Plutus Payroll operated, let alone any identification of the terms of any such arrangements, including any terms on which money was paid to Plutus Payroll or any terms regarding the role of any “intermediary”. Those are matters about which the evidence is silent, because there has not previously been any issue about the intention of the persons paying Plutus Payroll or the terms on which payment was made.

When this objection to the proposed amendment was raised, the Teplitsky Parties responded that their trust argument did not “raise any question about the intention of the parties providing the funds”. This led to the following exchange:

However, in closing address, the trust argument was advanced on the basis that an inference should be drawn as to the intentions of the persons who paid moneys to Plutus Payroll. The Teplitsky Parties submitted as follows:

Given the basis on which the amendment was advanced, and was allowed, it is not open to the Teplitsky Parties to advance a submission in support of the amendment in these terms.

Thirdly, even if it had been open to run an argument on this basis, I would not have been not satisfied that the intention to create a trust had been established.

While, as recognised by Gordon and Edelman JJ in Bosanac v Commissioner of Taxation (2022) 275 CLR 37; [2022] HCA 34 at [105], a presumption of a resulting trust may arise “if there be a paucity of evidence as to an intention to declare a trust”, their Honours noted that such an inference “cannot arise where a plaintiff has led evidence that tends to establish an objective intention or the lack of an objective intention to create a trust”. In the circumstances of the present case, I do not consider that it is open to me to make any inference from an absence of evidence on the issue of the intention of the employers who paid moneys to Plutus Payroll in the course of its payroll services business. The trust amendment was allowed on the basis that it did not raise any such question of intention, precisely because the Plaintiffs had not had any opportunity to investigate, or put on evidence, on that issue of intention. It would be fundamentally unfair to the Plaintiffs to allow an amendment raising an issue concerning the intention of multiple third parties, which the Plaintiffs did not have any opportunity to investigate, and then to draw an inference adverse to the Plaintiffs’ case on the basis of their failure to lead evidence on that issue.

Pursuant to the orders made by this Court in the POCA Proceeding, the $8.575m Payment has now been forfeited to the Commonwealth.

Section 73(1) of the Proceeds of Crime Act permits an application for an exclusion order to be made to the court that made the forfeiture orders. The consequence of an exclusion order being made is that the interest in question is excluded from the operation of the forfeiture orders: s 73(2)(a)-(b). If the interest has already vested in the Commonwealth and is yet to be disposed of, such an order must direct the Commonwealth to transfer the interest to the applicant: s 73(2)(c). If the interest has vested in the Commonwealth and has been disposed of, the order must direct the Commonwealth to pay the applicant an amount equal to the value of the interest concerned: s 73(2)(d).

Because the Plaintiffs were notified of the application for the forfeiture order and did not appear at the hearing of that application, it would be necessary for the Plaintiffs, in order now to bring an application for an exclusion order in respect of the $8.575m Payment, to obtain the leave of the Court: s 74(3)(a). The Court may grant such leave if the Plaintiffs have a good reason for having not appeared in the POCA Proceeding, or if there is some evidence now available which was not available at the time of the hearing, or if there are other special grounds for granting the leave: s 74(4)(a)-(c).

Having referred to those provisions of the Proceeds of Crime Act, the Teplitsky Parties submitted as follows:

I have addressed the trust argument above.

The contention that Plutus Payroll should make an application for an exclusion order depends on the submission that Plutus Payroll “can (and should) properly assert an interest” in the $8.575m Payment.

Certain conditions must be satisfied before an exclusion order is made: s 73(1)(a)-(d). These conditions include, relevantly, the following (s 73(1)(c)):

As the Plaintiffs submitted, in order for Plutus Payroll to make an application for an exclusion order, it would need to persuade the Court that Plutus Payroll’s interest in the $8.575m Payment was not the proceeds of unlawful activity. It is difficult to see how it could do so, having regard to the tax fraud for which the Plutus Officers have been imprisoned. The Teplitsky Parties advanced no submissions as to how this requirement could be met.

As the Plaintiffs submitted, if any issue of mitigation does arise in this context (which is disputed, and which I need not determine), there is nothing unreasonable in a liquidator refraining from “embarking on costly and probably unsuccessful litigation”.

The Teplitsky Parties submitted that:

As the Teplitsky Parties acknowledged, there are conflicting authorities on the question whether or not the Court has a discretion under s 588FF(1) of the Act to refuse relief to a liquidator in respect of a voidable transaction. I do not consider it necessary or desirable to reach a concluded view on this issue. For present purposes, I am prepared to proceed on the basis that there is such a discretion to deny or reduce relief: see BP Australia Ltd v Brown (2003) 58 NSWLR 322; [2003] NSWCA 216 at [157] and [171] per Spigelman CJ (with whom Mason P and Handley JA agreed); Great Investments Ltd v Warner (2016) 243 FCR 516; [2016] FCAFC 85 at [141] (Jagot, Edelman and Moshinsky JJ).

Assuming there is such a discretion, I would not exercise it so as to refuse or reduce the relief awarded to the Liquidators in respect of the $7m Transaction having regard to the circumstances of this case.

That is because, for the reasons outlined above, the Plaintiffs did not act unreasonably in failing to seek an exclusion order. Further, and in any case, I have found that the Teplitsky Parties engaged in serious improper conduct by knowingly assisting in a dishonest and fraudulent design that led to millions of dollars of Plutus Funds being paid away to third parties. Those are matters that weigh strongly against any exercise of discretion in the Teplitsky Parties’ favour.

The Teplitsky Parties also relied on the principle against “double recovery” or “double proof” to argue that the Court should, having regard to the forfeiture of the $8.575m Payment, exercise its discretion to refuse any relief to the Plaintiffs in respect of the $7m Transaction.

I do not consider that the making of an order for the Teplitsky Parties to pay to the Liquidators an amount equivalent to the payments or benefits which they received pursuant to the $7m Transaction would offend the principle against double recovery or the principle against double proof in insolvency.

As a starting point, it must be kept in mind that the principle against “double recovery” is a principle against actual double recovery: Anderson v Canaccord Genuity Financial Ltd (No 2) [2024] NSWCA 161 at [70] (Gleeson, Leeming and White JJA).

The Teplitsky Parties’ submissions on double recovery conflate Plutus Payroll with one of its creditors (the Commonwealth). Plutus Payroll has not received any compensation in respect of the payment of its funds out of the Lands Legal Trust Account pursuant to the $7m Transaction.

Further, any funds obtained by the Liquidators in these proceedings will need to be dealt with in accordance with the law, including in accordance with s 556 of the Act.

As the Plaintiffs submitted, it is, at this stage, uncertain how that process will play out. For example, any amount able to be recovered from the Teplitsky Parties in respect of a judgment in these proceedings may be less than the amount of the Liquidators’ fees and remuneration. Alternatively, the amount recovered may be equal to or less than the amount of any award made in respect of the $4.6m Transaction, such that it could fairly be said that no amount had been recovered in respect of the $7m Transaction.

If the amount recovered in respect of a judgment in these proceedings substantially exceeds any amounts payable under s 556 of the Act, and any amount (including interest) awarded in respect of the $4.6m Transaction, then the situation may arise where there is an amount available for distribution to creditors (including the Commonwealth), which can be regarded as an amount recovered in respect of the $7m Transaction.

The Commonwealth is entitled to approximately 98% of any amount available for distribution to creditors. However, it does not follow that, if there is a distribution to creditors of moneys recovered in respect of the $7m Transaction, there will be a double recovery by the Commonwealth. The $8.575m Payment which was forfeited to the Commonwealth did not represent a payment made to the Commonwealth in respect of its claim against Plutus Payroll. Instead, that amount, which was paid in substitution for the property interest of Luminous under its second mortgage over the Short Street Property, was forfeited to the Commonwealth because it represented the proceeds of criminal activity engaged in by the sole shareholder of Luminous, Mr Rostankovski. There does not appear to me to be any sound basis to regard this forfeiture of property, pursuant to the Proceeds of Crime Act, as reducing any liability of Plutus Payroll to the Commonwealth.

If such an approach were appropriate, then it would presumably also be necessary to take in account any amounts recovered by the Commonwealth from, say, the Plutus Officers in the POCA Proceedings which might be able to be characterised as referrable to the PAYG amounts that were diverted by the Plutus Officers for their own benefit. There is no evidence before the Court in relation to that issue, including as to whether any such recovery has been taken into account by the Commonwealth in its proof of debt, and there have not been any submissions, including from the Commonwealth (which is not a party to the proceedings), as to those matters.

As the Plaintiffs submitted, the appropriate time to consider any question of “double recovery” by the Commonwealth, insofar as it arises, is following any recovery from the Teplitsky Parties in these proceedings, when it is known whether any amount, and if so how much, is available, after the making of the payments specified in s 556 of the Act, for distribution to creditors:

Any such issue in respect of the administration of Plutus Payroll can, when it arises, be determined by the Court in its supervisory jurisdiction.

For those reasons, I am not satisfied that the issues raised regarding “double recovery” provide a sufficient basis for exercising any discretion to refuse or reduce any relief awarded to the Plaintiffs in respect of the $7m Transaction.

Plutus Payroll suffered a loss of $6.852m as a result of the $7m Transaction, comprising the amount of $6m advanced to Tepcorp Holdings and used to repay Tepcorp Investments’ debt to Moshav (which was guaranteed by Mr Teplitsky) and the amount of $852,000 paid in cash to Mr Teplitsky. Those payments were made from the Plutus Funds held in the Lands Legal Trust Account, and Plutus Payroll received nothing in return for those payments. This transaction was entered in furtherance of Mr Rostankovski’s dishonest and fraudulent design, and each of the Teplitsky Parties knowingly assisted Mr Rostankovski in giving effect to that design.

Accordingly, in respect of the $7m Transaction, Plutus Payroll is entitled to an order for equitable compensation against the Teplitsky Parties in the amount of $6.852m, together with interest.

Further, by reason of those matters, Plutus Payroll is entitled to an order under s 588FF(1)(a) and/or (c) that the Teplitsky Parties pay to Plutus Payroll the amount of the payments made to each of the Teplitsky Parties from the Plutus Funds, or the amount of the benefits received by each of them, pursuant to the $7m Transaction.

I have found that Mr Rostankovski breached his fiduciary duties to Plutus Payroll in further of a dishonest and fraudulent design.

I have found that the Teplitsky Parties assisted Mr Rostankovski in the breach of his fiduciary obligations and did so in circumstances where they had knowledge in the requisite sense of his dishonest and fraudulent design.

I have also found that each of the $7m Transaction and the $4.6m Transaction was an insolvent transaction and an uncommercial transaction of Plutus Payroll, which is voidable under s 588FF(3) of the Act.

Plutus Payroll is entitled to an order against Mr Teplitsky for equitable compensation in the amount of $11.152m, being the total amount of the Plutus Funds paid out of the Lands Legal Trust Account pursuant to these Transactions ($4.3m having been paid in respect of the $4.6m Transaction, and $6.852m having been paid in respect of the $7m Transaction). The Plaintiffs are also entitled to pre-judgment interest from the date that those payments were made.

Plutus Payroll is entitled to an order against Tepcorp Investments and Tepcorp Holdings for equitable compensation in the amount of $6.852m, being the amount of the Plutus Funds paid out of the Lands Legal Trust Account pursuant to the $7m Transaction, together with pre-judgment interest from the date that those payments were made.

In addition, the Plaintiffs are entitled to orders under s 588FF(1)(a) and/or (c) of the Act that the Teplitsky Parties pay the amount of the payments made to them, or benefits received by each of them, pursuant to the $7m Transaction and the $4.6m Transaction.

The Plaintiffs have succeeded in their claims against the Teplitsky Parties and are entitled to their costs.

I will direct the parties to bring in short minutes of order to give effect to these reasons, including dealing with interest and costs. If there is any dispute about the form of those orders, including the quantification of interest, or if any party seeks a different costs order, or a costs order other than on the ordinary basis, the parties will have an opportunity to be heard on these matters.

Accordingly, I make the following orders. The Court: