FEDERAL COURT OF AUSTRALIA
Westpac Banking Corporation v Forum Finance Pty Limited (in liq) (Liability) [2024] FCA 1176
ORDERS
CHEESEMAN J | |
DATE OF ORDER: |
THE COURT ORDERS THAT:
1. The proceedings be listed for a case management hearing at 9.30 am on 28 October 2024.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
NSD 642 of 2021 | ||
BETWEEN: | SOCIETE GENERALE (ABN 71 092 516 286) Applicant | |
AND: | FORUM FINANCE PTY LIMITED (IN LIQUIDATION) (RECEIVERS APPOINTED) ACN 153 301 172 Respondent BASILE PAPADIMITRIOU Second Respondent FORUM GROUP FINANCIAL SERVICES PTY LTD (ACN 623 033 705) (IN LIQUIDATION) Third Respondent | |
order made by: | CHEESEMAN J |
DATE OF ORDER: | 11 OCTOBER 2024 |
THE COURT ORDERS THAT:
1. The proceedings be listed for a case management hearing at 9.30 am on 28 October 2024.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
NSD 681 of 2021 | ||
BETWEEN: | SMBC LEASING AND FINANCE, INC. ARBN 602 309 366 Applicant | |
AND: | FORUM ENVIRO (AUST) PTY LTD (IN LIQUIDATION) ACN 607 484 364 First Respondent BASILE PAPADIMITRIOU Second Respondent FORUM ENVIRO PTY LTD (IN LIQUIDATION) ACN 168 709 840 Third Respondent | |
order made by: | CHEESEMAN J |
DATE OF ORDER: | 11 OCTOBER 2024 |
THE COURT ORDERS THAT:
1. The proceedings be listed for a case management hearing at 9.30 am on 28 October 2024.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
CHEESEMAN J:
1 These reasons concern the aftermath of an audacious fraud perpetrated against four financiers who collectively advanced about half a billion dollars to companies in the Forum group in Australia and to a related company in New Zealand. The applicant financiers are Westpac Banking Corporation (WBC) and Westpac New Zealand Limited (WNZL) (together Westpac); SMBC Leasing and Finance, Inc (SMBC); and Societe Generale. There are three separate proceedings before the Court brought by the duped financiers. There is some but far from a complete overlap between the respondents to each of the three proceedings.
2 The financiers advanced funds in respect of what proved to be fictitious and falsified equipment finance contracts. The impugned contractual arrangements with each of the financiers are similar in concept.
3 To presage what follows, the underlying fraud alleged by each financier has been comprehensively established, on evidence that was in the main, not contested. All parties, including the respondents who were alleged to have the requisite knowledge of the fraud, proceeded on the basis that the fraud, and Mr Papas’ involvement in it, was established. The position taken by the respondents in this regard was realistic — it reflected the strength of the evidence establishing the fraud.
4 The principal perpetrator of the fraud was Mr Bill Papas (also known as Basile Papadimitriou). Mr Papas is a respondent in each of the three proceedings. Directly or indirectly, Mr Papas, owned and controlled many of the corporate entities through which the tainted funds cycled. For the purpose of the financiers’ claims, Mr Papas’s knowledge of the fraud is properly attributed to his related entities which, by design or result, benefitted from the fraud.
5 Mr Papas fled the country in June 2021 at about the time the first threads of the fraud were discovered by Westpac. During the currency of these proceedings, a warrant was issued for Mr Papas’ arrest on a charge of contempt. Mr Papas did not defend the proceedings.
6 Shortly after Mr Papas left Australia, his domestic partner, Ms Louisa Agostino, followed him. In her defence, Ms Agostino pleaded that she commenced a relationship with Mr Papas in or around late 2018 to early 2019 and that she resided with Mr Papas from in or around September 2020. Ms Agostino was a Forum employee for the whole of the relevant period. One of the positions that she held was that of Forum’s “Business Solutions Manager”. She was involved in the day-to-day management of the equipment lease finance part of the business, with particular responsibilities in relation to Forum’s waste management offerings. Ms Agostino worked for Forum and held shares in the group holding company. She is a respondent in the Westpac proceeding. The evidence establishes that Ms Agostino was involved in creating fraudulent documents that were deployed as part of the fraud. Neither Mr Papas nor Ms Agostino have returned to the jurisdiction. Despite filing a defence, Ms Agostino did not, in substance, defend the proceedings against her.
7 The remaining individual respondents are joined only to the Westpac proceeding. They are Mr Vincenzo Tesoriero and Mr Moussa (Tony) Bouchahine.
8 Westpac allege, amongst other things, that Mr Tesoriero acted with Mr Papas in devising the fraud or alternatively had the requisite knowledge of the fraud to render him liable to Westpac. Mr Tesoriero defended the proceeding against him. The claims made against those of Mr Tesoriero’s related companies (of which Mr Papas was not a director) depend on Mr Tesoriero’s knowledge being attributed to them. These entities hold a significant amount of the property into which the tainted funds have been traced.
9 Mr Bouchahine is the former Chief Financial Officer (CFO) of the consolidated Forum Group of companies (the Consolidated Group) and of Forum Group Financial Services Pty Ltd (in liquidation) (FGFS). The Forum Group of Companies (in liquidation) (FGOC) was the ultimate holding company in the Consolidated Group. Westpac allege, amongst other things, that Mr Bouchahine, like Mr Tesoriero, had the requisite knowledge of the fraud to render him liable to Westpac. Mr Bouchahine defended the proceeding.
10 As mentioned, neither Mr Tesoriero nor Mr Bouchahine sought to contest the fact of the overarching fraud. Their respective defences were confined to challenging the allegations made against them as to their knowledge of, and involvement in, the fraud. The proceedings have resolved against all other individual respondents.
11 There were four direct recipient companies of the tainted funds (the Primary Recipients), three of which were Forum group companies, incorporated in Australia, and the fourth of which was a company incorporated in New Zealand, owned and controlled by Mr Papas.
12 The three Forum group companies which were Primary Recipients were Forum Finance Pty Limited (in liquidation) (receivers appointed); Forum Enviro Pty Ltd (in liquidation) and Forum Enviro (Aust) Pty Ltd (in liquidation). They were each members of the Consolidated Group. Mr Papas and Mr Tesoriero were the directors of Forum Finance at all relevant times. Mr Papas was the sole director of Forum Enviro and Forum Enviro (Aust) at all relevant times. Mr Papas was a director of FGOC from 2011 until liquidators were appointed in July 2021, following discovery of the fraud. Mr Tesoriero was a director of FGOC from 27 January 2013 until 24 April 2020. Mr Papas was the owner and sole director of the fourth Primary Recipient: Iugis (NZ) Limited (in liquidation) (previously known as Orca Enviro Solutions NZ Limited), a company incorporated in New Zealand (Iugis NZ).
13 The first of the impugned advances in these proceedings was in August 2018 (by SMBC). WBC made its first advance in September 2018. Societe Generale was late to the party, making the first of its three only advances in March 2021. The last advances were made in May and June 2021. The fraud was first discovered in June 2021.
14 The Forum relationships with Westpac and SMBC were cultivated in the period that the Forum relationship with another financier, Maia Financial Pty Ltd, was in its death throes. The Maia arrangements involved similar equipment finance arrangements as those that the financiers believed were in place in these proceedings. Limited documents relating to the Maia arrangements were in evidence in these proceedings. The Maia arrangements appear to have been in place from at least September 2017. By around March 2018, Maia was raising serious concerns with Mr Papas and Mr Bouchahine about the veracity of the arrangements. In around April 2018, Mr Papas made notes in a notebook that was seized during the execution of a search warrant at Mr Papas’ Sydney office, in which he sketched a mud map of the fundamental aspects of the fraudulent scheme, and which also included reference to his “overseas escape”. Included on the second of the two critical pages in which the fraudulent scheme is detailed is a notation “tell Vince everything you need to tell him”.
15 The Maia arrangements were ultimately finalised in around October 2018 on terms which involved Maia being paid out $58,850,000, by, amongst others, Forum entities, without the involvement of the third party customers, who ostensibly had the benefit of the equipment the subject of the equipment finance contracts. Mr Tesoriero guaranteed the obligations of Mr Papas and the Forum Entities in respect of the payout. Forum Enviro took an assignment of, amongst other things, Maia’s obligations in respect of the Maia equipment finance arrangements. The early tranches of funding advanced by WBC and SMBC in respect of the fraudulent equipment finance contracts overlapped chronologically with the staged payout of Maia by Forum. The limited documentary evidence in these proceedings reveals that each of Mr Papas, Mr Tesoriero, Mr Bouchahine and Ms Agostino had, to varying degrees, involvement in the finalisation of the Maia arrangements in the period between March 2018 and October 2018. The events relating to Maia form part of the circumstances in which the knowledge of each of Mr Tesoriero (and through him, the respondent entities associated with him), Mr Bouchahine and Ms Agostino fall to be assessed. The finalisation of the Maia relationship occurred relatively shortly after Forum entities established relationships with WBC and SMBC.
16 Distribution of the tainted funds after receipt by the Primary Recipients usually involved the funds being transferred to FGFS, a private company owned and controlled by Mr Papas and Mr Tesoriero. Notwithstanding its name, FGFS was not part of the Consolidated Group. It was not accounted for as part of the Consolidated Group and its accounts were not, and were not required to be, audited.
17 Upon receipt, FGFS in the main channelled the tainted funds to companies associated with Mr Papas and/or Mr Tesoriero in Australia, New Zealand, the Hellenic Republic (Greece) and the United Kingdom (UK). FGFS also used some of the tainted funds to fund payments due from Forum companies to the financiers under the bogus equipment finance contracts. Making these payments served to cloak and thereby prolong the life of the fraud. FGFS does not appear to have carried on a legitimate business other than to facilitate the dispersal of the tainted funds to the beneficiaries of the fraud. Other than the fraudulent purpose, no commercial rationale was revealed to justify why FGFS, sitting outside the Consolidated Group and not owned by the ultimate group holding company, should receive the large sums that it did.
18 Most of the corporate respondents, both in Australia and elsewhere, are in liquidation, and leave has been granted to proceed against them. The limited number of corporate respondents who appeared at the hearing did so by their liquidators.
19 The liquidators of the key companies involved in the fraud have traced the distribution of the funds derived from the fraud and identified the property acquired and/or serviced using the tainted funds. The tracing evidence is essentially unchallenged.
20 The financiers seek a variety of proprietary and personal relief against the respondents who had requisite knowledge of the fraud whether as recipients or participants and/or who hold property into which the tainted funds have been traced. These reasons concern liability only. The financiers wish to be heard separately on the form of relief if relief is granted.
21 For the reasons which follow, I find that the financiers are entitled to relief against each of the respondents against whom they pressed their primary claims. In so far as the individual respondents to the Westpac Proceedings are concerned, namely Mr Tesoriero, Mr Bouchahine and Ms Agostino, I find that Westpac has established that they are each liable on the basis, amongst other things, that they had knowledge of the fraud. I find that Westpac has established that each of the individual respondents had knowledge at or shortly after the inception of the financing arrangements. In relation to the claims made against the corporate respondents in the Westpac and SMBC Proceedings that rely on the attribution of Mr Tesoriero’s knowledge to Mr Tesoriero’s related entities, I find those respondents liable on the basis of Mr Tesoriero’s knowledge.
22 I will make timetabling orders that afford the parties an opportunity to review the detailed reasons that follow with a view to bringing forward appropriate orders, including in relation to the arrangements for the hearing on relief. Accordingly, the only orders that I will make today, are in respect of a case management hearing on 28 October 2024.
23 There are three proceedings before the Court. The applicants in each proceeding are the financiers who allege that they are the victim of a serious fraud perpetrated against them and for which the respondents are liable to them. Across the three proceedings, the fraud is alleged to have reaped in the realm of half a billion dollars collectively from the financiers.
B.1.1 The applicant financiers
24 The applicants are WBC and WNZL (together Westpac); SMBC, a registered foreign company in Australia; and Societe Generale, a registered foreign company in Australia. I will refer to the applicants as the financiers. Where it is necessary to distinguish between the proceedings, I will refer to the individual proceedings by reference to the names of the financiers: NSD616/2021 (the Westpac Proceeding); NSD681/2021 (the SMBC Proceeding), and NSD642/2021 (the Societe Generale Proceeding). Proceedings brought by WNZL against Iugis NZ in the High Court of New Zealand have been stayed as a consequence of Iugis NZ being in liquidation.
25 Three respondents are common to all the proceedings. They are Mr Papas, Forum Finance, a member of the Consolidated Group, and FGFS, a private company of Mr Papas and Mr Tesoriero that sits outside the Consolidated Group.
26 At the time of the fraud, Mr Papas was the Chief Executive Officer (CEO) of the Forum Group and a director of each of the Primary Recipients.
27 Despite initially appointing solicitors to appear on his behalf and participating in the proceedings, Mr Papas has not in any substantive way defended the allegations against him — he has not filed a defence (and has not been excused from so doing), he did not file and serve or adduce any evidence, he did not appear and was not represented at the hearing. As mentioned, orders were made on 20 October 2021 that a warrant be issued for Mr Papas’ arrest to bring him before the Court to answer a charge of contempt in the Westpac Proceeding: Westpac Banking Corporation v Forum Finance Pty Ltd [2021] FCA 1341.
28 The Court issued the warrant on that same day. Mr Papas has not been brought before the Court to answer the contempt charge.
29 Mr Papas did not appear when this matter was called on for hearing. Being satisfied that he had been served with the relevant originating applications, the pleadings and the evidence, I ordered that each of the three proceedings continue generally against Mr Papas in his absence pursuant to r 30.21(1)(b)(i) of the Federal Court Rules 2011 (Cth).
30 Forum Finance is a wholly owned subsidiary of FGOC which is the ultimate holding company in the Consolidated Group. During the relevant period when the fraud was perpetrated, the directors of Forum Finance were Mr Papas and Mr Tesoriero. Westpac allege that Mr Tesoriero had knowledge of and/or devised the fraudulent scheme with Mr Papas. He is not a respondent in the SMBC or Societe Generale Proceedings. SMBC do not positively advance a claim that Mr Tesoriero had knowledge of and/or devised the fraudulent scheme but seek to rely on any such finding that may be made in the Westpac Proceeding.
31 Forum Finance is alleged to have directly received the funds advanced by WBC and Societe Generale as a result of the alleged fraud. Mr Jason Preston and Mr Jason Ireland are the liquidators of Forum Finance. Forum Finance was excused from filing a defence in each of the three proceedings. At trial, Counsel for the liquidators indicated that they intended to play only a limited role in the proceedings, being that they wished to be heard on relief.
32 FGFS sat outside of the Consolidated Group. In the relevant period, the directors and shareholders of FGFS were Mr Papas and Mr Tesoriero. Mr Papas was a director from 23 November 2017 and continued as a director as at the date liquidators were appointed. Mr Tesoriero was a director from 13 November 2018 to 30 April 2020. FGFS is alleged to have received the tainted funds from the initial Forum recipients, including Forum Finance. As mentioned, aside from effectuating the distribution of the tainted funds to, or at the direction of, Mr Papas and/or Mr Tesoriero, FGFS did not appear to conduct a legitimate business in its own right. There did not appear to be any apparent commercial purpose for FGFS to have received the substantial sums which various Forum companies obtained from the financiers under the fictitious and falsified equipment lease contracts.
33 In broad terms, FGFS’s function was as an external treasury company of sorts, into which the tainted funds were funnelled from within the Consolidated Group and from which the tainted funds were subsequently applied in accordance with the wishes of Mr Papas and Mr Tesoriero. An issue which Mr Tesoriero contests in his defence of the Westpac Proceeding is whether the tainted funds, when moving from FGFS, were subject to approval being given by Mr Papas, even when those funds were ultimately applied to projects in which Mr Tesoriero was interested rather than Mr Papas or to projects in which both Mr Papas and Mr Tesoriero were interested.
34 Typically, the tainted funds were transferred to FGFS upon or very shortly after receipt by the initial Forum recipient. FGFS then disbursed the funds received by it in aid of personal projects being pursued by Mr Papas and/or Mr Tesoriero. The personal projects to which the tainted funds were directed included: property purchases; holiday houses; racing cars; racehorses; luxury cars; maintenance and storage of a yacht (XOXO), the purchase, maintenance and storage of a speedboat (Grady White Freedom) and a Greek football team as well as extravagant personal expenditure. FGFS also made payments back to Consolidated Group entities in order for those entities to make payments which were purportedly due to the financiers under the various contractual arrangements. The making of these cloaking payments served to delay discovery of the fraud and thereby prolong the fraud.
35 FGFS is alleged to have received $2,244,495 in tainted funds: $1,982,795 derived from Westpac and $261,700 derived from SMBC.
36 A result of FGFS sitting outside the Consolidated Group was that FGFS was not treated in the accounts as part of the consolidated accounts of the Consolidated Group. FGFS’s accounts were not required to be, and were not, audited. FGFS’s accounts were not prepared by the Consolidated Group’s accountant. FGFS’s accounts were prepared by Mr Lou Stefanetti of Pacific Blue Tax Services Pty Ltd, who was also accountant to Mr Tesoriero and his family. Mr Stefanetti certified in a letter dated 28 April 2017 to another financier, NWC Finance, that at that point in time, he was a practising accountant and had acted as the accountant for the Tesoriero family for the last 10 years. Mr Stefanetti continued to act as the accountant for Mr Tesoriero and his family as at, at least, 28 April 2017.
37 Mr Preston and Mr Ireland are the liquidators of FGFS, as well as being the liquidators or many other respondent companies. FGFS was excused from filing a defence in each of the three proceedings. At trial, Counsel for the liquidators indicated that they intended to play only a limited role in the proceedings, being that they wished to be heard on relief.
B.1.3 Additional respondents in the proceedings
38 Societe Generale only claims against the three respondents, common to all the proceedings, namely Mr Papas, Forum Finance and FGFS.
39 In addition to the three common respondents, there are numerous other respondents in the Westpac and SMBC Proceedings. There is a substantial, but not complete, overlap between the corporate respondents to the Westpac Proceeding and the SMBC Proceeding. By the conclusion of the hearing:
(1) the following corporate respondents were common to both the Westpac and SMBC Proceedings;
(a) Forum Group Pty Ltd (Receivers Appointed) (in liquidation) (FG);
(b) FGOC;
(c) Forum Enviro;
(d) Forum Enviro (Aust);
(e) Iugis Pty Ltd (in liquidation);
(f) Iugis (UK) Limited (Company No. 10745974) (in liquidation);
(g) Iugis Energy SA (registered in Greece) (Iugis Energy Greece);
(h) Mazcon Investments Hellas Ike (registered in Greece);
(i) Palante Pty Ltd (in liquidation);
(j) 26 Edmonstone Road Pty Ltd (in liquidation);
(k) 5 Bulkara Street Pty Ltd (in liquidation);
(l) 6 Bulkara Street Pty Ltd (in liquidation);
(m) 23 Margaret Street Pty Ltd (in liquidation);
(n) 286 Carlisle Street Pty Ltd (in liquidation);
(o) 64-66 Berkeley St Hawthorn Pty Ltd (in liquidation) (64-66 Berkeley Street);
(p) Intrashield Pty Ltd (in liquidation); and
(q) Spartan Consulting Group Pty Ltd (in liquidation).
(2) there were 18 corporate respondents against which Westpac sought relief that were not sued by SMBC:
(a) 1160 Glen Huntly Road Pty Ltd;
(b) Mangusta (Vic) Pty Ltd;
(c) 14 James Street Pty Ltd (in liquidation);
(d) Canner Investments Pty Ltd (in liquidation);
(e) 9 Gregory Street Ouyen Pty Ltd (in liquidation);
(f) Tesoriero Investment Group Pty Ltd (in liquidation) (TIG);
(g) 193 Carlisle Street Enterprises Pty Ltd (in liquidation);
(h) 14 Kirwin Road Morwell Pty Ltd (in liquidation);
(i) 123 High Street Taradale Pty Ltd (in liquidation);
(j) 160 Murray Valley Hwy Lake Boga Pty Ltd (in liquidation);
(k) 31 Ellerman Street Dimboola Pty Ltd (in liquidation);
(l) 4 Cowslip Street Violet Town Pty Ltd (in liquidation);
(m) 55 Nolan Street Maryborough Pty Ltd (in liquidation) ;
(n) 89 Betka Road Mallacoota Pty Ltd (in liquidation);
(o) 9 Main Street Derrinallum Pty Ltd (in liquidation);
(p) 275 High Street Golden Square Pty Ltd (in liquidation); and
(q) Iugis Hellas Ike (Iugis Greece) (initially sued by SMBC, but SMBC did not press its claim against it in final submissions); and
(r) Aromatika Fyta Tsai Olympou Theion Ike
(3) there were five corporate respondents against whom SMBC sought relief who were not sued by Westpac:
(a) Forum Fleet Pty Ltd (in liquidation);
(b) Imagetec Financial Services Pty Ltd (in liquidation) (Imagetec FS);
(c) Imagetec Solutions Australia Pty Ltd (in liquidation);
(d) Iugis Waste Solutions Pty Ltd (in liquidation); and
(e) Aramia Holdings Pty Ltd (in liquidation).
40 Iugis Holdings Limited (Company Number 11123437) (Iugis Holdings UK) was a respondent in both the Westpac and SMBC proceedings, however, the financiers did not press their respective claims against it by the time of closing submissions.
41 As mentioned, Westpac also maintained its claims against three individual respondents who were not respondents to the SMBC Proceeding: Mr Tesoriero, Mr Bouchahine, and Ms Agostino.
42 The alleged role of each of the respondents is addressed in detail in Section D below. For introductory purposes, the following entities are significant in terms of, inter alia, the inflow of the tainted funds sourced from the financiers into the web of entities related to Mr Papas and/or Mr Tesoriero.
43 The funds from WBC flowed first to Forum Finance, which then disbursed the funds principally to FGFS, although prior to early 2019, Forum Finance dispersed the funds directly to FG and Forum Enviro. As noted, FGFS sat outside the group. Substantial funds received from WBC were also dispersed via Eqwe Pty Ltd. Eqwe acted as a third party agent of WBC in its dealings with Forum Finance. Eqwe is not a party to these proceedings. No evidence was led by Westpac from any person from Eqwe.
44 WNZL advanced funds to Iugis NZ, who then disbursed the funds received to FGFS. Iugis NZ is not a respondent to any of the proceedings. Iugis NZ was placed into liquidation on 13 August 2021. Mr Andrew Grenfell and Ms Kare Johnstone are its liquidators. Evidence was led by WNZL from Mr Grenfell in relation to the payments advanced by WNZL to Iugis NZ.
45 Forum Enviro and Forum Enviro (Aust) were the Primary Recipients of the funds advanced by SMBC. Forum Enviro and Forum Enviro (Aust) then transferred the funds in the main to FGFS. SMBC also advanced some of the funds to Flexirent Capital Pty Ltd who then paid funds to Forum Enviro, and to Forum Enviro (Aust). Flexirent acted as a third party agent of SMBC in its dealings with Forum Enviro and Forum Enviro (Aust). Flexirent is not a party to these proceedings. No evidence was led by SMBC from any person from Flexirent.
46 As with Forum Finance, Mr Preston and Mr Ireland are the liquidators of Forum Enviro and Forum Enviro (Aust) as well as FGFS. Forum Enviro and Forum Enviro (Aust) were excused from filing a defence in the Westpac and SMBC Proceedings. At trial, Counsel for the liquidators indicated that they intended to play only a limited role in the proceedings, being that they wished to be heard on relief.
47 The funds from Societe Generale were paid to Forum Finance which then dispersed the funds to FGFS.
48 FGFS dispersed funds it had derived from each of the financiers to other entities within and outside of the Consolidated Group. The entities that were outside the Consolidated Group were in the main connected in some way to either or both of Mr Papas and Mr Tesoriero.
B.2 Concurrent hearing – evidence in one, evidence in all
49 The hearing of the three proceedings was concurrent. Well in advance of the hearing, orders were made for the evidence in each of the proceedings to be evidence in each of the other proceedings. During the hearing, the tender of a small number of documents by Westpac relevant to establishing its claim against Ms Agostino was made on the basis that the documents were not tendered against Mr Bouchahine. I have not relied on these documents in relation to my findings against Mr Bouchahine.
B.3 Evidence adduced in accordance with s 50 of the Evidence Act
50 The applicant financiers made extensive use of summary documents that were prepared pursuant to s 50 of the Evidence Act 1995 (Cth) which were, save for one exception, not contested. I will refer to the s 50 summaries in context in addressing the evidence below.
51 Mr Tesoriero objected to the entirety of the s 50 summary titled “Payments to, or on behalf of, Vince Tesoriero”. This summary document lists payments made to third party entities and to 286 Carlisle Street (a Tesoriero Entity) from an account in the name of FGFS, pursuant to emails from Mr Tesoriero directing payment to these entities. For each payment, the summary document identifies the total amount of funds from each financier. The objection taken by Mr Tesoriero was that the document draws conclusion or makes inference from documents which are not tendered and are not otherwise identified. Counsel for Mr Tesoriero suggested that the summary document should be amended to identify the primary documents evidencing the direction component of the evidence relied on for the submission, that the underlying documents be tendered and that the name of the document be corrected to be “Payments Concerning Vince Tesoriero”. An updated version of the summary was tendered during the hearing with minor amendments which did not impact the nature of the objection. The parties agreed to the tender of the summary with a revised heading and the tender of ten additional documents.
52 The frauds against Westpac and SMBC are alleged to have commenced at different times in 2018. The fraud against Societe Generale is alleged to have commenced in November 2020. In each case the fraud continued until detected in about June 2021. Each financier alleges that it was defrauded of the millions of dollars which it advanced pursuant to the documented arrangements it had with companies in the Consolidated Group.
53 The frauds alleged by each of the financiers are conceptually similar notwithstanding that the documented arrangements between the Forum entities and the individual financiers are bespoke to each financier.
C.1 The Documented Arrangements
54 In their evidence each financier has meticulously detailed the fraudulent transaction documents by which the fraud on them was effected. Westpac tendered a comprehensive s 50 summary of fraudulent transaction documents which is engrossed to reference the underlying primary documents which are in evidence. Engrossed versions of the customer affidavits cross-reference to the s 50 summary. SMBC also rely on a comprehensive s 50 summary of fraudulent transaction documents which is supported by a list of the underlying primary documents. Societe Generale do not have an analogous s 50 summary because of the relatively short duration of the period in which it was actively advancing funding. Instead, Societe Generale has tendered the underlying transactions documents which are supplemented by a thematic chronology which references the fraudulent transaction documents. Based on this evidence, I make the following broad findings in relation to the way in which the fraud was effected on each of the financiers. My reasons for reaching these conclusions are in Section I below.
55 In each fraud, the duped financier entered into arrangements to provide finance to enable third party customers to lease or licence equipment sourced through Forum related entities. On the surface, the Forum business model operated by presenting financiers with equipment financing packages in which a Forum entity acted as an intermediary between the financier and the customer who took delivery of the financed equipment. On the face of the relevant contractual and related documents, the detail of which is addressed in Section I.26 to I.32, each financier agreed to advance funds to a Forum company for the purpose of that company supplying equipment to customers for lease or license and in return the financier acquired from the relevant Forum company the receivable income stream comprising the usage payments due from the customer under the Forum lease or licence. The financier also took an equitable interest in the relevant equipment the subject of the lease or licence. Nothing turns on whether the arrangements took the form of leases as opposed to licences. For convenience I will describe the arrangements purportedly involving customers as leases.
56 In some cases, but not all, a third party agent of the relevant financier acted as an intermediary (or broker) in the dealings between the financier and the relevant Forum company. As mentioned, WBC’s and Societe Generale’s agent was Eqwe and SMBC’s agent was Flexirent.
57 In the main, the customers were large, well known Australian companies, usually with operations in multiple locations across Australia. They included, for example, Veolia Environmental Services (Australia) Pty Ltd, a waste management company, and Coles Supermarkets Australia Pty Ltd, a major chain of supermarkets in Australia.
58 The assets the subject of the equipment agreements included waste digesters (machines used to transform solid organic waste into liquid), surfacides (machines which use ultra-violet light to disinfect surface areas), GPS tracking devices, and multi-function office machines (machines which print, scan and transmit documents). On the face of the documented arrangements, these assets were sourced from or through entities in or related to the Consolidated Group and delivered to customers at diverse locations across Australia.
59 Pursuant to the impugned arrangements, WBC advanced about $341 million in the period from about September 2018 to June 2021; WNZL advanced about NZD $58 million in the period from about December 2018 to June 2021; SMBC advanced about $113 million in the period from about August 2018 to May 2021; and Societe Generale advanced about $8.9 million in the period from about March 2021 to May 2021.
C.2 Discovery of the fraud by the financiers
60 The fraud was first discovered by Westpac in about June 2021. At that time, Ms Carly Rossbach-Smith, Treasury Operations Manager, WesTrac Pty Limited, alerted Westpac to issues concerning certain Forum Finance transactions in which it had been represented to Westpac that WesTrac had purportedly purchased equipment from Forum Finance to the tune of about $9.7 million. Ms Rossbach-Smith’s inquiries revealed that WesTrac only had one printer/photocopier arrangement in place with Forum and that was in the amount of around $1.6 million. Ms Rossbach-Smith was unable to reconcile the $9.7 million drawdown which Westpac attributed to WesTrac. In addition, she identified that documents held by Westpac which were purportedly signed by Mr Jarvas Croome, WesTrac CEO, were not in fact signed by him. Ms Rossbach-Smith reported the result of her inquiries to Westpac, and this ultimately led to the discovery of the fraud.
61 Westpac issued a demand on 15 June 2021 to Forum Finance to repurchase certain receivables relating to WesTrac. A meeting was arranged between Mr Papas and WesTrac. It was scheduled to be held on 16 June 2021. The scheduled meeting with Mr Papas did not take place. Movement records maintained by the Department of Home Affairs confirm that Mr Papas in fact left Australia on 16 June 2021. As at 30 July 2021, he had not returned. There is no evidence to suggest that he has returned since.
62 Mr Papas’ departure appears to have been in train from at least 6 May 2021 when he applied for an exemption from the COVID-19 travel restrictions on international travel to leave Australia on 20 May 2021 to go to Greece for a period of three weeks. A letter in support of Mr Papas’ application signed by Mr Craig Rollinson as Executive Director of Iugis on 6 May 2021 indicated that it was essential for Mr Papas to travel to Greece at this time to oversee and facilitate the finalisation of multiple major contracts through Iugis’ subsidiaries in Greece and the Middle East
63 In response to the demand, Westpac was paid a total of approximately $4,425,358 in two tranches on 16 and 17 June 2021 by Forum Finance. On 17 June 2021, Westpac confirmed receipt of $4,425,358 and demanded payment of the outstanding amount of approximately $5,199,433 by 18 June 2021. Viewed in context, these payments made in June 2021 to Westpac were tactical. They were directed to delaying Westpac from taking recovery action and were made contemporaneously with Mr Papas leaving the country.
64 The fraud was first discovered by SMBC in about July 2021. Mr Michael Timpany, Director of SMBC Sydney Branch, sent an email to Forum Enviro personnel (including Mr Papas and Mr Bouchahine) about an unpaid Veolia-related payment which had fallen due on 30 June 2021. Following the exchange of several emails, on 2 July 2021 Mr Papas informed SMBC that “significant issues have arisen on our business” and requested that SMBC wait several days before taking action. Mr Timpany’s repeated requests for further information about the nature of the “significant” issues were left unanswered by Mr Papas or anyone from the Forum companies.
65 On 2 July 2021, Mr Timpany became aware of media reports regarding the Westpac Proceeding. Shortly after, SMBC obtained the necessary consent from Flexirent to contact Veolia directly to discuss the lease agreements ostensibly between Veolia and Forum Enviro. Ms Gurpreet Brar, CEO of Veolia India and former CFO of Veolia at the relevant times, confirmed that each of the 23 contractual documents and purported confirmation emails which ostensibly bore her signature were not signed or approved by her and appeared to be forged. Ms Brar also gave evidence that she had not seen the relevant leases before July 2021 when they were provided to her by SMBC’s solicitors. Other Veolia executives (including Mr Lorenzo Kozlovic, Mr Julian Gaillard and Mr Daniel Conlon) similarly confirmed that their purported signatures on the leases were forged and bore no resemblance to their real signatures.
66 The fraud was first discovered by Societe Generale in about June 2021 through conversations between Mr Gregory Thong, then Head of Corporate Coverage at Societe Generale, and Mr Luke Price and Mr Mike Sheeran, directors of Eqwe. On 21 June 2021, Mr Price and Mr Sheeran called Mr Thong and referred to Forum Finance having “some issues with Westpac”. On 23 June 2021, an in-person meeting was held at Eqwe’s offices with Mr Price, Mr Sheeran and Mr Thong to discuss the Westpac transactions and Societe Generale’s exposure. From this point in time, Societe Generale received updates on the Westpac Proceeding as the Westpac investigations progressed.
67 Mr Thong also contacted Ms Brar directly, including a telephone call on 24 June 2021 asking Ms Brar to check the signatures on three Societe Generale transactions. Upon reviewing the Societe Generale transaction documents, Ms Brar confirmed that the signatures had been forged on all three documents.
68 Mr Thong and Mr Price made further enquiries of Veolia representatives between 26 June 2021 and 28 June 2021, who confirmed that the product serial numbers did not correlate with the equipment that Veolia had leased from Iugis.
69 During this time, Societe Generale’s primary contact at Forum was Mr Rollinson rather than Mr Papas. Mr Tesoriero deposes that he understood that Mr Rollinson had been acting as CEO since at least 18 June 2021 when Mr Papas “disappeared”. Mr Rollinson was not a party to any of the proceedings and did not provide an affidavit or otherwise give evidence in the proceeding.
C.3 The reality of the arrangements
70 In stark contrast to the apparent operation of the arrangements, the financiers allege that the documented arrangements were fictitious, and the relevant documents were falsified in key respects. The financiers contend that the documentation between them and the Forum entities was nothing but a veneer for an audacious fraud.
71 The financiers contend that:
(1) The assets purportedly the subject of the impugned arrangements were not possessed by the relevant Forum company and were not supplied to the purported customers. Thus, the financiers did not obtain any equitable interests in the assets, purportedly the subject of the arrangements;
(2) The agreements and related documents purportedly executed by, or emanating from, the purported customers were forged and were not executed or despatched by the customers. Instead, the financiers, or their agents, were supplied with forged documents.
(3) Accordingly, the purported customers owed no obligation to make the monthly usage payments in respect of the assets with which they were purportedly supplied. In short, the receivables income stream due from the customers under the lease agreements, which the relevant Forum company purported to assign to the financiers (whether directly or where applicable through the financier’s agent), did not exist; and
(4) In fact, the monthly payments made to financiers, that ostensibly represented receivables in accordance with the documented arrangements, were made by Forum companies, often using tainted funds traceable to advances made by one or more of the financiers, and were not monthly usage payments made by purported customers. These payments served to cloak the fraud at the heart of the arrangements by giving the appearance that receivables were being paid in accordance with the documented arrangements.
72 As to what happened to the vast sums advanced by the financiers pursuant to the impugned arrangements, the financiers contend that upon receipt, the funds were transferred by the relevant recipient in the Consolidated Group company to FGFS, the private company of Mr Papas and Mr Tesoriero, and then deployed to fund personal projects of Mr Papas and/or Mr Tesoriero including property developments, holiday houses, maintenance and storage of a yacht, luxury cars, race cars, racehorses, jewellery, and Xanthi FC, a Greek football team.
73 The amount claimed in each of the proceedings is, at least for some of the causes of action, less than the amount advanced by the financier. As mentioned, in the period before the frauds were discovered, Forum companies made some of the monthly payments due under the impugned arrangements as if the receivables had been collected from customers. These cloaking payments served to prolong the period in which the fraud went undetected but also serve to reduce the principal amount claimed by each financier in respect of some of the claims for relief. In WBC’s case, the payments made in response to the demands made in June 2021 also reduce the total amount that is being claimed in respect of some of the causes of action.
74 In broad terms, and subject to submissions in relation to relief, the cloaking payments made to each of the financiers were approximately as follows:
(1) WBC received $82,453,096, (calculated by taking the total amount paid by WBC to Forum Finance and subtracting the amount claimed as outstanding by WBC, then further subtracting certain direct debits made from Eqwe to WBC following discovery of the fraud and the payments made pursuant to the repurchase demand on 15 June 2021);
(2) WNZL received NZD $17,325,824, comprising 48 payments made under the Iugis NZ Financing Programme between 7 February 2019 and 15 July 2021;
(3) SMBC received $30,556,390, comprising 57 monthly payments made by Forum Enviro (Aust) between 30 August 2018 and 28 May 2021; and
(4) Societe Generale received $298,800, comprising three monthly payments between 31 March 2021 and 28 May 2021 in connection with one transaction totalling $252,000 and one payment for a separate transaction on 28 May 2021 totalling $46,800.
75 The internal process by which the fraud was administered was exposed in an email communication that dates from the time when the financiers were scrambling to obtain a picture of what had in fact gone on. By way of context, for example, Westpac alerted customers, including Coles and Scentre, of their concerns that scheduled payments under the Eqwe/Forum Finance programme were not being paid in accordance with the contractual arrangements and that they had commenced internal reviews to reconcile the payment schedules purportedly signed by the customers. Some customers, including Coles and Scentre, forwarded the emails that they had received from the Westpac to Mr Tas Papas who in turn forwarded the email to Mr Rollinson. The customers expressed their confusion about the communications they had received and requested an explanation from Forum in relation to, amongst other things, the payment schedules purportedly signed by the customers.
76 As the pressure was building for Forum to provide a substantive response to customers and the financiers, Mr Rollinson was forwarded a copy of an email from Mr Brandon Chin (an employee who worked as an accountant for FGFS and reported to Mr Bouchahine) in which he described the way in which the “funding processes” were reflected in FGFS and Forum’s business records. I address in greater detail Mr Chin’s role in relation to the preparation and circulation of excel workbooks under Mr Bouchahine’s supervision which are relevant to the actual mechanics of how the fraud was affected in Section I.22. Westpac rely on the excel worksheets to prove that Mr Tesoriero and Mr Bouchahine had actual knowledge of the fraud.
77 On 29 June 2021, Ms Orlandini sent an internal Forum email to Mr Rollinson in which she said: “As requested below is a detailed list of Forum and FGFS accounting processes”. By this email, Ms Orlandini forwarded an email from Mr Chin, with the subject “Funding Processes – FGFS”. In his email, under the subject line “Funding Processes – FGFS”, Mr Chin sets out “a bit of a brain dump” but one which he hopes makes “structured sense”.
78 At the time of sending his “brain dump” email, Mr Chin no longer worked for Forum. The email is sent from his Gmail account rather than a Forum email address. Mr Chin resigned on 15 June 2021, but Mr Bouchahine said that he thought that Mr Chin had resigned earlier.
79 Westpac featured this email in its oral opening submissions. SMBC closed on the actual operation of the fraud by reference to this email.
80 In his email, Mr Chin lists the steps for each of the funding processes and “money movements” for Westpac (through its agents “BHO” and “BHO NZ”) and SMBC. I infer that the word “BHO” is a reference to BHD Leasing Pty Limited trading as BHO Finance, which acted as Westpac’s agent at this time pursuant to a Principal and Agency Agreement, and, in due course, later became Eqwe.
81 In effect, the actual arrangements, as described by Mr Chin, commenced with raising a nominal invoice in the account of Forum Enviro (Aust), processing the invoice through FGFS, then FGFS handing the money back to Forum Enviro (Aust) to repay to Westpac or SMBC as a monthly return. Mr Chin says that Forum Finance kept no records of the flow of funds.
82 Under the heading “BHO Funding Process”, Mr Chin identified the following steps and his recollection of repository where the relevant documents were kept:
1. Contract paperwork provided to BHO
2. Receive email from BHO (Katrina Constable) confirming settlement date, settlement amount, paperwork and PPSR (BHO and Forum Finance)
3. We register PPSR on our side (Forum Finance and Customer) and provide back to BHO
4. Money is received into "Forum Finance Westlawn" bank account (movements below)
5. Contract set up for monthly billing in Forum Enviro (Aust) to the customer (ALH, Coles, Veolia etc) - This is in BMS (prehistoric system)
6. Invoices raised in FE (Aust) monthly to the individual customer
7. FGFS processes these invoices into its' books and pays these invoices to FE (Aust)
8. FE (Aust) repays BHO the monthly amount
Contract files and PPSRs saved in drive (this is from memory but Fiona will know where they are saved): FGFS Documents>Dropbox - BPVT>Forum Enviro (Aust)>AU Settlement
83 Under the heading “BHO Money Movements”, Mr Chin identified the following movements and record-keeping:
1. Forum Finance Westlawn - Money in and out to FGFS. No records kept in company books of Forum Finance
2. FGFS - Money received, put on balance sheet in BHO Clearing Account. FGFS pay money to FE (Aust) via invoices
3. FE (Aust) receive money from FGFS but allocate it against the invoices it raises in the system to the customer.
4. BHO repaid by FE (Aust) monthly on 1st and 15th.
The BHO repayment schedule is saved in the FG AP team's files (again from memory but Fiona or Rebecca Huang can pull up the doc): AP Team Files (they called it something silly, but I can't remember the exact name)>Accounts Folder>Balance Sheet Reconciliation>BHO>21616 BHO.. something
84 Under the heading “SMBC Funding Process”, Mr Chin sets out a corresponding framework for SMBC:
I guess this is also going to be a similar situation to the BHO stuff above - relatively new, so only a few "deals" exist.
1. Contract paperwork provided to SMBC via Alex Colbert
2. SMBC settlement amount received into FE (Aust) bank account (money movements below)
3. Email Alex Colbert for copy of all paperwork to set up contracts
4. Contract set up for billing in Forum Enviro (Aust) to the customer (ALH, Coles, Veolia etc) - again, in BMS
5. Invoices raised in FE (Aust) monthly to the individual customer
6. FGFS processes these invoices into its' books and pays these invoices to FE (Aust)
7. FE (Aust) repays SMBC the monthly amount
Documents saved in FGFS documents: (somewhere in the ballpark of). Repayment schedule (similar to the BHO stuff above) is also saved in the same location FGFS Documents>Dropbox - BPVT>Forum Enviro (Aust)>SMBC Settlement
85 I note that Mr Alex Colbert previously worked for Flexirent and from 2020, assisted Mr Papas in engaging directly with SMBC. Under the heading “SMBC Money Movements”, Mr Chin explained:
1. FE (Aust) - Money in and out to FGFS. No records kept in company books of FE (Aust)
2. FGFS - Money received, put on balance sheet in SMBC Clearing Account. FGFS pay money to FE (Aust) via invoices
3. FE (Aust) receive money from FGFS but allocate it against the invoices it raises in the system to the customer.
4. SMBC repaid by FE (Aust) at the end of every month based on a loan schedule provided by SMBC.
86 Mr Chin’s email also included the subheading “Additional Notes: (mainly for your reference, as I feel some of this Tony might not want too many parties to know)”. I infer that “Tony” is a reference to Mr Bouchahine.
87 Returning to Mr Chin’s email, under the Additional Notes subheading, Mr Chin includes the following information:
- FE (Aust) just sees money coming in for invoices it has raised, and pays this back to the funder. In a perfect world, it would be money in from invoicing equals exact money repaid, but there have been errors in the set up of contracts, which will make it hard to identify but have since been fixed, but that is the aim.
- BHO settlements have no GST, but the monthly invoices that FGFS processes into the system do, so there is a very large supposed tax refund sitting on FGFS' balance sheet (in the 10s of millions). Tony would always say he needs Lou's advice on how to treat this, as we wanted it to offset each other to net 0.
- FE (Aust) invoices to customers were manually changed using PDF editor to put FGFS' name and details on them
- Some BHO funding monthly repayments are paid directly by Forum Group (also identified in the BHO repayment schedule excel document).
- Also meaning they have contracts that are billed monthly, then processed and paid by FGFS, same way as above, with these invoices also being PDF edited.
- From memory, they are for customers: Westrac, HWL and Cerebral. 9 monthly invoices in total.
88 Critically, this contemporaneous email confirmed during the fraud, Forum and FGFS had in place an internal system (albeit, an imperfect one) whereby payments were processed through FGFS and critical transaction documents were manually altered (“PDF edited”) in order to maintain an external appearance of legitimacy. Mr Bouchahine referred in his affidavit to the process of changing the invoices in this way.
89 Mr Chin described a similar process for “NZ Settlements”, noting the following differences between the Australian and New Zealand arrangements:
BHO NZ Settlements do also exist... listed below. A bit more of a mess as:
- Bookkeeping for Iugis NZ is done by Nat and Chris (not sure how they book it in)
- Money is only transferred from NZ to FGFS when needed, rather than an in-and-out like in Forum Finance
- Money is still transferred via loans (no NZ invoices are processed into FGFS)
- BHO NZ Settlements have GST, but repayments are from AU, so no GST can be recognised on this side as it is across international borders. Another GST issue that we needed Lou to advise because we wanted it to also offset and net 0.
90 Under the heading “BHO NZ Settlements”, Mr Chin explained the following process:
1. Contract paperwork provided to BHO
2. Receive email from BHO (Katrina Constable) confirming settlement date, settlement amount, paperwork
3. Money is received into Iugis NZ Ltd bank account - NZ bank account held with ANZ NZ (movements below)
5. Contract set up in a fake Iugis NZ entity so monthly invoices can be generated with GST at NZ rate of 15%. (We tried to do in FE (Aust) but it could not do the 15% GST)
6. Invoices raised in the above entity monthly to the individual customer (Veolia)
7. FE (Aust) repays BHO NZ the monthly amount in NZD (international transaction) and puts this into the general ledger code 11670, which is the FGFS loan.
8. FGFS recognises this loan in its' books as well
Contract files saved in drive: FGFS Documents>Dropbox - BPVT>Forum Enviro (Aust)>NZ Settlement
91 Under the heading “BHO NZ Money Movements”, Mr Chin explained:
1. Money received into Iugis NZ bank account. Nat and Chris do the bookkeeping for this entity
2. FGFS - Money received, put on balance sheet in BHO NZ Clearing Account. FGFS pay money to FE (Aust) if needed via a loan
3. FE (Aust) receive money from FGFS (if applicable)
4. BHO NZ repaid by FE (Aust) monthly on 1st and 15th.
This repayment schedule is also in same file as the BHO AU repayment schedule: AP Team Files (they called it something silly, but I can't remember the exact name)>Accounts Folder>Balance Sheet Reconciliation>BHO>21616 BHO.. something
92 This articulation of the funding processes is consistent with the diagram prepared by Mr Chin described as “an overview of some of the FGFS/FE Aust processes”, sent to Mr Stefanetti and Mr Bouchahine on 3 September 2020. Mr Bouchahine was cross-examined on this diagram and confirmed that diagram accurately reflected his recollection of the relevant money flow as at the period September 2018 onward. I infer that this diagram was likely prepared for the purpose of obtaining the GST advice that is referred to in Mr Chin’s “brain dump” email.
93 Under the heading “BHO and SMBC Funding Process” is a flow chart providing for the following steps:
BHO settle funds into FF, which transfer to FGFS
• In-out FF
• FGFS BHO Clearing account
• no GST
Contract set up in FE Aust.
FE Aust raise monthly invoice to FGFS
• Inc GST Invoices
• GST Liability in FE Aust = 600k
FGFS process invoice into system
• FGFS GST Receivable = 600k
FGFS Pays FE Aust
• Clears debtors in FE Aust
FE Aust Pays BHO
• No GST Funding, therefore, no GST on repayments
94 Under the heading “FGFS Funding Process” is a similar, much simpler, flow chart providing for the following steps:
FGFS funds FG and Iugis deals - i.e. invoices raised to FGFS
• Small Deals for FG; bigger Iugis deals via loan account (no cash movement)
• GST receivable
FGFS raise monthly Invoice to Forum Group and Iugis for no billing contracts
• FGFS GST liability = ~30k
• not enough to offset 600k from FE Aust + Settlements
FG and Iugis pay FGFS
• Clear FGFS debtors
95 Under the heading “Other FGFS Processes”, other considerations are listed including “Wages”, “Fund Iugis Operations via Loans: AU, UK, Greece, Germany, UAE”, “Fund Overseas Transactions and Acquisitions” and “Fund Property and Vehicles”.
C.4 The essential features of the fraud that were critical to its success
96 The financiers contend that there were four essential features of the fraud that were critical to its success.
97 First, historically Forum had in fact supplied some equipment to customers. This enabled Forum representatives to take representatives of the financiers to particular customers’ premises to demonstrate the equipment in use.
98 Secondly, Forum made cloaking payments purportedly by way of the monthly receivables income stream which the financiers were expecting to receive, thereby perpetuating the illusion that arrangements were legitimate.
99 Thirdly, the customers which purportedly entered into the leasing arrangements with the Forum entities were wholly unaware of the arrangements and in the main did not interact directly with the financiers or their agents/brokers.
100 Fourthly and finally, the customers allegedly purchasing the equipment were well-known, established companies, imbuing the arrangement with an air of legitimacy which was another factor in forestalling the financiers’ suspicions being aroused.
101 In relation to the last feature identified, I would add that the individuals featured as representatives of each of the alleged customers were real people who were relevantly employed by the companies concerned and who, in the main, held positions within those companies as identified in the falsified documents, and who based on the their respective position titles would be expected to have authority to approve entry into the underlying purchase and lease agreements.
C.5 Intended and actual structure of the scheme and flow of funds
102 The financiers relied on a series of aide mémoires in their submissions. The aide mémoires were supported by the evidence before me, including comprehensive s 50 summaries and the tracing evidence given by the liquidators and relied on by the financiers.
103 The first group of aide mémoires was directed to illustrating the structure of the arrangements that were in place between the Primary Recipients and the Financiers that became host to the fraudulent schemes. Although these aide mémoires were not uniform between the financiers, they are useful as a convenient snapshot of the way in which the scheme operated, the way in which the operation of the scheme departed from the documented arrangements to which the financiers had agreed, and the way in which funds were ultimately distributed to the respondents. My detailed reasons in relation to these topics are in Sections I.22 to I.31 of these reasons.
104 The second group of aide mémoires was provided by Westpac and SMBC. They each provided diagrams illustrating the ultimate flow of the funds that they had each respectively advanced to the Primary Recipients to the respondents.
105 The third aide mémoire was provided by Westpac. It is an “amended summary of payments to, or on behalf of, respondents” that traces the total amount of the funds held by each respondent which derive from the tainted funds advanced by the financiers collectively, and also within that total, the amount of funds derived from each financier individually.
106 In the balance of this section, I will introduce and annex each of the aide mémoires that may be of use in following the detailed reasons given on these topics in Section I.
C.5.1 Intended structure and actual structure
107 The tension between the documented versus the actual arrangements which I have described is summarised in a set of aide mémoires which the financiers used in their submissions.
108 Westpac provided two separate diagrams. The first depicted the documented arrangements (Annexure B). The second compared the documented arrangements with the reality of how the scheme was in fact operated (Annexure C). I note that due to multiple references in these reasons to the contemporaneous document titled ‘Annexure A’ to the payment schedules created by Forum (discussed at Section I.3 below), the annexures to these reasons commence at Annexure B.
109 The first diagram sets out the intended structure of the scheme and illustrates the intended flow of funds, assignment of rights and equipment between the financier, the relevant Forum entity, the broker, the customer and the equipment manufacturer. In terms of fund flow the documented structure relevantly includes:
(1) Forum Finance paying an equipment manufacturer for equipment and supplying equipment to the customer;
(2) Westpac paying the purchase price invoice for the equipment directly to Forum Finance;
(3) The customer making monthly rental payments to the Eqwe Westpac Bank Account for the benefit of Westpac who received the payments by way of direct debit from the Eqwe Westpac Bank Account.
110 The second diagram is a comparison of the intended structure and the fraudulent Scheme. A series of red arrows are overlaid on the diagram of the intended structure to demonstrate the actual flow of funds between the parties. It relevantly shows that, in contrast to the intended structure, for each of the fraudulent transactions there was no authentic customer or equipment manufacturer. Instead, Forum Finance disbursed the funds that Westpac had advanced with the result that some of those funds were transferred into the Eqwe Westpac Bank Account to simulate monthly rental payments and the balance of the funds were transferred to related Forum entities.
111 SMBC provided two diagrams, which set out the intended structure of the arrangements under the 2018 agreement and the 2020 agreement respectively. The only customer who was represented to have entered into equipment leases under the 2018 and 2020 agreements was Veolia.
112 The first diagram sets out the intended structure of the scheme under the Master Receivables Acquisition and Servicing Agreement between Flexirent and SMBC dated 2 August 2018 (the 2018 MRASA) (Annexure D). It illustrates the intended flow of settlement amounts, monthly receivables and usage charges as between SMBC, Forum Enviro (Aust) and Veolia.
113 Under the 2018 MRASA, it was intended that Forum Enviro (Aust) would enter into equipment leases with the customer and the customer would pay Forum Enviro (Aust) usage charges. Forum Enviro (Aust) acted as the undisclosed agent of Flexirent, providing a buffer which had the effect that Flexirent did not deal directly with the customer. Under the 2018 MRASA with SMBC, Flexirent was entitled to offer to sell SMBC receivables due from customers by submitting an offer letter that SMBC could accept by paying a settlement amount to purchase those receivables. The provision of funding was thus an offer by offer proposition.
114 The second diagram sets out the intended structure of the arrangements under the Master Receivables and Acquisition Servicing Agreement between Forum Enviro (Aust) and SMBC dated 17 July 2020 (the 2020 MRASA) (Annexure E). It too illustrates the intended flow of settlement amounts, monthly receivables and usage charges between SMBC, Forum Enviro (Aust), and Veolia, but does not include Flexirent, as there was no broker under the 2020 MRASA. It was intended that Forum Enviro (Aust) would enter into equipment leases with the customer and the customer would pay Forum Enviro (Aust) usage charges, who would pay them to SMBC.
115 SMBC did not provide a diagram to demonstrate the way in which the 2018 MRASA and 2020 MRASA operated in reality but rather opened by reference to the intended structure diagrams. In reality, under both the 2018 MRASA and the 2020 MRASA, Veolia did not in fact entered into any equipment leases with Forum Enviro (Aust) and did not pay any usage charges. In other words, there was not a lease of equipment to Veolia under either the 2018 MRASA or the 2020 MRASA and there were no monthly receivables.
116 Societe Generale provided a diagram in two parts (Annexure F). The top section illustrated the relevant documentation (transaction documents, servicing guidelines and master agreement) between Societe Generale, Eqwe and Forum Finance. The lower part of the diagram represents the intended flow of receivables, settlement funds and equipment between Forum Finance, Societe Generale and Veolia and the actual flow of money between the parties, highlighting with a red line, the actual diversion of the funds from Forum Finance to FGFS pursuant to the fraudulent scheme.
117 Westpac and SMBC each provided diagrams illustrating the flow of their funds to the respondents. The final versions of both diagrams are annexed to these reasons (Annexures G and H).
118 Both flow of funds diagrams replicate a diagram of ownership structure, but superimpose a flow of funds to represent where the financiers’ funds ultimately ended up. The dollar amounts in red beneath each entity indicate how much money is left with or is claimed against each entity. These amounts do not represent a total of all the funds which were received and then either retained or transferred from each entity. Where there is no indication of currency, the relevant currency is Australian dollars. Otherwise, “NZD” indicates that the funds are in New Zealand dollars and “USD” indicates that the funds are in United States dollars. Each of the entities in the diagrams is also colour-coded to reflect the category of respondent to which they belong (e.g. Forum Entities, Jointly Owned Entities, Tesoriero Entities).
119 The flow of funds diagrams show that Westpac’s funds initially went to Forum Finance and then to other entities, principally FGFS, and that SMBC’s funds initially went to Forum Enviro or Forum Enviro (Aust) and then to other entities. Ultimately, the funds of both Westpac and SMBC were dispersed to a variety of different individuals and entities related to Mr Papas and Mr Tesoriero.
C.5.3 Amended summary of payment to, or on behalf of, respondents
120 Westpac also provided a separate document (Annexure I) that categorises the proportion of the funds held by each respondent which derived from each financier and the total amount of tainted funds received from all the financiers. A revised version of the summary of payments to, or on behalf of, each of the respondents in respect of WBC and WNZL funds was annexed to Westpac’s closing submissions (Annexure J). This annexure also breaks down the totals given in respect of Westpac to differentiate the funds which originated from WBC from those that originated from WNZL. The amounts of the funds are the amounts received and retained by each respondent, and correspond to the amounts shown in the flow of funds annexures for Westpac and SMBC.
121 As mentioned, the three proceedings involve many respondents. There were originally 54 respondents in net terms, and 80 respondents in total, across the three proceedings: 49 in the Westpac Proceeding; 28 in the SMBC Proceeding and three in the Societe Generale Proceeding. By the end of the hearing, the number of respondents against whom the financiers pressed their respective claims had reduced in net terms to 46 and in total had reduced to 71: 42 in the Westpac Proceeding; 26 in the SMBC Proceeding and three in the Societe Generale Proceeding. Attached as Annexure J to these reasons is a table which lists the status of the remaining respondents in each of the three proceedings.
122 A number of the respondents are in external administration. Some of the assets held by those respondents have since the appointment of external administrators been realised. As mentioned, the liquidators seek to be heard at the hearing on relief.
123 On 9 July 2021, orders were made for the winding up of Forum Finance. The liquidators were appointed as joint and several liquidators of this entity. The Court has granted Westpac, SMBC and Societe Generale leave to proceed against this company: see orders made by Lee J on 15 July 2021, 30 July 2021 and 11 November 2021.
124 On 28 July 2021, orders were made for the winding up of FGOC, 14 James Street, 26 Edmonstone Road, 5 Bulkara Street, 6 Bulkara Street, Forum Fleet, Imagetec FS, Imagetec Solutions, Iugis, Iugis Waste, Aramia, Spartan and Intrashield. The Court has granted Westpac and SMBC leave to proceed against these companies (as they relate to their proceedings): see orders made by Lee J on 22 September 2021, 12 November 2021 and orders made by Cheeseman J on 22 November 2022.
125 On 12 November 2021, orders were made for the winding up of FGFS, FG, Forum Enviro and Forum Enviro (Aust). The liquidators were appointed as joint and several liquidators of each of those entities. The Court has granted Westpac, SMBC and Societe Generale leave to proceed against these companies (although in Societe Generale’s case, leave was only granted in relation to FGFS): see orders made by Lee J on 30 July 2021, 12 August 2021, 22 September 2021 and 12 November 2021.
126 On 2 February 2022, orders were made for the winding up of Palante. The liquidators were appointed as the joint and several liquidators of this entity. The Court has granted Westpac and SMBC leave to proceed against this company in liquidation: see orders made by Cheeseman J on 23 November 2022 and 22 December 2022.
127 On 2 November 2022, orders were made for the winding up of 64-66 Berkeley Street; 23 Margaret Street; Canner; 9 Gregory Street; 286 Carlisle Street; TIG; 193 Carlisle Street; and 8-12 Natalia Ave Oakleigh Pty Ltd (in liquidation) (8-12 Natalia Avenue). The liquidators were appointed as the joint and several liquidators of each of those entities. The Court has granted Westpac leave to proceed against the additional companies in liquidation: see orders made by Cheeseman J on 23 November 2022. Additionally, the Court has granted SMBC leave to proceed against the companies relevant to their proceedings: see orders made by Cheeseman J on 22 December 2022.
128 On 17 November 2022, Mr Matthew Byrnes and Mr Phillip Campbell-Wilson were appointed as joint and several voluntary administrators of 14 Kirwin Road; 123 High Street; 160 Murray Valley Hwy; 31 Ellerman Street; 4 Cowslip Street; 55 Nolan Street; 89 Betka Road; 9 Main Street and 275 High Street. Following this, on 16 December 2022, Mr Paul Allen and Mr Glenn Franklin of PKF Melbourne were appointed as joint and several liquidators of these entities. The Court has granted Westpac leave to proceed against these companies: see orders made by Cheeseman J on 24 January 2023. None of these entities are respondents in the SMBC or Societe Generale proceedings.
129 The respondents against whom the financiers press their respective claims are as follows.
D.1 The individual respondents
D.1.1 Mr Papas – Respondent in all three proceedings
130 As mentioned, Mr Papas is the only individual respondent common to all proceedings. He did not appear at the hearing and each of the financiers obtained leave to proceed generally against him in his absence. For present purposes, having regard to the matters addressed in the Sections A to C, I need only add that Mr Papas is the person whose knowledge is properly to be attributed for the purpose of these proceedings to all of the corporate respondents of which he was a director. In the taxonomy of the corporate respondents used by the financiers this includes the Consolidated Group Entities, the Jointly Owned Entities and the Other Papas-Related Entities, see further Section D.2 below. Mr Papas is alleged to hold $3,326,596 in tainted funds: $3,041,853 derived from Westpac and $284,743 derived from SMBC. The claim against Mr Papas by Societe Generale is based on knowing assistance rather than receipt, with the result that the entire $8,688,398 is claimed by Societe Generale against Mr Papas. Westpac and SMBC similarly claim the entirety of the funds that they each advanced, less the cloaking payments, on the basis of knowing assistance.
131 As mentioned, apart from Mr Papas, SMBC and Societe Generale do not name any individuals as respondents to their proceedings.
132 In the Westpac Proceeding, there are three other individual respondents, in addition to Mr Papas — they are Mr Tesoriero, Mr Bouchahine, and Ms Agostino.
D.1.2 Mr Tesoriero - Respondent in the Westpac Proceeding
133 With respect to Mr Tesoriero, again having regard to the introductory comments made above, I need only add that Mr Tesoriero is alleged to be the relevant person whose knowledge is to be attributed for the purpose of these proceedings to the corporate respondents of which he was a director (and Mr Papas was not). In the taxonomy used by the financiers these companies are referred to as the “Tesoriero Entities” and “Other Tesoriero Related Companies”. As will be seen in Section D.2, I refer to these entities collectively as the Tesoriero Entities. Mr Tesoriero is alleged to hold $1,558,907 in tainted funds derived from Westpac.
134 Mr Tesoriero defended the proceedings against him. He was represented by counsel and solicitors. He gave oral evidence and was cross-examined. His credit was hotly contested. He did not contest the primary allegations as to the fraud perpetrated against each of the financiers but defended the allegations made against him as to his knowledge of, and involvement in, the fraud. He asserts a positive defence by which he claims he received payments from Forum entities as a return on his investment in what he describes as the “Forum business”.
D.1.3 Mr Bouchahine - Respondent in the Westpac Proceeding
135 Mr Bouchahine is the former CFO of the Consolidated Group and of FGFS. He was responsible for transferring the tainted funds from within the Consolidated Group to FGFS, which sat outside the Consolidated Group. Thereafter he was also responsible for further dispersing those funds from FGFS to or for the benefit of, inter alia, Mr Papas and/or Mr Tesoriero. In addition, Mr Bouchahine is alleged to have personally received $81,612 in tainted funds derived from Westpac.
136 Like Mr Tesoriero, Mr Bouchahine defended the proceedings against him. He was represented by counsel and solicitors. He gave evidence and was cross-examined. His credit was also contested on key aspects of his defence. While he did not contest the fact of the fraud perpetrated against each of the financiers, he did defend the allegations made against him as to his knowledge of, and involvement in, the fraud.
D.1.4 Ms Agostino - Respondent in the Westpac Proceeding
137 Ms Agostino is Mr Papas’ domestic partner and also worked for the Forum Group. She held shares in FGOC. Ms Agostino is alleged to have received $231,870 in tainted funds derived from Westpac. Ms Agostino left the country on 15 July 2021, about a month after Mr Papas departed Australia. She has not returned. Ms Agostino filed a defence and was represented in the proceeding from January 2022 until August 2022. She ceased to take an active part in the proceedings after that time.
138 Ms Agostino did not, in substance, defend the proceedings against her — she did not appear at the final hearing nor did she file any evidence in relation to the relief sought against her at the final hearing. Westpac obtained leave to proceed generally against her in her absence.
D.1.5 Other individual respondents – Westpac Proceeding
139 The claims Westpac brought against the remaining individual respondents have resolved. It is not necessary to address those claims in these reasons.
140 The corporate respondents comprise companies incorporated in Australia, the UK and Greece. All of the corporate respondents (except for two entities), both in Australia and elsewhere, are in liquidation and/or deregistered, and leave has been granted to proceed against them. The two exceptions are 1160 Glen Huntly Road and Mangusta, who were not in liquidation as at the time the closing submissions were made.
141 With the exception of A Giamouridis P.C., the fiftieth respondent, the corporate respondents who appeared at the hearing were companies incorporated in Australia who appeared by their liquidators, Mr Preston and Mr Ireland. They are: Forum Finance, FGFS, FG, Forum Enviro, Forum Enviro (Aust), 64-66 Berkeley Street, 14 James Street, 26 Edmonstone Road, 5 Bulkara Street, 6 Bulkara Street, 23 Margaret Street, Canner, 9 Gregory Street, 286 Carlisle Street, Palante, FGOC, Iugis, Spartan, Intrashield, TIG, 193 Carlisle Street, 8-12 Natalia Avenue, Forum Fleet, Imagetec FS, Imagetec Solutions, Iugis Waste and Aramia. Of these companies, Forum Finance, FGFS, FG, Forum Enviro, Forum Enviro (Aust), 64-66 Berkeley Street, 26 Edmonstone Road, 5 Bulkara Street, 6 Bulkara Street, 23 Margaret Street, 286 Carlisle Street, Palante, FGOC, Iugis, Spartan, Intrashield and 8-12 Natalia Avenue are respondents in both the Westpac and SMBC Proceedings.
142 The respondent companies in provisional liquidation or liquidation in each of the proceedings were excused from filing a defence in the proceedings.
143 Prior to the appointment of the liquidators, and when they were represented by Mr Tesoriero’s legal representatives, the Tesoriero Entities filed defences that relevantly piggy backed on Mr Tesoriero’s positive defence to the allegation of knowledge made against him. The liquidators of the Tesoriero Entities acknowledge that the companies’ defences stand or fall with Mr Tesoriero’ defence in the Westpac Proceeding. The only exception is 64-66 Berkeley Street. The liquidators accept that because Mr Papas was a director of this company, his knowledge will be attributed to that company regardless of the fate of Mr Tesoriero’s positive defence. In those circumstances, the liquidators do not wish to be heard in relation to the defence which was filed by 64-66 Berkeley Street prior to their appointment.
144 Westpac was granted leave to proceed generally in the absence of the following corporate entities which did not appear in the Westpac Proceeding:
(1) 1160 Glen Huntly Road;
(2) Mangusta;
(3) the companies of which Mr Allen and Mr Franklin are the liquidators, being:
(a) 14 Kirwin Road;
(b) 123 High Street;
(c) 160 Murray Valley;
(d) 31 Ellerman Street;
(e) 4 Cowslip Street;
(f) 55 Nolan Street;
(g) 89 Betka Road;
(h) 9 Main Street;
(i) 275 High Street; and
(4) the following entities incorporated outside Australia being:
(a) Mazcon;
(b) Iugis Greece;
(c) Iugis Energy Greece;
(d) Iugis (UK); and
(e) Theion Ike.
145 SMBC was granted leave to proceed generally in the absence of the following overseas entities which did not appear in the SMBC Proceeding:
(1) Mazcon;
(2) Iugis Energy Greece;
(3) Iugis (UK).
146 The corporate respondents may be usefully grouped as follows:
(1) Consolidated Group Entities – entities that form part of the Consolidated Group (referred to in the parties’ submissions as the “Forum Entities”);
(2) Jointly Owned Entities – entities jointly owned, directly or indirectly, by Mr Papas and Mr Tesoriero;
(3) Tesoriero Entities – entities owned and controlled by Mr Tesoriero or jointly owned by Mr Tesoriero and Mr Giovanni Tesoriero (Mr Tesoriero Snr);
(4) Other Papas-Related Entities – entities related to Mr Papas incorporated in Australia and outside Australia; and
(5) Overseas recipient entity not related to Mr Papas or Mr Tesoriero.
D.2.1 Consolidated Group Entities (Forum Entities)
147 There are five relevant respondents in this category – they are FGOC, Forum Finance, FG, Forum Enviro and Forum Enviro (Aust). All five are in liquidation. Mr Preston and Mr Ireland are the liquidators appointed to each of these companies. Leave to proceed against each of these companies in liquidation has been granted and the companies have been excused from filing a defence and they have not done so.
148 The contemporaneous documents and witness evidence suggest that the phrase “the Forum business” has been used as shorthand to describe the entities within the Consolidated Group as well as other Forum entities which sit outside the corporate diagram. To the extent that it is possible to do so, these reasons will refer with specificity to each of the relevant respondents within the Consolidated Group. Where it is not necessary or not possible to distinguish between them, I will refer to “Forum” amorphously.
D.2.1.1 FGOC – Respondent in the Westpac and SMBC Proceedings
149 FGOC is the ultimate holding company of the Consolidated Group. The majority shareholders (directly or indirectly) are Mr Papas (59.4%) and Mr Tesoriero (38.6%). During the time the fraud was perpetrated, Mr Papas and Mr Tesoriero were each directors of FGOC. Mr Tesoriero ceased to be a director on or about 24 April 2020. FGOC is a respondent in both the Westpac and SMBC Proceedings. Based on the evidence which underpins the flow of funds diagrams, FGOC is alleged to have received at least $11,084,591 in tainted funds: $7,668,502 derived from Westpac and $3,416,089 derived from SMBC.
D.2.1.2 Forum Finance – Respondent in all three proceedings
150 As mentioned, Forum Finance is one of the three respondents that are common to the three proceedings. Forum Finance was wholly owned by FGOC, the ultimate holding company of the Consolidated Group. Forum Finance was the primary entry point into the Consolidated Group for the funds advanced by WBC and Societe Generale as part of the fraud. Under the arrangement, the total amount of funds advanced by WBC to Forum Finance was $341,097,895. Forum Finance also received secondary and subsequent transfers of tainted funds, including funds derived from funds obtained from SMBC and WNZL. It further received tainted funds that can be traced to the tainted funds that it had initially paid away, principally to FGFS, and which were returned to it. Based on the evidence which underpins the flow of funds diagrams, at the time of these proceedings, Forum Finance is alleged to hold at least $12,745,433 in tainted funds: $3,011,015 derived from Westpac, $747,220 derived from SMBC, and $8,987,198 from Societe Generale. During the period when the fraud was being perpetrated, Mr Papas and Mr Tesoriero were directors of Forum Finance. Mr Papas was appointed as a director on 19 September 2011 and was a director when Forum Finance was wound up by Court order on 9 July 2021. Mr Tesoriero was appointed as a director on 1 April 2017 and continued as a director as at the date Forum Finance was wound up by orders made on 9 July 2021.
D.2.1.3 FG – Respondent in the Westpac and SMBC Proceedings
151 FG is a wholly owned subsidiary of FGOC. Mr Papas was appointed the sole director on incorporation on 21 September 2011 and continued as sole director at the time liquidators were appointed on 28 July 2021. FG received a substantial amount of the impugned funds advanced by Westpac via Eqwe and SMBC via Flexirent, following intra Forum Group transfer(s). Under these arrangements, FG is alleged to have received at least $148,249,507 in tainted funds: $120,808,761 derived from Westpac and $27,440,746 derived from SMBC.
D.2.1.4 Forum Enviro – Respondent in the Westpac and SMBC Proceedings
152 Forum Enviro was the recipient of tainted funds advanced by SMBC via Flexirent, under contractual arrangements entered into in 2018. Under these arrangements, the total amount paid by SMBC to Forum Enviro via Flexirent was $29,709,714. Based on the evidence which underpins the flow of funds diagrams, Forum Enviro is also alleged to have received $15,606,244 in tainted funds derived from Westpac. Mr Papas was the sole director, appointed on 24 March 2014 and continued as sole director at the time liquidators were appointed on 12 November 2021.
D.2.1.5 Forum Enviro (Aust) - Respondent in the Westpac and SMBC Proceedings
153 Forum Enviro (Aust) was the direct recipient of tainted funds advanced by SMBC under contractual arrangements entered into in 2020. Under these arrangements, the total amount advanced from SMBC to Forum Enviro (Aust) was $83,993,909. Based on the evidence which underpins the flow of funds diagrams, Forum Enviro (Aust) is also alleged to have received $99,170,586 in tainted funds derived from Westpac. Mr Papas was the sole director, appointed on 5 August 2015 and continued as the sole director at the time liquidators were appointed on 12 November 2021.
154 There are seven Jointly Owned Entities — FGFS, five property owning special purpose vehicles (SPVs) and Intrashield. These companies are jointly owned, directly or indirectly, by Mr Papas and Mr Tesoriero. Mr Papas and Mr Tesoriero are the directors of each of the Jointly Owned Entities. None of the Jointly Owned Entities were part of the Consolidated Group. The Jointly Owned Entities are each in liquidation. As mentioned, Mr Preston and Mr Ireland are appointed as the liquidators.
D.2.2.1 FGFS – Respondent in all three proceedings
155 Principal among the Jointly Owned Entities is FGFS which is a respondent in all three proceedings. It was owned and controlled by Mr Papas and Mr Tesoriero. As mentioned, Mr Papas was a director from 23 November 2017 and continued as a director on 12 November 2021 when the liquidators were appointed. Mr Tesoriero was a director from 13 November 2018 to 30 April 2020. FGFS sat outside the Consolidated Group and was the primary conduit through which the tainted funds were channelled once received into a company in the Consolidated Group. FGFS is alleged to have received the following tainted funds derived from each of the financiers: $297,426,676 derived from WBC through Forum Finance; NZD $54,889,185 derived from WNZL through Iugis NZ; $79,900,308 derived from SMBC; and $8,987,198 derived from Societe Generale through Forum Finance I acknowledge that the total amounts advanced by each of the financiers may involve a degree of double counting as funds have flowed in and out of the FGFS account over the course of the scheme. Accordingly, the total amount of tainted funds from each of the financiers ultimately held by FGFS is reflected in the flow of funds diagrams.
D.2.2.2 Jointly owned property SPVs
156 Five of the remaining Jointly Owned Entities are companies that held particular real properties and whose names reflect the individual addresses of each of the properties. Each company was a SPV, with no function or business other than to own the real property after which it was named. The companies were each appointed as trustee of a series of correlating trusts of which Mr Papas and Mr Tesoriero, or their relatives, or companies owned by them, were the beneficiaries. The companies are:
(1) 64-66 Berkeley Street which is a respondent in the Westpac Proceeding and the SMBC Proceeding. Its directors were Mr Papas, appointed 26 August 2020 and Mr Tesoriero, appointed 26 August 2020 to 27 August 2020, and reappointed on 2 November 2020 and continued at the time liquidators were appointed on 2 November 2022.
(2) 26 Edmonstone Road which is a respondent in the Westpac Proceeding and the SMBC Proceeding. Its directors were Mr Papas appointed 20 November 2017 and continued as at the time liquidators were appointed on 28 July 2021 and Mr Tesoriero appointed 20 November 2017 to 1 May 2020;
(3) 5 Bulkara Street which is a respondent in the Westpac Proceeding and the SMBC Proceeding. Its directors were Mr Papas appointed 14 January 2019 and continued as at the time liquidators were appointed on 28 July 2021 and Mr Tesoriero appointed 1 March 2019 to 30 April 2020;
(4) 6 Bulkara Street which is a respondent in the Westpac Proceeding and the SMBC Proceeding. Its directors were Mr Papas appointed 13 March 2020 and continued as at the time liquidators were appointed on 28 July 2021 and Mr Tesoriero appointed 13 March 2020 to 27 October 2020; and
(5) 14 James Street which is a respondent in the Westpac Proceeding. Its directors were Mr Papas appointed 1 May 2020 and continued as at the time liquidators were appointed on 28 July 2021 and Mr Tesoriero appointed 14 January 2020 to 1 May 2020.
157 Each of these entities is in liquidation and was excused from filing a defence in the proceedings. Each appeared by their liquidators, Mr Preston and Mr Ireland. The relevant financiers were granted leave to proceed against them in liquidation. Apart from 64-66 Berkeley Street, the entities did not file a defence. As noted above, the liquidators do not rely on the defence filed prior to the liquidators’ appointment on behalf of 64-66 Berkeley Street given that Mr Papas is a director of that company.
158 It is alleged, based on the flow of funds diagrams, that:
(1) 64-66 Berkeley Street received at least $1,764,158 in tainted funds: $752,415 derived from Westpac and $1,011,743 derived from SMBC;
(2) 26 Edmonstone Road received at least $2,123,257 in tainted funds: $1,981,284 derived from Westpac and $141,973 derived from SMBC;
(3) 5 Bulkara Street received at least $3,444,986 in tainted funds: $3,000,717 derived from Westpac and $444,269 derived from SMBC;
(4) 6 Bulkara Street received at least $4,543,330 in tainted funds: $3,104,434 derived from Westpac and $1,438,896 derived from SMBC; and
(5) 14 James Street received $2,462,818 in tainted funds derived from Westpac.
D.2.2.3 Intrashield – Respondent in the Westpac and SMBC Proceedings
159 The final Jointly Owned Entity is Intrashield which is a respondent in both the Westpac and SMBC Proceedings. Intrashield is indirectly held by Mr Papas and Mr Tesoriero, through TIG (a Tesoriero Entity, discussed below) and Eros Management Pty Ltd (a company wholly owned by Mr Papas and controlled by Mr Papas as the sole director and shareholder since incorporation. It is not a respondent to the proceedings). Both Westpac and SMBC categorise Intrashield differently in the nomenclature they use in the proceedings. Westpac group Intrashield by itself as an “Other Papas and Tesoriero Owned Companies”. SMBC group Intrashield as an “Other Papas Related Companies”. Mr Papas is the sole director of the company. He was appointed on 6 May 2012 and continued as sole director as at the date the liquidators were appointed on 28 July 2021. Based on the flow of funds diagrams, Intrashield is alleged to have received $1,227,217 in tainted funds: $1,176,394 derived from Westpac and $50,823 derived from SMBC. Intrashield appeared by its liquidators, Mr Preston and Mr Ireland and was excused from the requirement to file a defence.
D.2.3 Tesoriero Entities – Respondents in the Westpac and/or SMBC Proceedings
160 There are 18 corporations which Westpac referred to as Tesoriero Entities and the Other Tesoriero Related-Companies. The distinction between Tesoriero Entities and Other Tesoriero-Related Companies was not explained in Westpac’s pleadings or submissions. Given this, I will deal with these corporations collectively as the Tesoriero Entities.
161 The Tesoriero Entities are:
(1) 23 Margaret Street;
(2) 1160 Glen Huntly Road;
(3) 14 Kirwin Road;
(4) Canner;
(5) 123 High Street;
(6) 160 Murray Valley;
(7) 31 Ellerman Street;
(8) 4 Cowslip Street;
(9) 55 Nolan Street;
(10) 89 Betka Road;
(11) 9 Gregory Street;
(12) 9 Main Street;
(13) 286 Carlisle Street;
(14) 275 High Street;
(15) 193 Carlisle Street;
(16) 8-12 Natalia Avenue;
(17) TIG; and
(18) Mangusta.
162 All of these entities are respondents in the Westpac Proceeding. Three of them, 23 Margaret Street, 286 Carlisle Street and 8-12 Natalia Avenue, are also respondents in the SMBC Proceeding.
163 Mr Tesoriero is the sole director of all of these entities, with the exception of 1160 Glen Huntly Road, 286 Carlisle Street and TIG.
164 1160 Glen Huntly Road was co-owned by Mr Tesoriero and his father Mr Tesoriero Snr, and together they are the directors of this company.
165 Mr Tesoriero and Mr Tesoriero Snr were appointed directors of 286 Carlisle Street on 8 November 2017 and continued as at the time liquidators were appointed on 2 November 2022. This company was owned by Mr Tesoriero.
166 Mr Tesoriero was appointed the sole director of TIG on 5 November 2015 and continued as at the time liquidators were appointed on 2 November 2022. It was jointly owned by Mr Tesoriero and Mr Tesoriero Snr.
167 Of the Tesoriero Entities all are in liquidation apart from 1160 Glen Huntly Road and Mangusta. 23 Margaret Street, Canner, 9 Gregory Street, TIG, 193 Carlisle Street, 8-12 Natalia Avenue and 286 Carlisle Street appeared by their liquidators, Mr Preston and Mr Ireland. Mr Allen and Mr Franklin are the liquidators of 14 Kirwin Road, 123 High Street, 160 Murray Valley, 31 Ellerman Street, 4 Cowslip Street, 55 Nolan Street, 89 Betka Road, 9 Main Street and 275 High Street. As discussed above, leave to proceed against all entities has been granted.
168 All of the Tesoriero Entities have filed defences but have not filed any evidence. As noted above, their defences were filed prior to the appointment of liquidators, when the companies shared legal representation with Mr Tesoriero.
169 With the exception of four entities, 286 Carlisle Street,193 Carlisle Street, TIG and Mangusta, these are all SPVs with no other business other than to hold the particular real properties after which (in the main) they were named. 286 Carlisle Street appears to be a company used to distribute funds including to foreign companies apparently connected with Mr Papas. 193 Carlisle Street appears to be a company used as trustee of the 193 Carlisle Street Enterprises Trust trading as Si Senor Mexican Restaurant. TIG appears to be an SPV for Mr Tesoriero’s investment in FGOC. Mangusta appears to be an SPV for the XOXO yacht (so described by Mr Tesoriero in his evidence).
170 The relevant financier(s) allege, based on the flow of funds diagrams, that:
(1) 23 Margaret Street received at least $825,782 in tainted funds: $638,433 derived from Westpac and $187,349 derived from SMBC;
(2) 1160 Glen Huntly Road received $942,639 in tainted funds derived from Westpac;
(3) 14 Kirwin Road received $251,392 in tainted funds derived from Westpac;
(4) Canner received $143,745 in tainted funds derived from Westpac;
(5) 123 High Street received $63,428 in tainted funds derived from Westpac;
(6) 160 Murray Valley received $200,337 in tainted funds derived from Westpac;
(7) 31 Ellerman Street received $125,393 in tainted funds derived from Westpac;
(8) 4 Cowslip Street received $271,389 in tainted funds derived from Westpac;
(9) 55 Nolan Street received $132,126 in tainted funds derived from Westpac;
(10) 89 Betka Road received $143,993 in tainted funds derived from Westpac;
(11) 9 Gregory Street received $5,173 in tainted funds derived from Westpac;
(12) 9 Main Street received $129,606 in tainted funds derived from Westpac;
(13) 286 Carlisle Street received at least $1,412,545 in tainted funds: $872,839 derived from Westpac and $539,706 derived from SMBC;
(14) 275 High Street received $273,391 in tainted funds derived from Westpac;
(15) Mangusta received $82,579 in tainted funds derived from Westpac;
(16) TIG received $465,953 in tainted funds derived from Westpac;
(17) 193 Carlisle Street received $30,305 in tainted funds derived from Westpac; and
(18) 8-12 Natalia Avenue received at least $2,806,412 in tainted funds: $2,272,473 derived from Westpac and $533,939 derived from SMBC.
D.2.4 Other Papas-Related Entities – Respondents in the Westpac and/or SMBC Proceedings
171 The Other Papas-Related Entities against which there are extant claims in the Westpac and/or SMBC Proceedings are comprised of companies incorporated in and outside Australia.
D.2.4.1 Incorporated in Australia
D.2.4.1.1 Iugis – Respondent in the Westpac and SMBC Proceedings
172 Iugis is a respondent in the Westpac and SMBC Proceedings. Mr Papas holds 100% of the shares in Iugis via Iugis Holdings UK, a company incorporated in the UK, which has been deregistered. Mr Papas was the director of Iugis since its incorporation on 12 April 2019.
173 The financiers have leave to proceed against Iugis. Iugis appeared by its liquidators, Mr Preston and Mr Ireland. Iugis has been excused from the requirement to file a defence in the Westpac Proceeding, and has not done so.
174 Based on the flow of funds diagrams, Iugis is alleged to have received at least $19,388,275 in tainted funds: $14,275,515 derived from Westpac and $5,112,760 derived from SMBC.
D.2.4.1.2 Palante - Respondent in the Westpac and SMBC Proceedings
175 Palante Pty Ltd (in liquidation) is a respondent in the Westpac and SMBC Proceedings. Mr Papas is the sole owner and has been a director of Palante since 6 March 2018.
176 The financiers have leave to proceed against Palante. Palante appeared by its liquidators, Mr Preston and Mr Ireland. Palante has been excused from the requirement to file a defence in the Westpac and SMBC Proceeding, and has not done so.
177 Based on the flow of funds diagrams, Palante is alleged to have received at least $2,809,655 in tainted funds: $2,452,403 derived from Westpac and $357,252 derived from SMBC.
D.2.4.1.3 Spartan - Respondent in the Westpac and SMBC Proceedings
178 Spartan is a respondent in the Westpac and SMBC Proceedings. Mr Papas is the sole owner and has been a director since its incorporation on 8 April 2014. Spartan appeared by its liquidators, Mr Preston and Mr Ireland. The financiers have leave to proceed against Spartan. Spartan has been excused from the requirement to file a defence in the Westpac and SMBC Proceeding, and has not done so.
179 Based on the flow of funds diagrams, Spartan is alleged to have received at least $1,618,095 in tainted funds: $1,333,226 derived from Westpac and $284,869 derived from SMBC.
180 The following entities are Papas-Related Entities against whom SMBC claim relief. They were not sued by Westpac. Each of them is in liquidation. They each appeared by their liquidators, Mr Preston and Mr Ireland. Leave to proceed against each of them was granted. They were each excused from filing a defence and have not done so.
D.2.4.1.4 Forum Fleet – Respondent in the SMBC Proceeding
181 Forum Fleet is owned by FGOC. Mr Papas is the sole director.
182 Based on the flow of funds diagrams, Forum Fleet is alleged to have received $190,000 in tainted funds derived from SMBC.
D.2.4.1.5 Imagetec FS – Respondent in the SMBC Proceeding
183 Imagetec FS is owned by Forum Finance. Mr Papas is the sole director. It appeared by its liquidators, but did not actively participate in the hearing. It was excused from filing a defence.
184 At the conclusion of the hearing, SMBC informed the Court that notwithstanding that Imagetec FS continued to be named as the ninth respondent to the SMBC Proceeding, the claims made against it were not pressed for the reason that the final tracing exercise undertaken by the liquidator did not demonstrate that Imagetec FS received tainted funds derived from SMBC. Accordingly, the SMBC Proceeding as against Imagetec FS will be dismissed.
D.2.4.1.6 Imagetec Solutions – Respondent in the SMBC Proceeding
185 Imagetec Solutions is owned by Imagetec Solutions Australasia Pty Ltd. Mr Papas is the sole director.
186 Based on the flow of funds diagrams, Imagetec Solutions is alleged to have received $1,385,211 in tainted funds derived from SMBC.
D.2.4.1.7 Iugis Waste – Respondent in the SMBC Proceeding
187 Iugis Waste is owned by Iugis Investments Pty Ltd. Mr Papas is the sole director. Iugis Investments Pty Ltd is not a respondent.
188 Based on the flow of funds diagrams, Iugis Waste is alleged to have received $1,010,820 in tainted funds derived from SMBC.
D.2.4.1.8 Aramia – Respondent in the SMBC Proceeding
189 Aramia is owned by Mr Papas. Mr Papas is the sole director.
190 Based on the flow of funds diagrams, Aramia is alleged to have received $101,914.00 in tainted funds derived from SMBC.
D.2.4.2 Incorporated outside Australia
D.2.4.2.1 Mazcon – Respondent in the Westpac and SMBC Proceedings
191 Mazcon is a company incorporated in Greece. The directors of Mazcon are Mr Papas and Mr Anastasios Giamouridis. Mr Papas owns 99% of the shares in Mazcon. Mr Giamouridis owns the remaining 1%. Mazcon is a respondent in the Westpac Proceeding and the SMBC Proceeding. Mazcon was the subject of a deemed service order. It did not appear at the hearing and leave was granted to proceed generally against it in its absence.
192 Westpac and SMBC allege, based on the flow of funds diagrams, that Mazcon received at least $13,504,884 in tainted funds: $7,873,961 derived from Westpac and $5,630,923 derived from SMBC. It is alleged that these funds were used in part to purchase the Xanthi Football Club, a Greek professional football club, and also used to purchase properties in Greece.
D.2.4.2.2 Iugis (UK) – Respondent in the Westpac and SMBC Proceedings
193 Iugis (UK) is a company incorporated in England and Wales. Mr Papas is the sole director and owner of Iugis (UK). Iugis (UK) is a respondent in the Westpac Proceeding and the SMBC Proceeding. It did not appear at the hearing and leave was granted to proceed generally against it in its absence. Westpac and SMBC claim, based on the flow of funds diagrams, that Iugis (UK) received at least $2,303,309 in tainted funds: $1,636,619 derived from Westpac and $666,690 derived from SMBC.
D.2.4.2.3 Iugis Greece – Respondent in the Westpac Proceeding
194 Iugis Greece is a company incorporated in Greece. Mr Papas is the sole director, and owns 98% of the issued shares. Iugis Greece is a respondent in the Westpac Proceeding. SMBC discontinued its proceedings against it. Iugis Greece was the subject of a deemed service order. It did not appear at the hearing. Leave was granted to proceed generally against it in its absence. Westpac allege, based on the flow of funds diagrams, that Iugis Greece received at least $472,927 derived from Westpac in tainted funds.
D.2.4.2.4 Iugis Energy Greece – Respondent in the Westpac and SMBC Proceedings
195 Iugis Energy Greece is a company incorporated in Greece. Mr Rollinson is a director appointed as the nominee of Mr Papas (through Mr Papas’ 99% shareholding of Iugis Holdings UK, which in turn holds 98% of issued shares in Iugis Energy Greece). Iugis Energy Greece is a respondent in the Westpac Proceeding and the SMBC Proceeding. Iugis Energy Greece was the subject of a deemed service order. It did not appear at the hearing and leave was granted to proceed generally against it in its absence. Westpac and SMBC allege, based on the flow of funds diagrams, that Iugis Energy Greece received at least $519,032 in tainted funds: $81,806 derived from Westpac and $437,226 derived from SMBC.
196 At the conclusion of the hearing, the financiers that had claimed against the following foreign Papas-Related Entities informed the Court that notwithstanding that these entities continued to be named as respondents to the proceedings, the claims made against them were not pressed because they had been deregistered or dissolved: Iugis Holdings UK; Iugis Global Financial Services Limited (Iugis GFS UK); Iugis Finance Limited (Company Number 11785331) (Iugis Finance UK); and D&D Group O.E. Accordingly, I will in due course order that these entities be removed as respondents to the Westpac Proceeding. Iugis Holdings UK will likewise be removed as a respondent to the SMBC Proceeding. These entities remain relevant in so far as they are alleged to have been involved in and/or to have received tainted funds as part of the overall operation of the fraudulent scheme.
D.2.6 Overseas entity alleged to have received tainted funds
D.2.6.1 Theion Ike - Respondent in the Westpac Proceeding
197 Theion Ike is a company incorporated in Greece. Theion Ike is a respondent in the Westpac Proceeding. In contrast to the other entities, Mr Papas is not a director or shareholder of Theion Ike. Rather, the “management and representation powers” are held by Mr Vassilios-Andreas Tafralis, who also holds 70% of the issued shares. Westpac allege that Theion Ike received at least $132,131 in tainted funds which was channelled through 286 Carlisle Street, one of the Tesoriero Entities. Theion Ike was served on 17 August 2022. Theion Ike did not file a defence or appear at the hearing. Leave to proceed generally against Theion Ike was granted on 8 February 2023.
E. RESPONDENTS AGAINST WHOM THE PROCEEDINGS HAVE RESOLVED
198 In addition to the claims that Westpac otherwise does not press, Westpac’s claims against the following respondents have resolved.
199 Pursuant to consent orders made on 10 February 2023, the Westpac Proceeding were dismissed as against Mr Giamouridis and against A Giamouridis P.C., with the distinctive title “GIAMOURIDIS INDUSTRIAL WORKSHOP” in the Greek Commercial Registry, an entity registered in Greece under his control (formerly the fiftieth respondent). The Westpac Proceeding against the Giamouridis respondents resolved by consent on terms that did not involve them paying Westpac. When the settlement was announced in Court, counsel for the Giamouridis respondents noted in open Court that “the Westpac applicants do not allege that the [Giamouridis] respondents were a party to the fraud perpetrated by Forum Finance, by Iugis NZ, FGFS against Westpac and Westpac New Zealand; and, secondly, that the Westpac applicants do not allege that the [Giamouridis] respondents were aware of the fraud by Forum Finance, by Iugis NZ and FGFS against Westpac and Westpac New Zealand”.
200 Westpac’s claim against Mr Eric Constantinidis was discontinued pursuant to a notice of discontinuance filed on 16 December 2022.
201 Lastly, Westpac’s claim as against Mr Tesoriero Snr, Vince Tesoriero’s father, also resolved. I made orders by consent on 28 August 2023 dismissing the Westpac Proceeding against Mr Tesoriero Snr and that he pay Westpac $750,000.
202 In each proceeding, the financiers’ evidence in the main comprised evidence on affidavit and documentary tender. There was very limited cross-examination of the witnesses called by the financiers. Only two of the witnesses called by the financiers were required for cross-examination. They were Mr Geoffrey Anderson, Director of Asset Finance at Westpac, and Mr Preston, one of the joint liquidators of many of the respondent companies. The cross-examination of each of these witnesses was of very limited compass. Large parts of their evidence were not challenged in cross-examination. The active respondents did not seek to challenge the evidence of these witnesses by a thesis other than that the fraud as advanced by the financiers had been effected.
203 As mentioned, the only two respondents who actively defended the allegations made against them were Mr Tesoriero and Mr Bouchahine, who were both named as respondents in the Westpac Proceeding. They each gave evidence and were cross-examined. Mr Tesoriero did not seek to read any affidavit evidence. Mr Tesoriero was however cross-examined on his outline of evidence dated 20 January 2023 and affidavits which he had previously sworn dated 19 November 2021 and exhibit VFT-1 and 23 December 2021.
204 The allegations of fraud at the centre of each proceeding were not contested and were established comprehensively on the evidence. Each financier led evidence from employees and officers of the alleged customers said to have been party to the impugned equipment finance arrangements. The customer evidence established that the underlying equipment supply contracts and associated finance arrangements were bogus. The signatures purportedly made on behalf of customers, (whether by way of execution or in the capacity of witness), were falsified. Those that were held out as having executed or witnessed the documents on behalf of the alleged customers deposed to the fact that they had not previously seen the documents that they were said to have signed, witnessed or authorised. The equipment allegedly the subject of the finance arrangement was not sought by, nor supplied to, the third parties who were held out to be customers of Forum. The customer evidence was not challenged. The evidence in each proceeding was evidence in each of the other proceedings. Thus, the customer evidence led in the Westpac Proceeding was also relied on by SMBC and Societe Generale in their respective proceedings. Similarly, the customer evidence in the SMBC Proceeding was relied on by Westpac and Societe Generale and the customer evidence in Societe Generale Proceeding was relied on by Westpac and SMBC. I will refer to the falsified documents collectively as the Fraudulent Transaction Documents. By that description, I include not only the primary agreements but also the falsified documents that were ostensibly issued pursuant to the primary agreements.
205 I will begin by describing the relevance of the witnesses relied upon by each of the parties before moving to the findings I make on the basis of the evidence.
F.1 Evidence relied upon by Westpac
206 The evidence led from witnesses by Westpac comprised affidavits from: employees of Westpac; employees of companies alleged to be the customers who received the equipment the subject of the relevant Westpac related agreements; the liquidators of various Westpac respondents; and other witnesses who gave evidence broadly in relation to the provenance of certain documents and the document review processes undertaken by Westpac in respect of the documentary evidence available to them.
207 Westpac rely on affidavit evidence from their own officers and former officers. Broadly, the evidence covered the following issues: the impugned arrangements; meetings with Mr Papas at the inception of the arrangements and during the period of the alleged fraud; the relevant fraudulent transactions; WBC and WNZL’s reliance on the representations made in connection with the transactions; the discovery of the fraud; conversations by WBC personnel with Mr Papas in the aftermath of the discovery of the fraud; payments made by WBC to Forum Finance and by WNZL to Iugis NZ and the amount of WBC’s and WNZL’s loss.
208 Mr Anderson, the then Director of Asset Finance in the Westpac Institutional Bank (WIB) division of Westpac Banking Corporation, has sworn three affidavits of 28 June 2021, 8 July 2021 and 14 October 2021 on which Westpac rely. Mr Anderson also gave evidence in chief and was cross-examined by counsel appearing for Mr Tesoriero and for Mr Bouchahine.
209 Mr Anderson’s evidence goes to, amongst other things, the genesis and nature of the financing arrangements and relationships between Westpac, Eqwe and Forum Finance; the emergence of concerns pertaining to the arrangements, preliminary inquiries made by Mr Anderson with customers allegedly party to the impugned arrangements; and the extent of Westpac’s exposure in connection with what he describes as the Forum/Eqwe Programme. Mr Anderson further deposed to the internal processes at WBC for approving transactions referred by Eqwe under the Forum/Eqwe Programme. Mr Anderson detailed a number of meetings which he, together with others, attended with Mr Papas including at around the time Eqwe introduced Forum Finance to WBC where information was provided by Mr Papas including about the waste digester units know as ORCAs.
210 Westpac rely on the affidavit of Mr Randyl Stack, affirmed 4 February 2022, who was the Head of Customer Lifecycle Management within WIB between November 2018 and November 2020, and since November 2020 has been the Head of Operations at WIB. Mr Stack deposed to his knowledge of the process of drawdowns and repayments under the Eqwe/Forum Programme.
211 Mr Trevor Chapman of WNZL, in his affidavit sworn 21 December 2021 (as the Head of Credit Restructuring), gave evidence as to the status of the proceedings which WNZL brought against Iugis NZ in the High Court of New Zealand, including, relevantly, that those proceedings were stayed as a consequence of Iugis NZ being in liquidation.
212 Mr Brent Moreton of WNZL, in his affidavit sworn 21 December 2021 (as a director in the asset finance team), deposed to, amongst other things, the genesis and nature of the arrangements between WNZL, Iugis NZ and Eqwe; the practices of WNZL in relation to transactions under the Iugis NZ Financing Programme; and WNZL’s discovery of anomalies in payments made into Eqwe’s account with WNZL.
213 WBC and WNZL rely on affidavit evidence from senior employees of each of the seven Australian customers and one New Zealand customer in respect of whom fraudulent transaction documents were created. The eight faux customers are: National Food Manager of Australian Leisure and Hospitality Group Pty Ltd (ALH); Catholic Healthcare Limited (CHC); Coles; HWL Ebsworth Lawyers (HWLE); Scentre Group Limited; Veolia; WesTrac; and Veolia Environmental Services (NZ) Limited (Veolia NZ).
214 A number of general observations may be made in respect of all the customer witnesses. None were required for cross-examination. Their evidence was admitted without objection and was not challenged. These witnesses were independent, having no personal stake in the litigation. The documentary evidence served to corroborate the evidence they gave. I accept the customer evidence led by Westpac in its entirety.
215 Westpac rely on this evidence to establish that the end customer contracts underlying all 136 transactions financed by WBC and WNZL were fraudulent. Each customer (by a senior employee) disavows entry into the impugned contract and deposed to the effect that the signatures purportedly given on behalf of the relevant customers on the contracts have been falsified. The customer witnesses also deposed to the fact that the equipment said to be the subject of the contractual arrangements was not sought or purchased from Forum Finance and was not supplied. Some of the customer witnesses gave evidence that the type of equipment purportedly supplied was not used in the customer’s business.
216 Westpac read an affidavit of Mr Trevor Smith, National Food Manager, ALH. Mr Smith deposed to an initial trial program for ORCA waste digester units at various ALH-licensed venues throughout Australia; a service agreement entered into between ALH and Iugis on 1 March 2021 with respect to certain ORCA machines being installed as part of a trial program; and communications with Westpac in June 2021 (when the fraud was discovered). Mr Smith’s evidence is that in around 2014 or 2015 upon approach from Mr Tas Papas from Forum Enviro, ALH entered into the trial program for the installation of ORCAs at various ALH licensed venues. Mr Smith deposed to receiving by email on 23 June 2021 from Mr Anderson of Westpac, various payment schedules and certificates of acceptance of delivery which purportedly bore his signature. Mr Smith deposed to not having previously seen those documents and disclaims signing those documents.
217 Mr David Maher, the Managing Director of CHC from in around January 2011 to May 2021 deposed in respect of customer payment schedules and certificates of acceptance of delivery dated in September and October 2018 in respect of ORCA machines. The thrust of Mr Maher’s evidence is that he did not sign those documents, which purport to bear his signature, he has never met Mr Tas Papas, who is recorded on those documents as witnessing Mr Maher’s signature and he is not aware of any ORCA food waste digester unit being purchased, leased or hired by CHC. Mr Maher gave similar evidence in respect of rental agreements. Mr Maher deposed that he had never seen before a document titled “certificate of currency” dated 12 June 2018 which noted CGC as an insured and “Forum Enviro Pty Ltd” as an interested party and letters from Forum Finance dated 24 September 2018 in respect of the Payment Schedule dated 16 September 2018 and 1 November 2018 in respect of the Payment Schedule 29 October 2018.
218 Ms Stacy Flanagan, Financial Controller for CHC from September 2019, swore an affidavit dated 22 December 2021 in which she deposed to the fact that CHC does not hold copies of the documents that purport to be part of the contractual arrangements which WBC was led to believe existed between CHC and Forum Finance and/or Eqwe. She deposed that she was unable to locate a copy of the purported customer payment schedules, certificates of acceptance of delivery and transfer of rights letters in the books and records of CHC, and that no payments were made by CHC to Forum Finance or Eqwe.
F.1.2.4 Rohan de Silva – Coles
219 Mr Rohan de Silva, Senior Category Manager of Stores and Sustainability at Coles from November 2016 until July 2019, affirmed an affidavit on 1 February 2022 in which he deposed to, amongst other things, the existence of a trial program between Forum Finance and Coles for ORCA waste digester units in around 2018. In relation to three purported customer payment schedules and certificates of acceptance of delivery dated in September and October 2018 which purportedly contained the signature of Mr Parikh described as witnessed by Mr de Silva, Mr de Silva gave evidence that he did not sign the documents himself and did not witness Mr Parikh sign the documents.
220 Mr Vinay Parikh of Coles swore an affidavit of 1 February 2022. At the time of swearing his affidavit, Mr Parikh was the Procurement Manager – Energy, Sustainability & Store Expenses. Prior to that role, Mr Parikh held the role of Procurement Category Manager – Store Operations (October 2017 to June 2019) and Procurement Category Lead – Energy and Sustainability (June 2019 to May 2021). Mr Parikh deposed to, amongst other things, four purported contracts with Forum Finance, including purported customer payment schedules and delivery certificates, and to the falsity of the signatures which purport to be his on those documents. Mr Parikh gave evidence that he did not have authority to execute contracts on behalf of Coles. Further, that he could not locate the purported customer payment schedules and delivery certificates, or any record of the relevant equipment, in Coles’ books and records.
221 Mr Kris Hopkins, as the Chief Operating Officer of HWLE, swore an affidavit of 4 February 2022. Mr Hopkins was previously the National Finance Manager – CFO of HWLE (April 2011 to January 2021). Mr Hopkins gave evidence, amongst other things, that he reviewed four purported customer payment schedules variously dated between August 2018 and September 2020, four purported certificates of acceptance of delivery dated in the period from August 2018 to October 2020 and said to be between Forum Finance and HWLE, and four purported print management agreements said to be between HWLE and Northern Managed Finance Pty Ltd (NMF), variously dated in June 2016, August 2016, March 2017 and May 2017. Mr Hopkins said that the signature on the certificate of acceptance of delivery from October 2020 which purported to be his was not his. Further, that following a review undertaken of the books and records of HWLE he could not find any record of the purported payment schedules and delivery certificates, the purported letters from Forum Finance in relation to the payment schedules, or the undated letter from NMF and Forum Finance to HWLE purporting to be a notice of assignment. Further still, he has not located any records documenting the purported arrangement in relation to the relevant equipment or any record of the goods (referenced by serial number) being delivered to HWLE. Mr Hopkins noted that HWLE did, however, separately enter into legitimate agreements with Forum Finance on 22 February 2019 and 1 October 2020 respectively. The legitimacy of those two agreements is not in issue in these proceedings.
222 Mr Juan Martinez, then Managing Partner of HWLE, in an affidavit sworn 4 February 2022 gave evidence that, amongst other things, he has reviewed the four customer payment schedules variously dated between August 2018 and September 2020, four certificates of acceptance of delivery between August 2018 and October 2020 as between Forum Finance and HWLE, and four print management agreements between HWLE and NMF variously dated in June 2016, August 2016, March 2017 and May 2017. Mr Martinez deposed that the signatures on all of these documents that purport to be his, are not his signature. Further, that following a search undertaken of the books and records of HWLE the following documents were not located: the payment schedules and certificates of acceptance of delivery; letters from Forum Finance in relation to the payment schedules; and the four purported print management agreements.
223 Mr Paul Giugni, General Counsel of Scentre, in an affidavit sworn 8 July 2022 gave evidence that, in relation to a subsidiary – Scentre Shopping Centre Management Pty Ltd – copies of purported customer payment schedules and certificates of acceptance of delivery with Forum Finance were not found within Scentre’s books and records. Mr Giugni further deposed to the fact that the employee that is recorded on the certificate of delivery as a witness to the purported signature of the Chief Operating Officer left the company 18 months prior to the date on which the document was purportedly witnessed.
F.1.2.9 Gregory Miles – Scentre
224 In an affidavit sworn 19 January 2022, Mr Gregory Miles, the Chief Operating Officer of Scentre until 19 December 2019, gave evidence that, amongst other things, the signatures on customer payment schedules and certificates of acceptance of delivery that purport to be his signatures were not his, and that his purported signature on a rental agreement with NMF was not his.
F.1.2.10 Gurpreet Brar – Veolia
225 Ms Gurpreet Brar, CFO of Veolia from around 1 February 2018 to 31 May 2021, swore an affidavit of 3 February 2022 in which she deposed, amongst other things, to the fact that she did not sign, on behalf of Veolia, or at all, the purported payment schedules and certificates of acceptance of delivery. Further, that she did not authorise anyone to sign those documents on her behalf or affix her electronic signature to them. Ms Brar said that she saw the transfer of rights letters and the Deed of Guarantee and Indemnity purportedly made between Veolia and Iugis NZ for the first time upon being provided with them by Westpac’s solicitors. Ms Brar said that the signature on the Guarantee purportedly to be hers was not hers.
F.1.2.11 Lorenzo Kozlovic – Veolia and Veolia NZ
226 Mr Lorenzo Kozlovic was the Chief Strategic Development & Innovation Officer for Veolia and Veolia NZ between January 2014 and July 2018, and Executive General Manager, Central/Western Australia and New Zealand for Veolia and Veolia NZ between July 2018 to September 2020. From 11 November 2015 to 31 August 2020, Mr Kozlovic was a director of Veolia NZ. In his affidavit of 1 February 2022, Mr Kozlovic deposed to the background to Veolia’s relationship with Forum Finance from 2018 and confirmed that signatures purportedly to be his on payment schedules and certificates of acceptance of delivery were not his. Mr Kozlovic said that the first time he saw transfer of rights letters from Forum Finance addressed to him or Ms Brar was when he was given them in connection with this proceeding.
F.1.2.12 Jarvas Croome – WesTrac
227 Mr Jarvas Croome, CEO and director, WesTrac, deposed in an affidavit sworn 3 February 2022, that, amongst other things, signatures purporting to be his on payment schedules and certificates of acceptance of delivery were not his, and that transfer of rights letters from Forum Finance addressed to WesTrac and marked for his attention were not documents that he has a recollection of receiving.
F.1.2.13 Carly Rossbach-Smith – WesTrac
228 Ms Carly Rossbach-Smith, Treasury Operations Manager, WesTrac, is the customer that alerted Westpac to the issues concerning the Forum Finance transactions which ultimately led to the discovery of the fraud.
229 In her affidavit of 3 February 2022, Ms Rossbach-Smith deposed that she was informed by Mr Nick O’Brien of WBC that WesTrac had $9.7 million of their leasing limit drawn. She said that this information put her on inquiry. Ms Rossach-Smith contacted Mr Tim Ewing, her primary contact in Westpac’s Structured and Asset Finance Team, who provided her with several email chains and payment schedules relating to WesTrac’s purported purchase of equipment from Forum Finance. In the course of her inquiries, Ms Rossbach-Smith spoke to several relevant WesTrac employees, including Mr James Mendham, Category Manager from the Procurement Team, none of whom were aware of, or had record of, the equipment purportedly purchased from Forum Finance identified in the payment schedules. Mr Mendham discussed the issue with WesTrac’s CEO, Mr Jarvas Croome. Mr Mendham informed Ms Rossbach-Smith that Mr Croome said he had not signed the relevant documentation, which on its face was purportedly signed by him. Ms Rossbach-Smith’s inquiries revealed that there had only been one printer/photocopier arrangement that had been in place with Forum in the amount of around $1.6 million and that the $9.7 million drawdown could not be reconciled. Ms Rossbach-Smith informed her contacts at Westpac of the result of her inquiries. Westpac then arranged for a meeting with Mr Papas which was scheduled to be held on 16 June 2021.
230 Westpac rely on affidavit evidence from the liquidators of the various respondents to the Westpac Proceeding. The liquidators’ evidence is directed to a tracing analysis and the ascertainment of cash and asset positions of the respondent companies. Westpac also rely on affidavit evidence of its solicitors in relation to the provenance of various documents and matters of internal document management.
F.1.3.1 Jason Preston – liquidator
231 Mr Preston, with Mr Ireland, is appointed as a joint and several liquidator of the following companies:
(1) in the Westpac Proceeding — Forum Finance, FGFS, FG, Forum Enviro, Forum Enviro (Aust), 64-66 Berkeley Street, 14 James Street, 26 Edmonstone Road, 5 Bulkara Street, 6 Bulkara Street, 23 Margaret Street, Canner, 9 Gregory Street, 286 Carlisle Street, Palante, FGOC, Iugis, Spartan, Intrashield, TIG, 193 Carlisle Street and 8-12 Natalia Avenue;
(2) in the SMBC Proceeding — Forum Enviro, Forum Enviro (Aust), FGFS, FG, FGOC, Forum Fleet, Imagetec Financial Services, Imagetec Solutions, Intrashield, Spartan, Iugis, Iugis Waste, 26 Edmonstone Road, 5 Bulkara Street, 6 Bulkara Street, 23 Margaret Street, 286 Carlisle Street and 64-66 Berkeley Street; and
(3) in the Societe Generale Proceeding — Forum Finance and FGFS.
232 Mr Preston swore three affidavits, respectively on 7 February 2022, 10 June 2022 and 20 February 2023, relied on by Westpac and SMBC. Amongst other things, Mr Preston provided a summary of the tracing analysis which he, and others in his employ, conducted as to the source and flow of funds from financiers within and outside the Consolidated Group, and the steps undertaken in order to conduct the tracing analysis. Mr Preston also deposed to processes undertaken to ascertain the current asset position of the liquidated entities, including by providing information in respect of certain motor vehicles, boats, jet-skis, a camper trailer, cash and property assets which are not under the liquidators’ control.
233 As mentioned above, Mr Preston was required for cross-examination. He was briefly cross-examined by counsel for Mr Tesoriero.
F.1.3.2 Andrew Grenfell – liquidator
234 Mr Andrew Grenfell, partner, McGrathNicol, New Zealand, was appointed as one of the liquidators of Iugis NZ. He swore an affidavit of 22 December 2021 in which he gave evidence in relation to various transfers made from Iugis NZ to FGFS based on a review of the records of Iugis NZ, tracing of transactions by ANZ Bank New Zealand Limited (ANZ) (with which Iugis NZ held an account), and information provided by the liquidators of FGFS.
F.1.3.3 Michael Hughes – solicitor
235 Mr Michael Hughes, partner, MinterEllison, lawyers for the financiers in the Westpac Proceeding, swore an affidavit of 4 February 2022 in which he gave evidence as to a search conducted of Forum Finance’s premises in Sydney by Westpac on 28 to 30 June 2021, pursuant to a search order made on 28 June 2021. Amongst other things, Mr Hughes deposed to his location of three notebooks in Mr Papas’ office which contain handwritten notes, that Mr Hughes provided to the Independent Solicitor appointed by the Court in connection with the search. The handwritten notes are relied on by Westpac (and by extension SMBC) as an admission by Mr Papas.
F.1.3.4 Chandana Kumaragamage – legal technology
236 Mr Kumaragamage, Head of Legal Technology, MinterEllison, swore an affidavit of 4 February 2022 in which he gave evidence as to the primary document review tool used by MinterEllison — Nuix Discover — the allocation of document ID codes to documents, and the “deduplication” process applied to documents when uploaded to Nuix.
F.2 Evidence relied upon by SMBC
237 The evidence led from witnesses by SMBC comprised affidavits from: an employee of SMBC; employees of companies alleged to be the customers who received the equipment the subject of the relevant SMC related agreements; the liquidators of various SMBC respondents; and the solicitor with carriage of the SMBC Proceeding.
238 SMBC rely on affidavit evidence from Michael Timpany, director, SMBC in respect of the two financing arrangements which SMBC entered into with Forum Enviro (Aust), the 2018 MRASA and the 2020 MRASA. Mr Timpany made three affidavits (dated 13 July 2021, 4 February 2022, and 4 July 2022). Mr Timpany described his involvement in setting up and finalising the 2018 MRASA and 2020 MRASA. He also addressed the extent of the drawdowns made by SMBC under those arrangements and transferred to Flexirent, payments made by Forum Enviro (Aust) to SMBC up to May 2021 pursuant to those arrangements, and the retention by SMBC of security deposits made by Forum Enviro (Aust) under the arrangements.
239 Mr Timpany recalled only one occasion prior to 30 June 2021 on which Forum Enviro (Aust) missed a payment under the 2018 MRASA and the 2020 MRASA, which upon demand was promptly paid. On 1 July 2021, Mr Timpany was informed by a member of the SMBC L&F Loan Administration team that payments due on 30 June 2021 under the 2018 MRASA and the 2020 MRASA had not been paid. Mr Timpany described his efforts on 1 July 2021 and 2 July 2021 to alert Forum Enviro (Aust) that the payment was not made. He said that Mr Papas informed him that payment would not be immediately forthcoming due to significant issues impacting the Forum business. Mr Timpany said that shortly after his exchanges with Mr Papas, he became aware through media reports of the Westpac Proceeding. He then began his own inquiries which extended to discussing the purported Forum contracts with the customers in which SMBC had an interest. His inquiries led him to believe that Forum had acted fraudulently in its dealing with SMBC.
240 Under both the 2018 MRASA and 2020 MRASA, the relevant purported customer was Veolia. Veolia was also held out as a Forum customer to Westpac and to Societe Generale. SMBC rely on affidavits of senior Veolia employees in relation to the fraudulent nature of the documents purportedly underlying the impugned financing arrangements.
F.2.2.1 Lorenzo Kozlovic – Veolia
241 Mr Kozlovic who also provided an affidavit in the Westpac Proceeding, swore an affidavit of 1 February 2022 in the SMBC Proceeding in which he gave evidence that, amongst other things, the signatures that appear on various documents including five Technology Licence Agreement (TLA) Schedules; associated certificates of acceptance of delivery; the Waste Management Master Technology License Agreement (Waste Management MTLA); and the Health Management Master Technology License Agreement (Health Management MTLA), both dated 23 July 2020, that purport to be his signatures, were not his. Mr Kozlovic noted that the TLA Schedules and certificates of acceptance of delivery incorrectly identify his position as “COO” of Veolia, which is not a position he has ever held at the company. Further, Mr Kozlovic noted that two emails which purport on their face to have been sent by him to Mr Papas in July and August 2020 communicating Veolia’s consent to the assignment to SMBC of certain receivables under unidentified TLAs were not sent by him. Further, that he did not authorise those emails to be sent on his behalf by anyone else.
F.2.2.2 Gurpreet Brar – Veolia
242 Ms Brar, who also provided affidavits in the Westpac Proceeding, deposed in an affidavit sworn 3 February 2022 that Veolia had “previously leased some waste digesters for use by its clients from companies within the Forum group of companies”, including Forum Enviro (Aust). However, Ms Brar further deposed that the TLA Schedules supplied to her by SMBC lawyers are forgeries – the signatures on those documents that purport to be hers were not hers and she had not seen these documents until she was supplied with copies by SMBC’s lawyers in connection with the SMBC Proceeding.
F.2.2.3 Julian Gaillard – Veolia
243 Mr Gaillard, Veolia Company Secretary, Risk and Insurance, since 1 June 2015, deposed that five TLAs apparently bearing his signature were not signed by him. He did not authorise anyone else to sign those documents on his behalf. Further, that he has never had any commercial or other dealings with Forum Enviro (Aust), Mr Papas or any other representative of Forum Enviro (Aust) in relation to those documents.
F.2.2.4 Daniel Conlon – Veolia
244 Mr Daniel Conlon was the Managing Director and CEO of Veolia from June 2018 to September 2020 (when he left the company). He had worked for Veolia since 1998. Mr Conlon gave evidence that the Waste Management MTLA and Health Management MTLA which purport to bear his signatures were not signed by him, and that his signature on those documents are forgeries.
F.2.3.1 Jason Ireland – liquidator
245 Mr Ireland, in his affidavit sworn 9 June 2022, deposed to the arrangements made with various Forum entities purportedly to obtain funding to acquire waste digesters and surface disinfectant machines, how those machines were used in the business of various Forum entities, and the investigations undertaken by the liquidators in relation to the legitimacy of purported equipment leases between Veolia and Forum Enviro (Aust) funded by SMBC or Flexirent in the period between 21 June 2018 and 26 May 2021. Mr Ireland prepared a Schedule in which he identified purported equipment leases as being legitimate or fraudulent based on whether there were records to substantiate the existence of the purported equipment or records of invoices issued to or payments being received by a Forum entity from the purported customer. As a result of this analysis, Mr Ireland concluded that all of the purported equipment leases that he reviewed were fraudulent.
F.2.3.2 Roger Dobson – solicitor
246 Mr Dobson, the partner at Jones Day with carriage of the SMBC Proceeding, in his two affidavits dated respectively 13 July 2021 and 14 July 2021 gave evidence as to, amongst other things, the financing arrangements involving SMBC and Forum Enviro (Aust), the 2018 MRASA and 2020 MRASA, and details the various transactions entered into pursuant to those arrangements.
F.3 Evidence relied upon by Societe Generale
247 The evidence led from witnesses by Societe Generale comprised affidavits from: employees of Westpac; an employee of Veolia, the company alleged to be the customer who received the equipment the subject of the relevant Societe Generale related agreements and the liquidators of various Westpac respondents.
248 Societe Generale rely on affidavit evidence from two if its senior employees in respect of the financing arrangements pursuant to the Master Agreement, discovery of the facts relevant to the alleged fraud, details of the various transactions entered into pursuant to the Master Agreement and their review of relevant transaction documents.
249 Mr Thong is the Head of Corporate Coverage – Australia & New Zealand at Societe Generale, Sydney Branch. In his affidavit sworn on 30 June 2021, Mr Thong gave evidence of the nature of the arrangement between Societe Generale, Forum Finance and Eqwe. He gave evidence about the payments Societe Generale made to Forum Finance pursuant to a Receivables Acquisition and Servicing Agreement executed on 6 November 2020 by Societe Generale, Forum Finance and Eqwe. This agreement provided for the sale and purchase of offered receivables that an obligor owed to Forum from time to time, being receivables derived from the provision of waste digestors to Veolia. The agreement appointed Eqwe as agent of both Societe Generale and Forum Finance in order to facilitate payments made by Forum Finance to Societe Generale, amongst other obligations. Pursuant to the agreement, Forum Finance would provide an offer notice, a payment schedule and a certificate of acceptance of delivery, purportedly signed by Ms Brar on behalf of Veolia. In respect of each payment made by Societe Generale, Mr Thong gave evidence that at no time did anyone from Eqwe or Forum Finance raise any concern about the amount to be paid by Societe Generale or any error in the payments being made by Societe Generale until the discovery of the fraud in June 2021. As discussed, Mr Thong first became aware of the alleged fraud on 21 June 2021 through Mr Price and gave evidence of the further steps taken by Societe Generale to ascertain the extent of the alleged fraud. Societe Generale received from Eqwe a verification statement for a Personal Property Securities Register (PPSR) registration made by Forum Finance against Veolia in respect of the goods listed in each payment schedule.
250 In his affidavit sworn 14 December 2021, Mr Thong further deposed to the steps he took at the relevant time to review the transaction documents and that he was satisfied as their truth and accuracy and binding effect on Veolia. Mr Thong noted that, as a result, he would leave it to Mr Nicolas Dumont (the then Front Office Originator — Structured Solutions & Leasing (SSL) at Societe Generale) and the SSL team to perform their own reviews of the documents and progress the matters internally (including, in due course, making administrative arrangements to make payments to Forum Finance), and that, amongst other things, if there was anything on the face of the transaction documents that had caused him concern, or if Eqwe had raised any concerns with him, then he would have not forwarded the documents to Mr Dumont (or if Mr Dumont already had the document, told him to pause his review) and would have gone back to Eqwe (and as necessary, Forum Finance) to have his concerns addressed. Further, that Mr Thong would not have allowed the transaction to be progressed further within Societe Generale if he had become so aware after he provided the documents to Mr Dumont.
251 Mr Dumont, Chief Operating Officer of 29H (Private Banking Division) Societe Generale (also known as Secretaire General du 29H), in affidavit sworn on 8 February 2022, gave evidence about, amongst other things, his role as Front Office Originator, the SSL group’s primary role within Societe Generale in administering the arrangements under the Master Agreement, and the steps he would have taken in relation to the transactions which he arranged to be paid to Forum Finance’s account, had he known or suspected that the relevant documents were not legitimate or authentic.
252 The only relevant third party held out as a customer to Societe Generale was Veolia.
F.3.2.1 Gurpreet Brar – Veolia
253 Ms Brar also provided affidavits to Westpac and SMBC, as well as to Societe Generale. Societe Generale rely on an affidavit of Ms Brar sworn 1 July 2021 in which she deposed that, amongst other things, she did not sign the relevant transaction documents, being the notices of assignments, payment schedules and certificates of acceptances. Ms Brar noted that the payment schedules attached to the notices of assignment set out a list of waste digesters, identified by serial number, purportedly supplied to Veolia. Her evidence is that those machines were not delivered to Veolia and the serial numbers in the payment schedule do not match any of the serial numbers of goods which were actually supplied to Veolia.
F.3.3 Other evidence – liquidator
254 Societe Generale relied on two affidavits of Mr Preston, liquidator, sworn 7 February 2022 and 10 June 2022. In his earlier affidavit, Mr Preston set out a summary of the tracing analysis undertaken in respect of funds advanced to various Forum entities by various financiers including Societe Generale and the steps he undertook in respect of the tracing. In his later affidavit, Mr Preston deposed to additional analysis he has undertaken in respect of additional bank account statements of Forum entities or related parties. Mr Preston then deposed to undertaking the tracing analysis set out in his earlier affidavit in respect of the additional bank accounts relevant to the exercise. Mr Preston also deposed to having undertaken an “alternative” tracing methodology which expends funds from the financiers first on a pro-rated basis prior to expending funds from a category designed as “other” when meeting payments from the relevant account.
F.4 Evidence relied upon by the individual respondents
255 Mr Tesoriero did not rely upon an affidavit containing his evidence in chief in the substantive Westpac Proceeding. Instead, Mr Tesoriero filed an outline of evidence in which he indicated the matters about which he may give evidence if he elected to give oral evidence during the hearing. Mr Tesoriero ultimately did give oral evidence. After giving evidence in chief he was cross-examined by senior counsel for Westpac. In his cross-examination, Mr Tesoriero agreed that he had reviewed his outline of evidence before it was provided to Westpac’s legal representatives.
256 Mr Tesoriero was cross-examined on an earlier affidavit he had sworn on 8 November 2021 which had been filed in the Westpac Proceeding in the context of freezing orders made against Mr Tesoriero and his companies. In that affidavit Mr Tesoriero deposed to the sources of the funds that he, or entities under his control, had used to acquire the assets which were at that time restrained. He also deposed to the payments he received from or made to the Forum Group, his role in the Forum Group and he asserted he was not involved in the impugned transactions.
257 Mr Tesoriero was also cross-examined on an affidavit he swore on 23 December 2021 which was filed in separate proceedings with the file number VID778/2021 (Statutory Demand Proceeding). That affidavit was made in support of an application to set aside statutory demands made by FGFS against various entities of which Mr Tesoriero was a director. The statutory demands were partly based on deeds of loan purportedly entered into by each of the entities and FGFS and which bore Mr Tesoriero’s electronic signature. Mr Tesoriero deposed that he had no recollection of any of the plaintiffs in the VID778/2021 proceeding accepting loans from FGFS as alleged by FGFS’s liquidators. Further, he asserted that he did not sign the deeds of loan relied upon by FGFS.
F.4.2 Moussa (Tony) Bouchahine
258 Mr Bouchahine relied on his affidavit sworn on 2 February 2023 in which he described his role as the CFO of the Forum group of companies, including, Forum Finance, FG, Forum Enviro, Forum Enviro (Aust) and FGOC. He also deposed to his role in FGFS. Mr Bouchahine deposed to, amongst other things, his qualifications (which relevantly include a Diploma in Accounting from TAFE NSW), his work history, his relationship and history with Mr Papas, his employment with, and investment in, the Forum group of companies and his role in relation to the transfer of the tainted funds between Forum Group companies and FGFS. Mr Bouchahine recounted his role in FGFS in paying expenses in relation to the many personal projects of Mr Papas and/or Mr Tesoriero. Mr Bouchahine sought to explain his contemporaneous understanding in relation to the funding arrangements which various Forum entities had in place with Westpac, SMBC and Societe Generale. Mr Bouchahine conceded that there were inadequacies in the accounting practices of the various companies of which he was CFO.
259 Mr Bouchahine was cross-examined by senior counsel for Westpac.
260 Societe Generale sought leave to re-open on 17 February 2023 to read an affidavit of service of Mr Julian Zoller sworn on 20 February 2023 and tender its exhibits in relation to service of documents on Mr Papas, which was granted. Mr Zoller deposed that Mr Papas had been served the orders made on 8 February 2023 granting leave to proceed in Mr Papas’ absence and the documents referred to during Societe Generale’s opening, including Societe Generale’s supplementary opening submissions. Mr Zoller deposed that service had been effected on Mr Papas in accordance with the existing service orders. Societe Generale sought to make a point in relation to Mr Papas’ continued non-appearance during the hearing, notwithstanding being made aware that it was proceeding in his absence. Leave was granted on the papers on 21 February 2023. The affidavit of service of Mr Zoller was read and exhibits JZ-1 to JZ-6 to that affidavit were tendered.
G. PROCEEDING IN THE ABSENCE OF A RESPONDENT
261 Rule 30.21 of the Rules sets out the procedure which applies when a party is absent when a proceeding is called on for trial. Rule 30.21(b) sets out what is to occur where the party that is absent is a respondent. Upon an application being made by another party, the Court may order that: (i) the hearing proceed generally or in relation to a particular aspect of the application; (ii) the hearing be adjourned; or (iii) the trial proceed only if specified steps are taken. When the three proceedings were called on for trial, a number of the respondents did not appear.
262 At the hearing, Westpac, SMBC and Societe General each advanced an application pursuant to r 30.21(b) and obtained orders that each of the three proceedings continue generally in the absence of those respondents who did not appear when the matter was called on.
263 Where an application is made under r 30.21(b)(i) for the hearing to proceed generally, the Court may make an order to that effect if it is satisfied that the respondent has been given adequate notice of the hearing and that it is in the interest of justice to do so: see Fair Work Ombudsmen v Grouped Property Services Pty Ltd [2016] FCA 1034 at [24]-[28]; Cathro (Liquidator) in the matter of Petsamo No 14 Pty Ltd (in liq) v Thomassian [2022] FCA 399 at [40]-[48]; Australian Securities and Investments Commission v CFS Private Wealth Pty Ltd (No 2) [2019] FCA 24 at [25]. As part of this assessment, the Court will be conscious that it must exercise its powers in a way which best promotes the overarching purpose of the Federal Court of Australia Act 1976 (Cth) (FCA Act), that is to facilitate the just resolution of disputes according to law and as quickly, inexpensively, and efficiently as possible.
264 I was satisfied that each of the absent respondents had been sufficiently notified of the final hearing and that it was in the interests of justice for the hearing to proceed generally. Each of the financiers led evidence which established that each of the relevant absent respondents had been served, including those respondents outside Australia, and that adequate steps had been taken to inform them of the date of the hearing. Accordingly, I granted each of the applications to proceed generally against the respondents. In the Westpac Proceeding leave to proceed generally was granted against Mr Papas, Ms Agostino, Iugis (UK), 1160 Glen Huntly Road, 14 Kirwin Road, 123 High Street Taradale, 160 Murray Valley, 31 Ellerman Street, 4 Cowslip Street, 55 Nolan Street, 89 Betka Road, 9 Main Street, 275 High Street, Mazcon, Mangusta, Iugis Greece, Theion Ike. In the SMBC Proceeding leave to proceed generally was granted against Mr Papas, Iugis Energy Greece, and Mazcon. In the Societe Generale Proceeding leave to proceed generally was granted against Mr Papas.
265 In making findings of fact in the proceedings I adopt and apply the following principles.
266 The financiers as the applicant for relief in each proceeding carry the burden of satisfying the Court of the facts that, in the absence of proof of other facts, would justify the grant of that relief on the civil standard: Warner v Hung, in the matter of Bellpac Pty Limited (Receivers and Managers Appointed) (In Liquidation) (No 2) [2011] FCA 1123; 297 ALR 56 (Warner v Hung (No 2)) at [46] (Emmett J), cited with approval by Dowsett and Gleeson JJ in Gore v Australian Securities and Investments Commission [2017] FCAFC 13; 249 FCR 167 at [29]; McAdam v Chylos Pty Ltd [2015] FCAFC 161 at [54] (Griffiths, Farrell and Gleeson JJ).
267 In Helton v Allen [1940] HCA 20; 63 CLR 691 at 712, Dixon, Evatt and McTiernan JJ cited with approval Dixon J’s (as his Honour then was) observation in Briginshaw v Briginshaw [1938] HCA 34; 60 CLR 336 at 361 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. It cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality.
268 In Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1, Dixon, Williams, Webb, Fullagar and Kitto JJ explained (at 5):
Of course as far as logical consistency goes many hypotheses may be put which the evidence does not exclude positively. But this is a civil and not a criminal case. We are concerned with probabilities, not with possibilities. The difference between the criminal standard of proof in its application to circumstan[t]ial evidence and the civil is that in the former the facts must be such as to exclude reasonable hypotheses consistent with innocence while [in] the latter you need only circumstances raising a more probable inference in favour of what is alleged. In questions of this sort where direct proof is not available it is enough … [if] the circumstances appearing in the evidence give rise to a reasonable and definite inference: they must do more than give rise to conflicting inferences of equal degrees of probability so that the choice between them is mere matter of conjecture … But if circumstances are proved in which it is reasonable to find a balance of probabilities in favour of the conclusion sought then though the conclusion may fall short of certainty it is not to be regarded as a mere conjecture or surmise…
This passage was cited with approval by Dixon, Fullagar and Kitto JJ in Luxton v Vines [1952] HCA 19; 85 CLR 352 at 358 and by Dixon CJ (at 304-5), Menzies J (at 309-310) in Jones v Dunkel [1959] HCA 8; 101 CLR 298. In Jones v Dunkel, Dixon CJ illustrated this proposition by emphasising that the court’s remit is not “to choose between guesses … on the ground that one guess seems more likely than another or the others” (at 305). See also GLJ v Trustees of the Roman Catholic Church for the Diocese of Lismore [2023] HCA 32; 97 ALJR 857 at [60] (Kiefel CJ, Gageler and Jagot JJ).
269 In Seltsam Pty Ltd v McGuiness [2000] NSWCA 29; 49 NSWLR 262 at [84], Spigelman CJ observed in relation to the line between inference and conjecture:
It is often difficult to distinguish between permissible inference and conjecture. Characterisation of a reasoning process as one or the other occurs on a continuum in which there is no bright line division. Nevertheless, the distinction exists.
270 On the same theme Beach J observed in Australian Competition and Consumer Commission v Olex Australia Pty Ltd [2017] FCA 222; (2017) ATPR 42–540 at [480] that:
A conjecture, even though plausible, is no more than a guess, whereas an inference is a deduction from the evidence. If the deduction is reasonable, the inference may rise to legal proof (Jones v Great Western Railway Co (1931) 144 LT 194 at 202). But there must be objective facts from which the inference could be drawn, otherwise what is left is mere speculation or conjecture (Caswell v Powell Duffryn Associated Collieries Ltd [1940] AC 152 at 169 and 170 per Lord Wright).
271 As expounded by Dixon J in Briginshaw at 362:
…reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters “reasonable satisfaction” should not be produced by inexact proofs, indefinite testimony, or indirect inferences.
272 The authorities in relation to the application of the Briginshaw principle in a civil case involving fraud were addressed by Gordon J in Re Day [2017] HCA 2; 91 ALJR 262 (at [14]–[18], footnotes incorporated):
[14] The ordinary standard of proof required of a party who bears the onus in civil proceedings is proof on the balance of probabilities [Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; 67 ALJR 170 at 170]. This remains so even where the matter to be proved involves allegations of fraud [Rejfek v McElroy [1965] HCA 46; 112 CLR 517 at 521–522; Neat Holdings at 170–171].
(I) Nature of the allegation
[15] However, the seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether an issue has been proved to the reasonable satisfaction of the tribunal [Briginshaw at 362; Helton 712]. Where, as here, fraud is alleged, “reasonable satisfaction” is not produced by inexact proofs, indefinite testimony, or indirect inferences [see Helton at 712 quoting Briginshaw at 362]. This does not mean that the standard of persuasion is any higher than the balance of probabilities [Rejfek at 521–522; Neat Holdings at 171]. It does not mean the nature of the issue necessarily affects the process by which the reasonable satisfaction is reached [Briginshaw at 363].
[16] Why? There is a conventional perception that members of society do not ordinarily engage in fraudulent conduct and a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct [Neat Holdings at 171].
[17] The nature of the allegation requires, as a matter of common sense, the careful weighing of testimony, the close examination of facts proved as a basis of inference and, on appeal, a comfortable satisfaction that the tribunal reached both a correct and just conclusion [Briginshaw at 350].
[18] The tribunal must feel an actual persuasion of the occurrence or existence of a fact before it can be found [Briginshaw at 361]. Where direct proof is not available and satisfaction of the civil standard depends on inference, “there must be something more than mere conjecture, guesswork or surmise” [Cross on Evidence, 10th Aust ed (2015) at 356 [9055]] – there must be more than “conflicting inferences of equal degrees of probability so that the choice between them is [a] mere matter of conjecture” (Bradshaw at 5 quoted in Luxton at 358. See also Trustees of the Property of Cummins v Cummins [2006] HCA 6; 227 CLR 278 at [34]]. An inference will be no more than conjecture unless some fact is found which positively suggests, or provides a reason in the circumstances particular to the case, that a specific event happened or a specific state of affairs existed [see Jones v Dunkel at 305].
273 Pursuant to s 140(2) of the Evidence Act, the statutory successor to the principles set down in Briginshaw, the Court must take into account the following matters in deciding whether it is satisfied that the case of a party is proven on the balance of probabilities:
(1) the nature of the cause of action or defence;
(2) the nature of the subject-matter of the proceeding; and
(3) the gravity of the matters alleged.
274 The Full Court of this Court has recognised that the mandatory considerations in s 140(2) reflect the common law rule as expressed in Briginshaw: Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing & Allied Services Union of Australia v Australian Competition and Consumer Commission [2007] FCAFC 132; 162 FCR 466 at [31] (Weinberg, Bennett and Rares JJ). The Full Court in its decision observed that (at [30]):
The mandatory considerations which s 140(2) specifies reflect a legislative intention that a court must be mindful of the forensic context in forming an opinion as to its satisfaction about matters in evidence. Ordinarily, the more serious the consequences of what is contested in the litigation, the more a court will have regard to the strength and weakness of evidence before it in coming to a conclusion.
See also Warner v Hung (No 2) (at [48], Emmett J), a passage frequently cited, including at appellate level.
275 Where a respondent does not appear at the hearing and the Court orders that the proceeding proceed generally, the applicant must prove its claim so far as the burden of proof lies with it: see Mayfair Wealth Partners Pty Ltd v Australian Securities and Investments Commission [2022] FCAFC 170; 295 FCR 106 at [12] (Jagot, O’Bryan and Cheeseman JJ) citing Bentley Smythe Pty Ltd v Anton Fabrications (NSW) Pty Ltd [2011] NSWSC 186; 248 FLR 384 at [11] (Ward J). This is consistent with the principle that where the trial is proceeding “generally”, the Court must investigate the merits of the matter: see Shergill v Singh [2023] FCA 1346; 326 IR 428 at [23]–[24] (Raper J). It is also consistent with the reasoning of the High Court in Banque Commerciale SA. En Liquidation v Akhil Holdings Ltd [1990] HCA 11; 169 CLR 279, where it was recognised that any judgment which an applicant might obtain necessarily depends upon the applicant establishing an entitlement to relief (at 282 per Mason CJ and Gaudron J).
276 The principles applicable in the scenario where a respondent fails to appear were neatly summarised by McKerracher J in United Group Resources Pty Ltd v Calabro (No 5) [2011] FCA 1408; 198 FCR 514. His Honour observed that, where the Court proceeds with the hearing generally in the absence of a respondent, the authorities provide that (at [44]):
(a) the Court must investigate the merits of the matter (A184 v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 210 ALR 543 at [89]);
(b) the applicants must prove their case on the balance of probabilities in the usual way (TVBO Production Ltd v Australia Sky Net Pty Ltd (2009) 82 IPR 502 at [15]):
(c) the Court should generally restrict the relief to that claimed (AA Shi Pty Ltd v Avbar Pty Ltd (No 5) [2010] FCA 971 at [12]);
(d) the Court may allow evidence to be tendered and affidavits to be read on behalf of the party which is present (Scoway Pty Ltd v Faxon Pty Ltd [2004] FCA 249 at [7]–[9]; and AA Shi Pty Ltd at [12]); and
(e) the Court is entitled to assume the correctness of the facts claimed by the applicants in their submissions, where there is uncontroverted evidence tendered by the applicants in support of those submissions (AA Shi Pty Ltd at [13]).
277 As noted by Heydon, Crennan and Bell JJ in Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; 243 CLR 361 at [64], the court may draw inferences against absent respondents in specific circumstances, and flight can be relied upon to show a consciousness of guilt or as circumstantial evidence (footnote incorporated):
The rule in Jones v Dunkel permits an inference, not that evidence not called by a party would have been adverse to the party, but that it would not have assisted the party [Dilosa v Latec Finance Pty Ltd (1966) 84 WN (Pt 1) (NSW) 557; 1 NSWR 255 at 266-277]. But the conclusion by the trial judge that the plaintiff – a party-witness – deliberately withheld evidence reflected a stronger reaction. It operated as a finding that there had been an admission. It could be inferred that the evidence was withheld, in breach of the witness's duty to tell the whole truth in answer to the question, because the plaintiff was conscious that success in the litigation would be rendered impossible or less likely if the material withheld were revealed. Depending on the circumstances, when a party lies, or destroys or conceals evidence, or attempts to destroy or conceal evidence, or suborns witnesses, or calls testimony known to be false, or fails to comply with court orders for the production of evidence (like subpoenas or orders to answer interrogatories), or misleads persons in authority about who the party is, or flees, the conduct can be variously described as an implied admission or circumstantial evidence permitting an adverse inference. The position must be the same where there is a failure of a party-witness to comply with the duty of a witness to tell the whole truth. There is a reason why failure to call a witness or failure to ask a particular question of a witness supports the possible inference that the witness's evidence would not have assisted the party, while failure of a party-witness to tell the whole truth may support an inference that the party suppressed evidence which would have been damaging to the party-witness. A litigant has no duty to call particular witnesses or to procure that any witnesses called by that litigant are asked particular questions. A litigant who enters the witness box, on the other hand, is under a positive duty to tell the whole truth in answer to the questions asked.
278 In considering Kuhl in Chong v CC Containers Pty Ltd [2015] VSCA 137; 49 VR 402 at [212], the Victorian Court of Appeal (Redlich, Santamaria and Kyrou JJA) noted (footnotes incorporated):
Where a party elects not to give evidence ‘the court is entitled to be bold’ [SS Pharmaceutical Co Ltd v Qantas Airways Ltd [1991] 1 Lloyd’s Rep 288, 293 (Gleeson CJ and Handley JA) citing Insurance Commissioner v Joyce (1948) 77 CLR 39, 49 (Rich J)]. As Heydon, Crennan and Bell JJ stated in Kuhl v Zurich Financial Services Australia Ltd [(2011) 243 CLR 361], the rule has a particular application where it is the party which is the uncalled witness and may permit the court to draw, with greater confidence, any inference unfavourable to the party that failed to call the witness, if that uncalled witness appears to be in a position to cast light on whether the inference should be drawn.
279 As to the inferences that may be drawn from an accused’s flight, Buss JA notes in Dodd v State of Western Australia [2014] WASCA 13; 238 A Crim R 72 at [100], citing Wigmore on Evidence (Chadbourn rev 1978), vol 2, § 276(4):
Flight from justice, and its analogous conduct, have always been deemed indicative of a consciousness of guilt. …
It is universally conceded today that the fact of an accused’s flight, escape from custody, resistance to arrest, concealment, assumption of a false name, and related conduct, are admissible as evidence of consciousness of guilt, and thus of guilt itself. (footnote omitted)
280 I adopt and apply those principles in relation to the claims against the respondents who did not appear or participate at the final hearing.
281 The credit of each of Mr Tesoriero and Mr Bouchahine was in issue. Mr Tesoriero’s evidence was relevant not only to the positive defences which he personally relied upon but also to those of the Tesoriero Entities which sought to piggyback on Mr Tesoriero’s evidence.
282 I remind myself of the principles relevant to the assessment of a witness’s credit.
H.2.1 Fallibility of human memory
283 It is perhaps trite to observe the obvious that oral evidence is subject to the limitations of the human experience, which includes the fragility and malleability of human memory: Gautam v Health Care Complaints Commission [2021] NSWCA 85 at [21] (Leeming JA); see also Goodrich Aerospace Pty Ltd v Arsic [2006] NSWCA 187; 66 NSWLR 186. As the New South Wales Court of Appeal observed in Coote v Kelly [2013] NSWCA 357 (at [51]):
Memory is all too fallible. McHugh J referred to ‘the everyday experience of the courts that honest witnesses are frequently in error about the details of events’: M v The Queen [1994] HCA 63; 181 CLR 487 at 534. The process of conscious and subconscious reconstruction of what was actually said in a conversation, to which McLelland CJ in Eq referred in Watson v Foxman (1995) 49 NSWLR 315 at 319, is familiar.
284 The relevant observation by McClelland CJ in Eq in Watson v Foxman [1995] NSWCA 497; 49 NSWLR 315, to which the NSW Court of Appeal refers is (at 319):
…Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
285 That description of the fallibility of human memory is oft-cited and is recognised as being incisive in its understanding of the human experience. The Full Court of this Court described his Honour’s exposition as reaching “canonical status”: CCL Secure Pty Ltd v Berry [2019] FCAFC 81 at [135] (McKerracher, Robertson and Lee JJ). In Martin v Norton Rose Fulbright Australia [2021] FCAFC 216; 289 FCR 369, the Full Court added to his Honour’s observation by noting that “[i]t is because of ordinary human experience that we know that evidence about what a person believes they would or might have done in the past requires caution irrespective of the honesty or credit of the person giving the evidence. Evidence of that kind is inherently fraught as it is necessarily a product of hindsight and belief separate in time from the events in question”: at [147]) (Jagot, Katzmann and Banks-Smith JJ).
286 Many of the civil authorities which address the fragility and malleability of human memory in a litigation setting, and the limitations on the court’s ability to discern between: reliable testimonial evidence; sincerely held but unreliable reconstruction; and dishonest evidence are collected in the comprehensive analysis of Leeming JA in Arizabaleta v R [2023] NSWCCA 217 (at [103] to [106]). The extracts from Coote v Kelly and Watson v Foxman above suffice for present purposes.
287 There has also been an increasingly diminished reliance on witness demeanour and credibility by Australian courts over time at least the last two or so decades. In Fox v Percy [2003] HCA 22; 214 CLR 118, their Honours Gleeson CJ, Gummow and Kirby JJ after citing Atkin LJ’s famous observation in Société d’Avances Commerciales (Société Anonyme Egyptienne) v Merchants’ Marine Insurance Co (The “Palitana”) (1924) 20 Ll L Rep 140 (at 152), “that an ounce of intrinsic merit or demerit in the evidence, that is to say, the value of the comparison of evidence with known facts, is worth pounds of demeanour”, observed that (at [31]):
Further, in recent years, judges have become more aware of scientific research that has cast doubt on the ability of judges (or anyone else) to tell truth from falsehood accurately on the basis of such appearances. Considerations such as these have encouraged judges, both at trial and on appeal, to limit their reliance on the appearances of witnesses and to reason to their conclusions, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events. This does not eliminate the established principles about witness credibility; but it tends to reduce the occasions where those principles are seen as critical.
(Footnote omitted)
H.2.2 Reliance on documentary evidence
288 Primary recourse must be had to documentary evidence, where it is available, in order to make findings of fact. Contemporaneous documents often serve as the most reliable source of what in fact occurred untouched by the potential distortion that may attend on the examination of the relevant events through the lens of the litigation. Accordingly, contemporaneous documents may be a sound basis against which to assess the reliability of witness testimony. Oral evidence often serves a limited purpose and may best be utilised to determine the personality, motivations and working practices of a witness. As Bell P (as his Honour then was) observed in ET-China.com International Holdings Ltd v Cheung [2021] NSWCA 24; 388 ALR 128:
25 As with most commercial disputes, a proper understanding of the chronology of events is critical and, as has been regularly observed, contemporaneous documents generally furnish the most reliable source of evidence as to what occurred or, at the very least, provide a generally reliable reference point from which to assess the reliability of witness testimony.
…
27 Whilst the quality and accuracy of oral recollection of actual conversations should be treated with care and caution given the fallibility of human memory (of which there has been a growing appreciation within the judiciary in recent decades), oral testimony may still be of value and importance, as was recognised in the nuanced observations of Leggatt J (as his Lordship then was) in Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC (Comm) 3560 at [22] (Gestmin):
“the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose - though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.” (emphasis added)
28 Documents and events have to be understood in their context, and evidence of context will often be furnished by witnesses in their oral evidence. Documents, moreover, will not always present a complete picture of events. Indeed it would be rare that they do. Nor do contemporaneous documents necessarily or invariably convey or record the background or context in which events took place. That background or context will be familiar to the actors at the time of those events but may not always emerge from documents.
29 Context is critical for at least two reasons. Documents and events take their meaning from their context. The context in which events occurred may not necessarily be apparent to a court many years later when hearing a case. A clear understanding of context, both commercial and cultural, is also important where, as in the present case, some or all of the events under consideration occurred overseas and in settings that may differ from those usually dealt with in domestic litigation.
289 I respectfully adopt his Honour’s observations in relation to the correct approach to be adopted in relation to the interplay between oral and documentary evidence. In the context of the fraud that permeates the present proceedings, it is necessary to add that the documentary evidence must be scrutinised with a particular attention to whether the documents, although contemporaneous, are false, or have been falsified, or were otherwise created (whether contemporaneously or after the event) in order to effect, perpetuate and conceal the fraud from those not involved in or aware of it.
H.3 General principles applicable to fact finding and credit
290 As a matter of general principle, evidence which is inherently probable in the whole of the context or is given by a witness against their interest is to be preferred: Saravinovksa v Saravinovski (No 6) [2016] NSWSC 964 at [467] (Kunc J).
291 Further, I am conscious that the rejection of some evidence of a witness does not necessarily mean that “what remains is tainted, or otherwise lacks probative force”: Cubillo v Commonwealth (No 2) [2000] FCA 1084; 103 FCR 1 at [118] (O’Loughlin J). Another way of expressing this principle is that where a witness is found to be lying about one thing does not automatically mean that they are to be disbelieved about everything else: Saravinovksa at [469] (Kunc J). There is no rule of law or practice that states that an adverse finding on any aspect in the evidence of a witness means that the whole of that witness' evidence must be rejected: Cubillo at [121] (O’Loughlin J).
292 Similarly, the rejection of a falsehood uttered by a witness does not necessitate the acceptance of the opposite proposition: Steinberg v Federal Commissioner of Taxation (1975) 134 CLR 640 at 694 (Gibbs J); Edwards v The Queen [1993] HCA 63; 178 CLR 193 at 208 (Deane, Dawson and Gaudron JJ). If, however, the truth must lie between two alternative states of fact, disbelief in evidence that one of the state of facts exists may support the existence of the alternative state of facts: Steinberg at 694 (Gibbs J); Lee v Russell [1961] WAR 103 at 109 (D’Arcy J). It may also give rise to an inference that [the/a] witness was of the view that the truth would not have assisted their case or been consistent with other evidence; Steinberg at 694 (Gibbs J); Eade v The King [1924] 1924 HCA 9; 34 CLR 154 at 158 (Knox CJ, Gavan Duffy and Starke JJ); Tripodi v The Queen (1961) 104 CLR 1.
293 Beech-Jones J has extra-judicially cautioned that a judge must “never call a witness a liar unless you have to” and yet also states that “in some cases, such a finding cannot be avoided, especially if fraud or something like that is alleged” (“Seven Random Points About Judging”, National Judicial Orientation Program, 17 March 2024, at 1-2). As Kirby J stated, in a dissenting judgment in Whisprun Pty Ltd v Dixon [2003] HCA 48; 200 ALR 447 at [119]–[120]:
Some judges in the past regarded untruthful evidence - even about peripheral or irrelevant matters - as fatal to a litigant. Most judges today understand that the evaluation of evidence involves a more complex function, requiring a more sophisticated analysis. Courts, after all, are not venues for the trial of the parties’ morality or credibility, as such. As judges often explain to juries in criminal trials, people sometimes tell lies in court and elsewhere for extraneous and irrelevant reasons, having nothing to do with the legal issues in the trial. If this is true in criminal trials, it is equally true in civil trials. What is important is not the proof of untruthfulness, as such, but the significance (if any) of any demonstrated falsehoods for the issues at trial. That significance can only be judged when measured against the entirety of the relevant testimony. By its logical force, that testimony may well require that the falsehoods be ignored as irrelevant or immaterial to the decision-maker’s ultimate conclusion. In particular cases, it may require the decision-maker, within the pleadings, to consider and decide a case different from - or even contrary to - that advanced by the party, because such is the legal entitlement of the person concerned.
Obligations of this kind recognise the ultimate duty of the decision-maker in an Australian court to decide a case according to law and the substantial justice of the matter proved in evidence, not as some kind of sport or contest wholly reliant on the way the case was presented by a party. Litigants are represented in our courts by advocates of differing skills. Litigants are sometimes people of limited knowledge and perception. Occasionally, they mistakenly attach excessive importance to considerations of no real importance. In consequence, they may sometimes tell lies, or withhold the entire truth, out of a feeling that they need to do so or that the matter is unimportant or of no business to the court. This is not to condone such conduct. It is simply to insist that, where it is found to have occurred, it should not deflect the decision-maker from the substance of the function assigned to a court by law.
(Footnotes omitted)
294 The Full Court of this Court in CCL Secure Pty Ltd (at [94], per McKerracher, Robertson and Lee JJ) observed that the approach as set out in Cubillo:
reflects the accumulated wisdom and experience of the common law that witnesses may lie about some things and yet tell the truth about others, and the tribunal hearing the evidence is best placed to fix upon the truth. The same can be said about a tribunal of fact assessing whether the balance of the evidence of a witness should be believed, when the witness has admitted an untruth after having been caught out in a deceit.
295 Indeed, in Sangha v Baxter [2009] NSWCA 78; 52 MVR 492, Basten JA (with whom Handley AJA agreed) warned that there are risks with making global findings about the credibility of a witness, and that where possible the reasons for the witness’ untruthfulness should be assessed in order to determine if other parts of their evidence are likely to be tainted (at [155]). It was emphasised that “the evidence of a witness who is believed to have lied in a particular respect, will nevertheless be able to bear some weight and should be placed into a balance, with other material evidence, before a conclusion is reached in relation to a critical fact” (at [156]).
H.4 Principles in relation to findings on knowledge
296 The central issue for determination in relation to Mr Tesoriero, his related companies (excluding the Jointly Owned Companies) and Mr Bouchahine is whether they were each fixed with knowledge that would render them liable. It is convenient to address the applicable principles in relation to findings of knowledge before moving to make factual findings.
297 Before turning to each of the primary claims pressed by the financiers it is convenient to first set out the categories of knowledge in Baden v Société Générale pour Favouriser le Développement du Commerce et de l’Industrie en France SA [1993] 1 WLR 509 which are relevant to the recipient trust claims, the knowing receipt claims and the knowing assistance claims. The Baden category which constitutes sufficient knowledge for the purpose of a relevant claim or defence varies according to the particular claim or defence.
298 The parties who appeared at the hearing all proceeded on the basis that there had in fact been a major fraud. Liability for each of the respondents under the principal claims (whether it be the recipient trust claims, knowing assistance or knowing receipt), ultimately turns on their knowledge; importantly, whether their knowledge would constitute knowledge that fell within the first four Baden categories of knowledge.
299 The five categories of knowledge identified in Baden at [250] (Peter Gibson J) are:
(1) actual knowledge;
(2) wilfully shutting one’s eyes to the obvious;
(3) wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make;
(4) knowledge of circumstances which would indicate the facts to an honest and reasonable person; and
(5) knowledge of circumstances which would put an honest and reasonable person on inquiry.
300 Categories (1) to (3) are species of actual knowledge. Categories (4) and (5) encompass constructive knowledge: Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch 437 at [454] (Nourse LJ).
301 The decision in Baden postdated the High Court’s decision in Consul Development Pty Ltd v DPC Estates Pty Ltd [1975] HCA 8; (1975) 132 CLR 373, however the Baden nomenclature is a useful means of describing the type of knowledge which will be sufficient to attract liability in a variety of contexts: see, eg, Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 at [175] (Gleeson CJ, Gummow J, Callinan J, Heydon J, Crennan J).
302 Relevantly, in relation to the primary claims which the financiers relied upon in final submissions, the financiers contend that the type of knowledge that will constitute sufficient knowledge is as follows:
(1) recipient trust claims: notice, actual or constructive, that the property was trust property and that the transfer to the recipient was a breach of trust is sufficient. The principle of coherence in the law leads to the conclusion that constructive knowledge in this context means Baden category (4) knowledge, namely knowledge of circumstances which would indicate the facts to an honest and reasonable person: Eleanor Makeig, ‘Money Had and Received - And Retained? The Role of Retention at Notice for Personal Common Law Liability’ (2020) 94 Australian Law Journal 855, 871. The financiers point to the analysis of sufficient knowledge in relation to a claim for knowing receipt in Turner v O’Bryan [2022] NSWCA 23; (2022) 107 NSWLR 171 at [106];
(2) knowing receipt claims: In Farah, the High Court did not decide which of the Baden categories sufficed for a knowing receipt claim. However, the preponderance of authority since Farah supports the view that Baden categories (1) to (4) suffice for a knowing receipt claim, but Baden category (5) does not suffice: Break Fast Investments Pty Ltd v Rigby Cooke Lawyers [2022] VSCA 118 at [115] (Kyrou, McLeish and Walker JJA), citing Kalls Enterprises Pty Ltd (in liq) v Baloglow [2007] NSWCA 191; (2007) 63 ACSR 557, [199] (Giles JA); Imobilari Pty Ltd v Opes Prime Stockbroking Ltd (in liq) [2008] FCA 1920; (2008) 252 ALR 41 at [27] (Finkelstein J) ; Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296, [268]–[270] (Finn, Stone and Perram JJ); Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) [2012] WASCA 157; (2012) 44 WAR 1 at [2128]–[2130] (Drummond AJA); Milfoil Pty Ltd v Commonwealth Bank of Australia Ltd [2020] VSCA 305, [74] (Beach, McLeish and Sifris JJA);
(3) knowing assistance claims: In Farah, the High Court explained that for knowing assistance Consul supports the proposition that circumstances falling within any of the first four Baden categories will be sufficient to answer the knowledge requirement but that category five does not suffice ([174]-[178]).
303 Relevantly, the financiers contend that the evidence establishes at least category (4) knowledge for all the respondents, save Theion Ike (in relation to which the claim made does not depend on knowledge).
304 At the level of principle, SMBC submitted that if the defences of any of the respondents are characterised as engaging the defence of bona fide purchaser for value without notice, then only constructive notice is required to prevent a third party from availing itself of the defence. This is equivalent to Baden category (5) knowledge: Grimaldi at [251], [261] (Finn, Stone and Perram JJ); Great Investments Ltd v Warner [2016] FCAFC 85; 243 FCR 516 at [112] (Jagot, Edelman and Moshinsky JJ).
H.4.2 Attribution of knowledge
305 The Financiers in each of the three proceedings seek to (at least in part) establish liability on the part of some of the Respondent entities on the basis that the knowledge of Mr Papas and Mr Tesoriero is the knowledge of those entities. If this is correct, and subject to the other elements of each cause of action being satisfied, each entity may relevantly be accessorily liable for fiduciary breaches under the two limbs of Barnes v Addy. The principles governing the attribution of the knowledge of individuals to corporate entities are therefore of some significance in these proceedings.
H.4.2.1 Background to the Principles of Corporate Attribution
306 The principles by which the conduct or state of mind of a natural person is attributed to a body corporate are well established. The need for such principles was explained by Lord Hoffman in Meridian at 506, where his Lordship opined that:
A company exists because there is a rule (usually in a statute) which says that a persona ficta shall be deemed to exist and to have certain of the powers, rights and duties of a natural person. But there would be little sense in deeming such a persona ficta to exist unless there were also rules to tell one what acts were to count as acts of the company. It is therefore a necessary part of corporate personality that there should be rules by which acts are attributed to the company.
307 Earlier cases in which the liability of a body corporate was also at issue feature observations to a similar effect. In Lennard’s Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705, a case involving a defendant company’s liability for a loss of cargo which occurred on its ship, for example, Viscount Haldane LC observed in a much-cited passage at 713 that:
[A] corporation is an abstraction. It has no mind of its own any more than it has a body of its own; its active and directing will must consequently be sought in the person of somebody who for some purposes may be called an agent, but who is really the directing mind and will of the corporation, the very ego and centre of the personality of the corporation…
308 Lord Reid explained the concept in similar terms in Tesco Supermarkets Ltd v Nattrass [1972] AC 153 at 170, where he said:
A living person has a mind which can have knowledge or intention or be negligent and he has hands to carry out his intentions. A corporation has none of these: it must act through living persons, though not always one or the same person.
309 As these passages make clear, in spite of the law’s persistent anthropomorphism as regards corporations, the notion of corporate personhood is a fiction. Corporations are, by their very nature, legal constructs. Although their recognition is rooted in the law, it is upon natural persons whom they depend for their operation and their continued existence. This being so, it has therefore been necessary for the Courts to develop a body of rules or principles which dictate whether (and in what circumstances) the conduct or state of mind of those natural persons may be imputed to them. These rules have been referred to as the ‘rules of attribution’: see Meridian at 506.
H.4.2.2 The Rules of Attribution
310 Whether the knowledge of a director is attributable to the company depends on the context and the purpose for which the attribution is relevant. The inquiry begins with identifying the relevant legal rule or cause of action which necessitates the consideration of whether a director’s knowledge ought to be attributed to the company: Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) [2018] FCA 751; (2018) 266 FCR 147, [1660] (Beach J) cited in Anderson v Canaccord Genuity Financial Ltd [2023] NSWCA 294; (2023) 113 NSWLR 151, [235] (the Court); All Class Insurance Brokers Pty Ltd (in liq) v Chubb Insurance Australia Ltd (No 2) [2021] FCA 782; 154 ACSR 78, at [167]-[168] (Allsop CJ).
311 There is a distinction between attributing a director's knowledge to the company where the purpose of the attribution is to apportion responsibility between the company and the director, in order to determine the rights and liabilities between the company and the director, and where, as here, the purpose is to apportion responsibility between the company and a third party, such as the financiers.
312 The financiers rely on Australia Kunqian International Energy Co Pty Ltd v Flash Lighting Company Ltd [2020] VSCA 239 at [148] where the Victorian Court of Appeal, citing Grimaldi at [284], quoting Beach Petroleum NL v Johnson [1993] FCA 392; (1993) 43 FCR 1 at [22.34], observed:
In most circumstances, the actions and state of mind of a director of a company can be attributed to the company based upon the principles of agency. This general proposition is subject to the ‘fraud exception’, whereby the knowledge of a director’s own fraud committed upon his or her company is not to be imputed to that company. However, whilst a director’s knowledge will not be imputed to the company where the director’s conduct is directed against the interests of the company, it will be otherwise where the conduct is not totally in fraud of the company if ‘by design or result the fraud partly benefits the company’
(Emphasis added)
313 In Bilta (UK) Ltd (in liq) v Nazir (No 2) [2015] UKSC 23; [2016] AC 1, Lord Toulson and Lord Hodge JJSC observed (at [208]) that:
[A]s between the company and the defrauded third party, the company should be treated as a perpetrator of the fraud; but … in the different context of a claim between the company and the directors, the defaulting directors should not be able to rely on their own breach of duty to defeat the operation of the provisions of the Companies Act 2006 in cases where those provisions were intended to protect the company …
314 Allsop CJ in All Class Insurance said (at [167]-[168]):
The judgment of the Supreme Court in Bilta [2016] AC 1 is to the effect that there is no general fraud exception to imputation, rather the question is an open one: whether or not it is appropriate to attribute an action by, or a state of mind of, a company director or agent to the company or the agent’s principal in relation to a particular claim against the company or the principal must depend on the nature and factual context of the claim in question: Bilta at 11 [9] per Lord Neuberger, see also 18–19 [41]–[45] per Lord Mance JSC, 64–73 [180]–[209] per Lord Toulson and Lord Hodge JJSC, cf Lord Sumption JSC at 38 [86]; P Watts and FMB, Bowstead and Reynolds on Agency (21st ed, Sweet & Maxwell, 2018) at [8-214].
Drawing upon the Court’s reasoning in Bilta, the UK Supreme Court in Singularis Holdings Ltd (in liquidation) v Daiwa Capital Markets Europe Ltd [2019] UKSC 50; [2020] AC 1189 held at 1205 [34] that the question as to whether knowledge of a particular officer of a company should be attributed to the company depends on the particular context in which the question of attribution arises.
315 I will first consider the factual findings relevant to the claims made by each of the financiers before turning to consideration of the claims against each category of respondent by each financier. In making findings of fact, I have regard to the whole of the evidence that I was taken to in the parties’ submissions and applied the principles identified in Section H. I have adopted a largely chronological approach in making my factual findings however in some parts I depart from strict chronological order to address overarching themes or to address particular episodes fulsomely before returning to the relevant chronology of events. Some repetition with other parts of these reasons is included where I have found it useful to provide immediate context or high-level cross-referencing with the earlier part of these reasons.
316 The primary allegation of fraud was not actively defended by any respondent in any of the proceedings. Although Mr Tesoriero and Mr Bouchahine actively defended the Westpac Proceeding by contesting their own knowledge of, and involvement in, the fraud they did not contest the fact that a fraud had been perpetrated on each of the financiers.
317 Similarly, the corporate respondents did not contest the fact of the fraud. To the extent that the knowledge and involvement of the corporate respondents was in issue, that issue was limited to the Tesoriero Entities which relied on Mr Tesoriero’s positive defence in relation to knowledge succeeding. The liquidators of those companies reserved the right to piggyback on Mr Tesoriero’s evidence if his knowledge defence in the Westpac Proceeding proved to be successful.
318 I am satisfied having regard to the whole of the evidence that the fraud alleged by each of the financiers is established. I have no hesitation in reaching this conclusion. Indeed, the evidence on this issue was in substance all the one way. I am compelled to that conclusion.
319 Each of the financiers has established the fraudulent scheme to which they were victim by thoroughly prepared documentary evidence. That evidence included the comprehensive suite of s 50 summaries. Principal amongst the s 50 summaries were the following:
(1) Fraudulent Transaction Documents summaries, prepared by Westpac and SMBC;
(2) summaries of payments to or on behalf of each respondent, prepared by Westpac;
(3) summary of property purchases and ownership, prepared by Westpac;
(4) summaries of payments to properties, additional property-related expenditure and assets, prepared by Westpac;
(5) summary of payment directions emails, prepared by Westpac;
(6) summary of payments by WBC to Forum Finance pursuant to Transaction 1 to 100, prepared by Westpac;
(7) summary of payments by Westpac to Iugis NZ pursuant to Transaction NZ1 to NZ36, prepared by Westpac;
(8) summary of payments by SMBC to Forum Enviro via Flexirent; and
(9) summaries of payments to and received from Forum Enviro (Aust) prepared by SMBC.
320 In the Societe Generale Proceeding, where the fraudulent scheme operated for a much more confined period, the underlying primary documents were in evidence.
321 The extensive documentary evidence relied on by each of the financiers was phalanxed by:
(1) the comprehensive customer evidence which was led in respect of the underlying lease arrangements that were ostensibly in place in respect of the financing arrangements in place with each of the financiers and which was not challenged;
(2) the evidence given by the officers of the financiers which was not relevantly challenged in so far as it went to establishing the fraud;
(3) the detailed evidence of the liquidators in respect of the flow of the tainted funds from the Primary Recipients to principally FGFS and thereafter to others, including entities related to Mr Papas and/or Mr Tesoriero (including Forum entities), and thence into an extensive array of real and personal property; and
(4) the careful evidence of Mr Ireland which demonstrates by detailed analysis that the leases allegedly underpinning the SMBC Transactions were fictitious and were not supported by any real assets.
322 This evidence, which as I have said was not challenged, informs my findings in relation to each financier having established the fraudulent scheme to which it fell victim.
I.2 Mr Papas was the architect of the fraud
323 At the centre of the fraud, but absent from the hearing and indeed, the country, was Mr Papas. He did not defend the proceedings. As mentioned, he is the subject of an extant arrest warrant. Each of the financiers had leave to proceed against him in his absence. It remains the case that I must be satisfied to the requisite standard that each financier has established its case against Mr Papas. I am.
324 Flight can be relied upon to show a consciousness of guilt or as circumstantial evidence: Kuhl at [64]; Dodd at [100]. I find that Mr Papas’ flight, taken in the whole of the circumstances, demonstrates his consciousness of guilt, and is evidence of his guilt. The evidence against Mr Papas is so strong that I need not have recourse to the principle that where a party elects not to give evidence the court is entitled to be bold: Chong v CC Containers at [212].
325 Appreciating the gravity of doing so, I find that Mr Papas was the architect of the fraud. The evidence which is addressed in detail below demonstrates that the fraud was premeditated by Mr Papas. He carefully planned and effected the fraudulent scheme against each financier. He made notes in about April 2018, some six months before the first advance by any of the present financiers was made, in which he sketched how a fraud using equipment financing leases would work. It would be underpinned by the central pillars of “Fraudulent Contracts” and “Advance funding of Contracts”. It would have a veneer of “reputation credibility” and utilise “company structures” with himself and Mr Tesoriero as directors. He also noted the steps he would take to protect himself by having “money here & overseas” and if the fraud was detected an “overseas escape”. The notebook, in which he made these notes, was seized during the execution of a search warrant, very shortly after he fled to Greece.
326 My findings based on the notebook is addressed in Section I.18.2.7.
327 The evidence demonstrates that Mr Papas created, or caused to be created, false and fraudulent documents to be provided to each of the financiers under the agreements which were in place with each of them. Mr Papas forged the signatures of the counterparties on the Fraudulent Transaction Documents (including the customers’ signatures on the certificates of acceptance of the equipment) and also falsely witnessed many of the forged signatures. He created, or caused to be created, false documents, including false certificates of currency of insurance and false emails, which he submitted or caused to be submitted to financiers. He enlisted Ms Agostino to assist in the creation process. He manufactured the Fraudulent Transaction Documents for the purpose of causing the financiers to advance funds under the equipment lease financing arrangements, knowing that the underlying customer and equipment manufacturer transactions upon which the financiers depended were a fiction. Knowing that the funds were stolen, he caused the substantial majority of the funds obtained to be dispersed to other companies related to himself and Mr Tesoriero, including FGFS, and to the other corporate respondents related to one or both of himself and Mr Tesoriero, or otherwise for his own purposes. He caused some of the stolen funds to be deployed as cloaking payments that were paid back to the financiers to prolong the life of the fraud.
328 The consequence of finding that Mr Papas was the architect of the fraud is twofold.
329 First, each of the financiers is entitled to relief against him.
330 Secondly, the financiers are entitled to relief against all of the companies of which he was a director and against which they pressed their claims. Critically, this includes Forum Finance and FGFS, the other two respondents common to all three proceedings, which were owned jointly by Mr Papas and Mr Tesoriero.
331 Applying the principles outlined in Section H, in the context of the claims by the financiers, Mr Papas’ knowledge is readily attributed to all of the companies of which he was a director. None of the Respondents who took part in the proceedings submitted to the contrary. The evidence comprehensively establishes that Mr Papas as the CEO of the Forum Group was the key person running the business across all of the relevant entities. Put simply, he was the boss. The financiers are third parties who claim against Mr Papas and his related companies in circumstances where those companies received funds and financial benefits and participated in the fraudulent scheme. The relevant companies have thus “by design or result” benefited from the fraud.
I.3 Ms Agostino’s role in the fraud
332 Ms Agostino was Mr Papas’ domestic partner and is a respondent in only the Westpac Proceeding. She held shares in FGOC.
333 Ms Agostino is alleged to have received $231,870 in tainted funds derived from funds advanced by Westpac. A freezing order was made over her remaining Australian assets. There is a relatively small fund held in a solicitor’s trust account over which Westpac seeks proprietary relief.
334 Ms Agostino left the country abruptly on 15 July 2021, about a month after Mr Papas fled Australia. She has not returned. At the time, in submitting an application for approval to travel during the then prevailing COVID 19 requirements, Ms Agostino said that her reason for travel was “to undertake urgent travel to the UK for the purpose of [her] role as Global Sales Manager to iugis”. She provided a letter of support dated 29 June 2021 which was signed by Mr Papas. This was the day after the Westpac Proceeding was commenced. After being rejected for travel approval on the first occasion on which she applied on 7 July 2021, Ms Agostino succeeded in obtaining the requisite travel approval on 13 July 2021. She departed Australia two days later.
335 I accept Westpac’s submissions that as with Mr Papas, so too with Ms Agostino, flight can be relied upon to show a consciousness of guilt or as circumstantial evidence: Dodd v Western Australia at [95]-[103] (Buss JA). Further, that consistently with the observations of Heydon, Crennan and Bell JJ in Kuhl at [64], flight can, depending on the circumstances, amount to an implied admission or circumstantial evidence permitting an adverse interest to be drawn. Further, I accept that, as Westpac submitted, in the circumstances attendant on the failure of Ms Agostino to engage in the proceedings, the Court is entitled to be bold and may draw with greater confidence such unfavourable inferences as arise against her given that she was in a position to shed light on the relevant facts but elected not to do so: Chong v CC Containers at [212] (Redlich, Santamaria and Kyrou JJA). That said, I am conscious that Ms Agostino’s departure on 15 July 2021 does not necessarily indicate that she herself was aware of the fraud during the earlier period. The timing of when, if at all, Ms Agostino was seized with knowledge sufficient to render her liable requires careful consideration of the duration and nature of her involvement and the context in which it occurred.
336 As mentioned, Ms Agostino filed a defence in the Westpac Proceeding and was represented in that proceeding from January 2022 until August 2022. She has taken no active part in the Westpac Proceeding since that time. Westpac obtained leave to proceed generally against her in her absence. Ms Agostino did not, in substance, defend the proceedings against her — she did not appear at the final hearing nor did she file any evidence in relation to the relief sought against her at the final hearing.
337 Ms Agostino pleaded in her defence that the funds which she received were received in connection with her employment within the Consolidated Group. While she admits that she received payments from entities in the Consolidated Group, she pleads that the payments made to her were “salary payments”, “reimbursements for out-of-pocket expenses” and “commission payments to which she was entitled”. She did not adduce any evidence in support of her defence. Further, Mr Preston’s unchallenged evidence is that amounts paid to a respondent which related to salary payments have been excluded from the tracing analysis that has been undertaken. That said, Mr Preston acknowledges that “management fees”, so described, paid to respondents from FGFS have not been excluded from the analysis. There is no indication in Ms Agostino’s defence or the available evidence that Ms Agostino received management fees from FGFS, as opposed to salary and commission payments.
338 Although the evidence which was presented to the Court in support of Westpac’s claim was voluminous, the way in which Westpac sought to rely upon that evidence in relation to Ms Agostino was relatively limited. In particular, little attention was afforded to Ms Agostino’s role within the Forum business. While it is clear that she was an employee during the whole of the relevant period and that she was involved with both the Forum and Iugis entities, the precise nature of her role and responsibilities as regards each of them was not fleshed out by Westpac. The findings of fact which I make below are made principally by reference to the documents in evidence and in a context where I consider that Ms Agostino has fled the jurisdiction in circumstances that properly enable the Court to be bold in making findings in relation to her conduct.
339 Ms Agostino was given various titles in her time as a Forum employee. The email signature which she used in her correspondence from time to time described her as Forum’s “Business Solutions Manager”; Mr Papas described her role to her colleagues at Forum as being “UK and UAE Sales and Sales Support”; and in promotional material distributed for the Forum Group she was listed as the “UK Account Manager & Business Solutions” contact. Prior to leaving Australia in July 2021, she informed the Department of Home Affairs that she was the “Global Sales Manager of Iugis”, a claim which is not inconsistent with Mr Bouchahine’s evidence that she was one of the “key personnel” involved with the Iugis entities. Ms Agostino used both a Forum and an Iugis email address from which she sent and received correspondence.
340 Several other matters may also be gleaned about the nature of Ms Agostino’s role from the documents which appear in evidence.
341 First, Ms Agostino was reasonably involved in the day-to-day operations of the Forum business. She attended meetings as a representative of Forum, compiled documents for and corresponded with Forum’s other employees, and was a point of contact for both Forum’s financiers and their agents, as well as for its clients. For example, on 16 October 2018, which was around the time that Forum Finance was first introduced to Westpac, Ms Agostino attended a meeting between Eqwe, Forum Finance and Westpac alongside Mr Papas, ostensibly to discuss financing arrangements for the ORCA product, one of Forum’s waste management offerings.
342 Ms Agostino’s attendance at this meeting was consistent with the outward facing role that she played in Forum’s business more generally. The documentary evidence includes examples which demonstrate that when problems arose in relation to the equipment financing lease business, she was, at times, one of the first points of contact. This is evident in relation to the problems identified in relation to the Maia equipment finance leases. Maia’s agent first reached out to Ms Agostino, copied to Mr Papas, when duplication of serial numbers on invoices and non-payment into locked box accounts were identified as concerns. Ms Agostino’s involvement in the events concerning Maia in 2018 are addressed in Section 1.18. Similarly, in June 2021 at about the time the fraud was discovered, it was Ms Agostino who was contacted by Mr Aaron Elliott, Head of Information Technology, HWLE, when HWLE discovered a document which purported to be a notice of assignment issued to them by Forum in September 2018 but of which they had no knowledge. Mr Elliott emailed Ms Agostino with the subject “Payments?” attaching the relevant document and said:
Hi Lou – see attached.
Is this a (real) thing?
343 She replied a few minutes later:
Hi A,
This is not from us. Leave it with me I will follow up and get back to you.
344 Mr Elliot replied on 24 June 2021:
Note that Kris got a bunch of them via email yesterday - along with copies of COAs.
If they were indeed sent to Juan, I am certain he would have passed them onto Kris and/or myself - and we haven’t seen them.
345 Notwithstanding the limited way in which Westpac referenced the evidence in the Court Book, it is plain from the contemporaneous documents in evidence that Ms Agostino was enmeshed in the day-to-day operations of the Forum business. Ms Agostino appears to have been a primary point of contact for both Forum’s external partners and its clients in relation to the equipment leasing finance arrangements when queries arose. I find that she had a degree of knowledge and familiarity with key aspects of the equipment leasing finance part of the Forum business, consistent with her day-to-day involvement with this part of Forum’s operations.
346 Secondly, the evidence demonstrates that Ms Agostino had knowledge of, and was entrusted with responsibilities, in relation to some parts of the financial aspects of Forum’s business. She was copied into emails which related to Forum’s expenditure and operating costs, and was occasionally tasked with supervising and assisting with sales transactions on behalf of the business. In April 2019, for example, Mr Papas advised other employees of Forum to liaise with Ms Agostino to confirm account details in relation to the transfer of funds for the purchase of ORCA machines in Greece. Similarly, in June 2021, after Mr Papas had fled, Ms Agostino was copied into emails that were sent to Mr Tesoriero about expenses for payroll, loan repayments and rent which were to shortly fall due by Forum. I infer that this was on the basis of her close involvement in Forum’s operations and in assisting Mr Papas in relation thereto.
347 Thirdly, part of Ms Agostino’s role in the business (whether as a result of or independently of her personal relationship with him) was to assist Mr Papas with Forum’s operations. She was regularly tasked with providing documents to other parties on Mr Papas’ behalf, had attended business meetings with him, and also prepared documents which, at the very least, were draft versions of some of the documents which were used by Mr Papas to perpetuate the fraud (which I address below). Between 21 June and 24 June 2019, for example, Ms Agostino sent various documents to Mr Price of Eqwe at the instruction of Mr Papas, including documents purporting to be a sale notice between Forum Finance and BHD Leasing, a letter from Mr Papas to Veolia and a Certificate of Acceptance of Delivery signed by Veolia dated 4 June 2019. There are other instances of similar conduct recorded in the Court Book. On 28 June 2019, Ms Agostino sent various documents to Mr Price purportedly witnessed and signed by Mr Papas, including a payment schedule and Certificate of Acceptance of Delivery which were purportedly signed by Mr Kozlovic earlier that day, a sale notice between Forum Finance and BHD Funding signed by Mr Papas earlier that day and a transfer of rights letter from Mr Papas to Mr Kozlovic dated 28 June 2019. On 11 July 2019, Ms Agostino sent similar tranches of documents for two Veolia transactions, which were purportedly witnessed and signed by Mr Papas, directly to Mr Price and copied to Mr Papas.
I.3.1 Ms Agostino’s Relationship with Mr Papas
348 As noted above, Ms Agostino is the domestic partner of Mr Papas. In the defence which she filed before her active involvement in these proceedings ceased, Ms Agostino says that she commenced a relationship with Mr Papas in or around late 2018 to early 2019. She says that she commenced residing with Mr Papas in or around September 2020. Westpac has not adduced evidence to the contrary. I accept that Ms Agostino and Mr Papas have been in a relationship since around this time.
I.3.2 Ms Agostino’s involvement in Maia
349 In Section I.18.2.2, I address Ms Agostino’s role in relation to the Maia events of 2018. For present purposes, I note that I have found that by March 2018, Ms Agostino was aware that Maia and NMF were challenging the authenticity and legitimacy of the equipment lease financing arrangements in place with Forum. She understood that NMF was concerned to establish that Coles and Veolia (in the example given) had actually received the equipment the subject of the lease. That she knew this is reflected in the fact that she immediately provides Mr Papas with documents to use to purportedly demonstrate that the customers had accepted delivery. That is a significant circumstance when it comes to assessing Ms Agostino’s knowledge at later points in time where the evidence shows she assisted Mr Papas in creating false documents.
I.3.3 Ms Agostino’s Participation in the Scheme
350 Westpac adduced various evidence about Ms Agostino’s involvement with and participation in Mr Papas’ scheme directed to supporting its submission that she had actual knowledge of the fraud. I make the following findings as to each of the points which Westpac has raised.
I.3.3.1 Fraudulent Transaction Documents – Schedules
351 Westpac alleges, and I accept, that Ms Agostino assisted Mr Papas to create at least some of the Fraudulent Transaction Documents which were used in the scheme. She did so by providing him with unexecuted annexures for payment schedules and delivery certificates which were then used to deceive Westpac.
352 Westpac identified six occasions on which Ms Agostino is said to have assisted Mr Papas in this way. For present purposes, it is unnecessary to consider all of them. The nature of Ms Agostino’s involvement is illustrated by the following.
I.3.3.2 The 9 September Annexures – Coles
353 On 9 September 2018 at 11.21am, Ms Agostino sent an email to Mr Papas from her Forum email address. The email had no subject line or body text, but attached a single file which was entitled “FF Annexure – Coles BHD Finance.docx”. The attached file was an equipment schedule listing ORCA products which were purportedly located in Western Australia, the ACT, Victoria, Queensland and New South Wales. The schedule was not signed, but the customer signature field had been completed with some of the relevant information for Coles. Namely, Coles was identified as the customer that would be signing the agreement and its ABN was listed. The signature, name and title of the signatory, and date fields all remained incomplete. I infer that the words “BHD Finance” in the document title are a reference to BHD Leasing, Westpac’s agent which traded under the name BHO Finance at this time and, in due course, later became Eqwe.
354 On 9 September 2018 at 12.54 pm, Mr Papas emailed Mr Sheeran of BHO Finance about the “Coles deal”. Attached to this email was a PDF file which purported to be an executed payment schedule between Coles and Forum Finance. The payment schedule related to the provision of various “hardware” by Forum Finance to Coles. The hardware which was the subject of the Schedule was set out in an “Annexure A” which was attached to the payment schedule. Annexure A was followed by a “Certificate of Acceptance of Delivery” with a date of acceptance of delivery of 7 September 2018.
355 Each of the payment schedule, the Certificate of Acceptance of Delivery, and Annexure A were purportedly executed by a Mr Parikh on behalf of Coles on 6 September 2018. Mr Parikh was identified therein as a “Category Manager – Procurement” for Coles. The Annexure A which was purportedly executed by Mr Parikh was almost identical in form to the Annexure which Ms Agostino had emailed to Mr Papas about an hour earlier. It listed a number of ORCA products with serial numbers and locations which corresponded identically to the products listed in the document sent by Ms Agostino to Mr Papas. From my review of the primary materials, the only difference between the two documents appears to be the title of the document – the attachment sent by Ms Agostino to Mr Papas is described as an “Annexure” at the top right hand of the page, whereas the document sent to Mr Sheeran is titled “Annexure A” in the same location.
356 The equipment that is referred to in both the draft and executed document corresponds to the equipment which is listed in the customer payment schedule in the Transaction 4 Documents (these documents are addressed in Section I.27.4 below). Annexure A to the payment schedule in the Transaction 4 documents is purportedly executed by Coles on 6 September 2018. Mr Parikh is one of the customer witnesses relied on by Westpac. He deposed to the signature on Annexure A to the payment schedule as not being his and, in any event, not having the requisite authority to sign contracts of this nature.
I.3.3.3 Other similar instances
357 There is evidence in the Court Book of Ms Agostino engaging in similar conduct on other occasions.
358 On 16 November 2018, Ms Agostino emailed Mr Papas (from her Forum email address) attaching a document titled “FF Annexure – Veolia BDH Finance 131118.docx”. The attachment was an equipment schedule which purported to list ORCA waste digester products. It recorded both the serial number and the location of each of the products listed therein. Although the schedule was unsigned, the customer signature field had been completed with the information for Veolia. It listed Veolia as the customer and included its ABN. The signature, name and title of signatory, and date fields all remained incomplete.
359 On 21 June 2019, Ms Agostino forwarded Mr Papas an email which she had initially sent to him on 5 June 2019. The subject line of the original email was “FF Annexure – Veolia BHO Finance 04062019 (Aus 2)”. Attached was a draft equipment schedule in the form of Annexure A, again for Veolia. On this occasion, although the signature and date fields were incomplete, Veolia’s customer information had been entered. Veolia’s ABN was included and the name and title of signatory fields were completed with information for Ms Preet Brar, who was identified as the Chief Financial Officer.
360 On 12 February 2020 at 3:16am, Ms Agostino emailed Mr Papas from her Iugis email address. This email, like her emails on 9 September 2018 and 16 November 2018, contained no body text or subject line. A single file was attached to the email – a document with the title “FF Annexure –Veolia BHO Finance February 2020 (12).docx”. The file was, again, a schedule listing ORCA products and their location at various places across New South Wales, Western Australia and Victoria. In the customer signature field, Veolia’s information had been pre-filled. This time, however, the date field and the name and title of signatory fields had been completed. The signatory was identified as “Laurie Kozlovic”, purportedly the “COO” of Veolia, and the Annexure was said to be dated 3 February 2020, about a week before Ms Agostino’s email was sent.
361 At 3.28 am, Ms Agostino sent a further email to Mr Papas, again from her Iugis email address. This email attached another document, entitled “FF Annexure – Veolia BHO Finance Feb 1202.docx”. It contained a similar schedule, listing the serial numbers and locations of ORCA waste digester equipment in locations across New South Wales, Western Australia and Victoria, but identified different models of ORCA waste digesters to those which were listed in the attachment to the earlier email. Although the Customer was listed as Veolia, the date, name and title of signatory, and signature fields were not completed.
I.3.3.4 Conclusions on “Annexure A” Document Preparation
362 Before turning to the factual conclusions which I have reached on the basis of this evidence, it is helpful to first set out some additional context as to the creation of these schedules and Ms Agostino’s involvement in producing them. This context may be gleaned from an email exchange between Ms Agostino and Mr Papas which occurred on 28 February 2020 in the early hours of the morning. There are two email chains in the exchange – one sent by Mr Papas at 12.04 am, followed by a further email sent by him at 2.17 am, and separately, Ms Agostino sent Mr Papas an email at 1.47 am. The emails were sent and received from Iugis email addresses.
363 The first email sent by Mr Papas had the subject line “veolia annexures”. No files were attached to the email. The body text contained two tables which appear to have been copied from an excel spreadsheet titled “Aus Deal” and “NZ Deal” respectively. Each table set out the model, the total units and the location of what I infer were ORCA waste digesters which were to be the subject (or were to be said to be the subject) of leasing agreements with Veolia. In identifying the location of the units, the table was no more specific than listing the state in which they were to be located. For example, in respect of the “Aus Deal” there were to be 25 OG100 model units, 18 of which were to be located in NSW, 4 of which were to be located in WA, and 3 of which were to be located in Tasmania.
364 Ms Agostino sent an email to Mr Papas at 1.47 am in a separate email chain with the subject “FF Annexure - Veolia BHO Finance FEB 27022020” attaching a document similarly titled “FF Annexure - Veolia BHO Finance FEB 27022020.docx”. The body text of the email reads “I’ll do the other later”. The attachment is a draft equipment schedule in the form of Annexure A for Veolia and lists product models, total units and locations which correspond with the table titled “Aus Deal” in Mr Papas’ earlier email. For example, 25 OG100 model units are listed, 18 of which are listed at locations in NSW, 4 at locations in WA and 3 at locations in Tasmania. The document sent by Ms Agostino listed Veolia as the customer and included its ABN. The signature, name and title of signatory, and date fields all remained incomplete. Given the similarities between the document sent by Ms Agostino and the specifications of the “Aus Deal” provided by Mr Papas, I infer that Ms Agostino has prepared the draft schedule in response to the information provided by Mr Papas. I will infer that Ms Agostino’s reference in her email to “the other” is a reference to the “NZ Deal”, being the other table of specifications provided by Mr Papas in his email.
365 The second email sent by Mr Papas to Ms Agostino at 2.17 am was a reply to his own email of 12.04 am, rather than Ms Agostino’s email of 1.47 am. The body text of the email read “NZ IS WRONG… … no OG15s”.
366 Although I was not taken to any evidence of Mr Papas expressly instructing Ms Agostino to prepare the draft schedules, I infer from this exchange that he did so. That is evident from the body text of Mr Papas’ first email and the fact that Ms Agostino had, on a number of prior occasions, prepared schedules incorporating information of the kind contained within it. The scant information included in the emails between Mr Papas and Ms Agostino, in the context of both the close personal and working relationship they shared, supports an inference that Ms Agostino well knew what she was expected to do when she received the fairly basic information provided by Mr Papas. Further, that she proceeded to prepare at least the “Aus Deal” document in accordance with Mr Papas’ expectations.
367 The other conclusions which I am willing to reach on the basis of this evidence are as follows.
368 First, Ms Agostino did assist Mr Papas to prepare at least some of the Fraudulent Transaction Documents. She did so by preparing unexecuted equipment schedules (Annexure A’s) which were then used by Mr Papas to defraud Westpac.
369 Secondly, Ms Agostino assisted Mr Papas with this task from at least September 2018 until February 2020. The period of time in which she was involved in preparing documents thus covered a large part of the period of time in which the scheme was on foot against Westpac. Given her role in relation to the waste management offerings of both Forum and Iugis, I infer that from early in the period when she was preparing these documents, she knew that the relationship with Maia had soured and that Maia was not prepared to finance the Forum/Iugis international aspirations for its waste management lease finance business. As the period in which she was preparing these documents wore on, she cannot have failed to connect, if she did not already know, that the genesis of the Maia relationship breakdown was the concerns in relation to the authenticity of the underlying rental agreements and whether the assets were in place with customers.
370 Thirdly, a number of the documents that were sent to Mr Papas by Ms Agostino, or email exchanges between them, were prepared or occurred at times that were well outside of ordinary business hours. Not infrequently, they occurred in the very early hours of the morning or on the weekends. Where emails were sent between Mr Papas and Ms Agostino late at night or very early in the morning, the unexecuted versions attached to Ms Agostino’s emails were followed very shortly thereafter with executed versions. It is implausible given the timing that these communications involved the intervening provision by real customers of executed versions of the relevant documents.
371 Fourthly, although it does not automatically follow from each of these findings that Ms Agostino had actual knowledge that the documents were being used by Mr Papas for a fraudulent purpose, the evidence reveals the following additional peculiarities. On at least one occasion, for example, Ms Agostino was instructed to prepare documents which listed the addresses at which waste digesters were located in circumstances where that information had not actually been provided to her (see Mr Papas’ email on 28 February 2020 above). Similarly, on other occasions she had prepared documents which had pre-filled the information of the signatories, or were dated as being executed on a date that was earlier than the day on which the document had actually been prepared. While I accept that, considered in isolation, each one of these circumstances may not necessarily have given rise to a suspicion of wrongdoing on Ms Agostino’s part, my view is that, when looked at holistically and taking into account the recurrent nature of the circumstances, an honest and reasonable person in Ms Agostino’s position over time would have not only suspected but come to understand what Mr Papas was doing.
372 Having said this, I do not accept that the evidence establishes – as Westpac contends – that Mr Papas routinely returned these documents to Ms Agostino for her to then send on to Eqwe. This characterisation of events, I think, takes the evidence too far. Westpac did not take me to any documents in the Court Book which evidenced a sequence in which Ms Agostino sent documents to Mr Papas, Mr Papas returned those documents to her, and she then sent them on to Eqwe. The fact that I was taken to evidence of some occasions on which Ms Agostino had sent executed agreements to Eqwe at the instruction of Mr Papas does not alter my view on this. The fact of Ms Agostino having, on some occasions, drafted schedules for Mr Papas, and then, on other occasions, having sent completed schedules to Eqwe at his instruction is different to her having created the schedules, received fraudulently executed copies back, and then sending those same schedules on to Eqwe. Westpac had ample opportunity to direct me to a paper trail which recorded a sequence of this kind. It did not do so. That may be because the documentary record available to Westpac is incomplete. I do not know. On some occasions, Mr Papas sent the executed documents to Eqwe himself. I infer that Ms Agostino would likely have had access to the finalised versions of the forged customer documents as part of her role in the business but, I am not satisfied there is a basis to infer that the Fraudulent Transaction Documents, once the forged signatures were applied, were returned to Ms Agostino so that she could supply them to Eqwe.
373 I am satisfied that Westpac has established that Ms Agostino assisted Mr Papas in creating Fraudulent Transaction Documents to provide to financiers from at least about September 2018, but likely from the inception of the fraudulent scheme involving Westpac and SMBC.
374 The evidence of Ms Agostino’s involvement goes further.
I.3.4 False insurance certificates
375 In addition to the creation of the Fraudulent Transaction Documents, the limited documentary evidence which is before me establishes that Ms Agostino also prepared false insurance certificates at Mr Papas’ direction and provided them to him in accordance with his directions. There are a number of examples in evidence. It is sufficient to illustrate Ms Agostino’s involvement by reference to the following sequence of events in which Ms Agostino had three takes, in close succession, at producing a false certificate of currency that was to Mr Papas’ satisfaction before he then submitted the falsified certificate to Mr Price of Eqwe.
376 On 9 July 2020 at 1.13 pm, Mr Papas forwarded Ms Agostino an email she had earlier sent to him on 20 September 2017 with the subject “CoC” (which I take to be shorthand for certificate of currency) attaching a Confirmation of Insurance from the insurance broker Lockton Companies Australia Pty Ltd in favour of WesTrac dated 20 September 2017 in respect of a period of cover from 30 June 2017 to 30 June 2018. At 2.01 pm, Ms Agostino emailed Mr Papas attaching a version of the same Confirmation of Insurance document, now dated 7 July 2020 and with a period of cover from 30 June 2019 to 30 June 2020. At 2.03 pm, Mr Papas responded to Ms Agostino stating “Period of cover is wrong”. Ms Agostino sent an email a few minutes later at 2.06 pm attaching a Confirmation of Insurance document with a cover period from 30 June 2020 to 30 June 2021. Ms Agostino then sent a further email at 2.14 pm with the subject “take 3”, attaching a Confirmation of Insurance document with a cover period from 30 June 2020 to 30 June 2021 which had been amended to remove a notation relating to the interests of Forum Group and NMF under the policy. All other details remained unchanged. Each new version of the Confirmation of Insurance included the signature of Mr Peter Barron on behalf of Lockton.
377 At 2.43 pm, Mr Papas emailed Mr Price and Ms Constable of Eqwe attaching the falsified Confirmation of Insurance with a cover period of 30 June 2020 to 30 June 2021. In doing so, Mr Papas appears to have composed his email so that it looks like he is forwarding what purports to be an email sent to him from “Mr Tim Clayden, EGM Sales – South Region”. The signature block for Mr Clayden gives a Forum Group email address and a work address in Perth. The email has a sent description of 12.04 pm on 9 July 2020 and the text comprises the following “Hi Bill. As requested, WesTrac Insurance. Let me know if you need anything else”. The header for the purportedly forwarded email does not include a line entry for “Attachments”. Mr Papas’ email purportedly “forwarding” the document to Mr Price and Ms Constable of Eqwe lists in the header “Attachments: Industrial Special Risks – Westrac Forum Group Pty Ltd 09072020.pdf (123.28kB)”. The attached document is the version of the Confirmation of Insurance prepared by Ms Agostino at 2.14 pm.
378 This sequence of documents demonstrates that Mr Agostino was falsifying critical documents at Mr Papas’ direction by manipulating and altering existing, seemingly legitimate documents. When viewed side by side, having regard to the nature of the changes and the very short period of time in which the changes were made by Ms Agostino, and in the absence of an explanation from Ms Agostino, I readily draw the inference that Ms Agostino was creating the false insurance certificates and providing them to Mr Papas knowing that the documents were to be provided to financiers (or their agents) to support the provision of financial accommodation.
379 An amount of $231,870.31 has been traced as being paid to or for the benefit of Ms Agostino. This includes funds that were deployed in the purchase of and servicing of the mortgage in relation to a property at Rozelle.
I.3.5 Conclusion on Ms Agostino’s knowledge
380 As Mr Papas’ domestic partner, Ms Agostino observed, and indeed enjoyed, Mr Papas’ extravagant lifestyle. She was also a senior Forum employee. The information to which she was privy, coupled with her knowledge that Mr Papas was supplying forged documents to financiers, would, at the very least, indicate to an honest and reasonable person in her position that the Consolidated Group was not legitimately able to support the personal projects in which Mr Papas indulged, both on his own and jointly with Mr Tesoriero. As I have said, I draw the available inference of consciousness of guilt, and thus guilt, against Ms Agostino from the fact that she fled the country following the discovery of the fraud. She has not sought to refute the evidence led in relation to her personal involvement in the fraudulent scheme. The evidence included a section 50 summary of the Fraudulent Transactions Documents, which meticulously details the transaction documents for each of the pleaded transactions and Ms Agostino’s role in submitting some of the Fraudulent Transaction Documents to the financier’s agents. This evidence was not challenged.
381 Being conscious of the gravity of making a finding of this nature, I am satisfied that Westpac has established that Ms Agostino had actual knowledge of the fraud. The Maia events would have put an honest and reasonable person in Ms Agostino’s position on enquiry in around late February 2018. On the basis of Ms Agostino’s subsequent involvement in creating fraudulent documents, I am satisfied that from at least late 2018 that she had actual knowledge of the fraud. I find it likely that Ms Agostino had actual knowledge of the fraud from early in the period when Forum first obtained advances from Westpac and SMBC. I do not understand it to be necessary for the purpose of the relief against Ms Agostino to determine exactly when she came to have the requisite knowledge. It is sufficient for the purpose of Westpac’s claim against her that I find, as I do, that she was aware of the fraud by at least late 2018.
382 If I am wrong in my finding that Ms Agostino had actual knowledge of the fraud, I am satisfied that she had fourth Baden category knowledge from at least late 2018.
383 I find that Ms Agostino actively assisted Mr Papas to create Fraudulent Transaction Documents during the life of the fraudulent scheme. I am satisfied that Westpac has established that she had actual knowledge of, and knowingly assisted Mr Papas in executing, the fraud. Further, that she knew that the benefits that she received (including funds, expensive jewellery and other luxury items and a deposit on the Rozelle apartment) were derived from the tainted funds reaped from Westpac pursuant to the fraudulent scheme.
I.3.6 Flow of funds to Ms Agostino
384 The amended summary of payment records that $290,583 has been traced as being paid to, or for the benefit of, Ms Agostino, comprised of $218,921 of WBC funds, NZD $12,949 of WNZL funds, and $9,970 of SMBC funds. There appears to be an anomaly in the total, which should be addressed at the hearing on relief. The amount which flowed to Ms Agostino includes funds that were used to purchase and service a mortgage in relation to the Rozelle apartment which was purchased for $925,000 on 18 April 2019 in Ms Agostino’s name. The property was sold on 11 February 2022 for $1.13 million. The residual proceeds of the sale of that unit are held in a trust account in the name of Ms Agostino.
385 It is next convenient to address the credit of the two witnesses who were subject to an attack on their credit, Mr Tesoriero and Mr Bouchahine.
386 In closing submissions, counsel for Mr Tesoriero submitted that:
Mr Tesoriero gave his evidence to this Court carefully, candidly and without fear of recrimination. He endured all manner of attacks on his credit, his character and his conduct. In doing so, his evidence revealed no material inconsistency, whether from the contemporaneous documents or prior accounts, which could logically support Westpac’s case that he was knowingly concerned, even if only constructively, in the epic fraud that Mr Papas perpetrated. He trusted Mr Papas, not blindly or without question, but with good reason based on the circumstances known to him, just as so many others in this case did, including Westpac.
387 I do not accept that submission.
388 I found Mr Tesoriero to be both an unsatisfactory and unimpressive witness. Many of Mr Tesoriero’s answers were speculative — Mr Tesoriero frequently did not answer questions directly, even during his evidence in chief. Instead, he deposed to what he “would have” said or done or that various events “would have” occurred. On two occasions, he conceded that he was guessing in response to some questions.
389 At times, his evidence was combative, as illustrated by his retort to questions asked in accordance with the principle in Brown v Dunne:
And the position again is that you really are prepared to say anything at all if you think it will assist your case. Correct?
No, not correct.
Now, the - - -?
It would appear you are the one doing that, sir.
His indignance, when displayed in the witness box, appeared to be feigned.
390 At times Mr Tesoriero appeared to be dissembling but he also presented himself in the witness box as having a limited grasp of commercial concepts. He used commercial language in a way that was jargonistic and when challenged on what he meant, he was often unable to supply a coherent explanation, other than repeating what he was being asked to explain. An illustration of this was his explanation of the purpose for which FGFS was set up and how it would generate its own revenue stream by taking a “clip” on the tainted funds received from the Primary Recipients before redistributing the funds to, amongst others, Consolidated Group Entities and entities involved in Mr Papas and Mr Tesoriero’s personal projects. This is addressed in detail in Section I.16. If Mr Tesoriero had other than a basic grasp of commercial concepts, his evidence did not reveal it. He was unable to give a coherent explanation of the central tenets of what he says informed his understanding at the time that the arrangements were legitimate.
391 Mr Tesoriero displayed a lack of candour. His interactions with counsel cross-examining were often snide as he sought to evade answering direct questions or quibbled to no purpose with the cross-examiner’s choice of words. When he answered direct questions, his answers were often lacking in specificity and the detail he did offer proved to be malleable in his later answers. A prime example of the malleability of his evidence was the evidence he gave in relation to whether funds advanced by FGFS to entities which he controlled were advanced by way of loan. In his defence, Mr Tesoriero, and companies then under his control, positively contended that the funds were advanced by way of loan. In his evidence, he flip-flopped on this issue, but generally denied that FGFS had loaned the funds to his companies. Mr Tesoriero’s evidence on this issue is addressed in detail below.
392 His evidence on specific issues was directly contradictory to legitimate contemporaneous documents that he was privy to at the time. When confronted with documents of this kind, he adhered to his oral evidence, refusing to make appropriate concessions.
393 As mentioned, he was cross-examined on an affidavit he had sworn earlier in the Westpac Proceeding which he did not read at the final hearing and an affidavit he swore on 23 December 2021 in the Statutory Demand Proceeding. These two affidavits were inconsistent in material respects to the evidence that he gave orally at the final hearing. My impression based on the whole of his evidence, bearing in mind that he gave his evidence in chief orally and was then cross-examined, was that at no time in the currency of these proceedings had his oath to tell the truth weighed heavily upon him.
394 Similarly, during the relevant period, contemporaneous documents which Mr Tesoriero supplied, or caused to be supplied, to brokers for the purpose of obtaining finance demonstrate that he provided information, including important information as to his employment and income, that was materially misleading. He did so for the purpose of enhancing the prospect that he would obtain the finance that he was seeking.
395 Each of these issues is addressed in my consideration of Mr Tesoriero’s evidence that follows.
396 Westpac point to the following areas of Mr Tesoriero’s evidence as exemplifying the fundamental difficulties with his evidence:
(1) The allegation made in Mr Tesoriero’s amended defence in the Westpac Proceeding that FGFS loaned funds to the Tesoriero Entities and Jointly Owned Entities;
(2) The incoherence of his evidence as to whether he was an employee of any Forum entity and what if any, income or other form of remuneration he received;
(3) The nature of Mr Tesoriero’s “investment” in Forum and any “return” therefrom;
(4) Mr Tesoriero’s knowledge of being a director of Forum Finance; and
(5) Mr Tesoriero’s receipt of FGFS spreadsheets.
397 These areas of Mr Tesoriero’s evidence are dealt with in context below.
398 For these reasons, and the further reasons given below, I find Mr Tesoriero’s evidence to be unreliable, and in material respects, dishonest. I do not accept it unless it is supported by legitimate contemporaneous documents or is otherwise against his own interests.
399 The position in relation to Mr Bouchahine’s credit is different.
400 Mr Bouchahine and Westpac both submitted that Mr Bouchahine made many appropriate concessions, many against interest, and on key issues in these proceedings. I accept that is the case.
401 The significant concessions made by Mr Bouchahine, which are addressed in context below, included the following:
(1) Mr Bouchahine admitted that for the most part, FGFS had no legitimate business and carried on personal projects of Mr Tesoriero and Mr Papas, and was used as the vehicle for the fraud;
(2) Mr Bouchahine agreed that he caused the entire sum of approximately $340 million paid by Westpac to Forum Finance to be paid out and into FGFS (which he regarded as itself being a personal project of Mr Papas and Mr Tesoriero);
(3) Mr Bouchahine agreed that he did not account accurately, or at all, for those payments in Forum Finance’s books and records, and that this was contrary to the interests of the shareholders of the Forum group, save perhaps for the interests of Mr Tesoriero and Mr Papas;
(4) Mr Bouchahine admitted that by causing these funds to be taken out of Forum Finance, paid to FGFS and thereafter used to make “repayments” to Westpac – he was endeavouring to conceal from Westpac the fact that customers were not truly making repayments on their supposed funding agreements;
(5) Mr Bouchahine also admitted that with hindsight he appreciated that the arrangements were entered into in the form in which they were for the purpose of deceiving funders and had he thought about it at the time he would have appreciated that; and
(6) Mr Bouchahine admitted that in his work as CFO of Forum that he created, caused to be created, or was aware of documents which he knew to contain materially false information, being prepared for the purpose of submission to financiers in order to enhance the prospect of funding being advanced that may not have otherwise been approved.
402 The critical issue on which Mr Bouchahine stuck to his guns was his denial that he had sufficient knowledge of the fraud to render him liable to Westpac. This was the basis on which Mr Bouchahine defended the Westpac proceeding. Westpac submits that his denial on this issue should be rejected. I consider the issue of Mr Bouchahine’s knowledge in context below.
403 Mr Papas established the Forum Group. Prior to the discovery of the fraud, he was the CEO of the Forum Group. The relevant extent of his directorships and shareholdings in the corporate respondents and more broadly is detailed in Section I.7 below.
404 A recurrent theme in the evidence was that Mr Papas was a confident, impressive and persuasive person. He was repeatedly described as a “great salesman”, including by Mr Anderson, then Director of Asset Finance, WIB, who was cross-examined by counsel for Mr Bouchahine on his impressions of Mr Papas.
MR KIRBY: How would you describe Mr Papas as a person, the impression that he made on you?
Strong, confident. Knew his product. Knew his clients. Probably – confident is probably the key – key word that sticks in my – in my mind about him.
Did you find him impressive?
I – probably the short answer is yes, at the time.
405 Mr Bouchahine submitted that Mr Papas was “an extremely forceful, extremely charismatic, dominant character who was able through those personality traits to, like a magician’s sleight of hand, just ensure that people were not concerned to look in the sorts of places that people would ordinarily look”.
406 Mr Tesoriero submitted that the force of Mr Papas’ personality and his ability to deflect unwanted attention from the reality of what he was doing was evident in his dealings including with sophisticated third parties who were drawn in and duped by Mr Papas.
407 Mr Tesoriero sought to illustrate this by an instance in 2019 in which the auditors of Coles raised a query, which resulted in a discussion on 25 July 201 between Mr Papas, Mr Price and Mr Sheeran (of Eqwe), and Mr Michael Daniel and Mr Anderson (of WIB). The purpose of the discussion appears to have been to discuss, amongst other things, Coles’ existing exposure based on the query received by WIB from Coles’ auditors in the context of the auditors providing a standard audit certificate. The query arose in circumstances where Westpac had been disclosed to Coles as the funder (through Eqwe) of ORCA equipment. Mr Anderson’s evidence was that Westpac’s general approach where it was the disclosed principal was to rely on Eqwe to administer the financing relationship. Westpac would only communicate directly with customers on an exceptions basis, one of which was when WBC received audit certificate queries. In this instance, Mr Tesoriero submitted that Mr Papas was able to deftly deflect Mr Anderson’s attention from the query that had been raised in relation to the nature of Coles’ apparent commitments under the Forum program and Coles’ expectation that future payments would be paid to Forum by talking about a commercial opportunity to capture and commercialise methane emissions from ORCA units. Mr Tesoriero advanced the following submission in closing:
One of the memorable features of this case, for me, concerns the evidence Mr Anderson gives about the Coles audit certificate in July 2019.
Coles auditors raise a potential red flag about Mr Papas’ fraud, and Mr Anderson arranges a call with Mr Papas on 25 July 2019 to find out whether Westpac’s funding has been disclosed. Now, when Mr Anderson comes to pen his affidavit, the only positive recollection he has of this meeting with Mr Papas was Mr Papas spruiking some commercial opportunity to deal with methane gas, and that really sums up the ability of Mr Papas to conceal this conduct. Now, the point of Westpac’s proximity to the fraud is not to prove that they were negligent, but rather to demonstrate how the fraud was concealed, and that was by the very astute and able deception practised by Mr Papas, constituted by forgery and a very persuasive veneer of success that was known to all.
408 I accept that Mr Papas was a dominant personality — he was charismatic, persuasive and confident. Mr Papas was clearly astute, and he was deceptive. Mr Papas was ostentatious in his business affairs and in his personal lifestyle. He flaunted the overt trappings of conspicuous wealth and ostensible success — the racehorses; the Greek football team, Xanthi FC; hosting an annual marquee at the Spring Racing Carnival; several luxury cars including 1967 Ford Mustangs (Shelby GT500, Big Boss), Chevrolet Bel Air, Porsches (Cayenne, Cayman, GT2 RS, GT4) and Audis (R8, RSQ8), Range Rover, 2018 Lamborghini Huracan Spyder, and a VW GTI; car racing sponsorship; a Seadoo jet ski; XOXO yacht, including mooring costs; luxury jewellery from Canturi and Van Cleef & Arpels; and travelling via helicopter. He was a skilled and voracious salesman. Mr Papas was adept in spruiking commercial opportunities that he claimed Forum was exploiting or had in prospect. He played to audiences within the Forum Group and to third parties, including the financiers and their agents. Mr Papas was effective in deflecting and redirecting attention. He used that skill in conjunction with the veneer provided by the extensive forgery and falsification of the relevant commercial documents, to perpetuate the concealment and continuance of the fraud. The attributes and skills of Mr Papas that I have identified are readily recognised as the key performance indicators of many a fraudster.
409 I do not accept that the underlying premise of the submissions advanced for Mr Tesoriero and Mr Bouchahine that there is a meaningful analogy to be drawn between their interactions with third parties and those of third parties, or the broader pool of people engaged in the Forum business. Mr Tesoriero and Mr Bouchahine knew Mr Papas well over a very long period of time. They each interacted with Mr Papas in a way that was materially different to those who dealt with him in their capacities as customers or suppliers to the Forum business. They were also, each in their own way, part of the senior management of the Forum business. They were privy to information and communications with Mr Papas that other Forum employees were not. That said, Mr Papas was clearly regarded by each of Mr Tesoriero and Mr Bouchahine as their superior. Mr Papas was Mr Bouchahine’s boss. Although Mr Papas and Mr Tesoriero were co-directors of the Consolidated Group Entities and FGFS, on the evidence, it is plain that Mr Papas was at the top of the Forum hierarchy. Nevertheless, Mr Tesoriero and Mr Bouchahine were insiders who moved in Mr Papas’ inner circle. Mr Tesoriero also had a close and enduring personal relationship with Mr Papas. It is in that context that their knowledge falls to be assessed.
410 A powerful example of the insider communications to which Mr Bouchahine was privy is an email exchange between Mr Papas and Mr Bouchahine on 19 March 2018, in connection with the emerging crisis with the Maia arrangements. Mr Papas emailed Mr Bouchahine saying:
“I’m going to fck these cunts!!”
Mr Bouchahine replied:
“[t]hat’s the Papas I know”.
I will return to this email in context when addressing the demise of the Maia relationship.
411 As between Mr Papas and Mr Tesoriero, the following email exchange on 16 and 17 April 2020 in relation to the payment from FGFS of expenses associated with their personal projects, which was also copied to Mr Bouchahine, demonstrates the extent to which they were in the trenches together. On 16 April 2020, at 9.41 pm, Mr Tesoriero writes to Mr Papas as follows:
Subject: Re: Outstanding Invoices - BP&VT
Billy… I get it… and I love you dearly but I’m not creating this… these settlements…. some run as far back as the middle of last year and we made these commitments together… I’m not trying to be difficult but I’m all out of options … I’ve been pushing everything back as much as I can as you’ve asked but people have now got tired of me and it’s at the point where they have all culminated close together… I don’t know what the answer is…. tell me what you want me to do…
412 On 16 Apr 2020, at 9.54 pm, Mr Papas responded:
How can you say to me, be reasonable? I can’t pluck money from trees or my ass! If I could, I would Vinnie…
413 On 17 Apr 2020, at 5.32 am, Mr Tesoriero replied to Mr Papas:
… We’ve had worse hurdles then this over the years Billy…. it’ll be okay in the end…. and if it’s not okay… it’s not the end…
414 Mr Papas was a director of each of the Primary Recipients of the impugned advances from the financiers into the Forum Group, namely Forum Finance, Forum Enviro, Forum Enviro (Aust) and Iugis NZ. In the case of Forum Finance, the only other director was Mr Tesoriero. Mr Papas was the sole director of Forum Enviro, Forum Enviro (Aust) and Iugis NZ. He with Mr Tesoriero was a director of FGFS, relevantly until 20 April 2020, and thereafter he was the sole director of FGFS. Together they owned FGFS in equal shares. The financiers have established through the comprehensive tracing analysis undertaken by the liquidators that FGFS received the vast majority of the tainted funds derived from financiers and thereafter distributed those funds. There is no challenge to the tracing evidence that demonstrated that approximately 80% of the funds received by the Primary Recipients were transferred to FGFS. Mr Papas owned and controlled, either in isolation, or together with Mr Tesoriero, many of the companies, in Australia and elsewhere, through which the subsequent movement of the tainted funds has been traced.
415 The receipt and distribution of the tainted funds by FGFS was overseen by and effected by Mr Bouchahine. In his closing submissions, Mr Bouchahine acknowledged that he was responsible for the vast majority, if not all, of the impugned fund transfers in these proceedings. Mr Bouchahine expressly conceded in cross-examination that he was responsible for the transfer of the whole of the WBC funding from Forum Finance to FGFS. Mr Bouchahine’s counsel accepted that Mr Bouchahine was integral to the fraud – it was Mr Bouchahine who held the keys to the gate and permitted the exodus of funds from within the Consolidated Group. It was Mr Bouchahine who actioned the flow of money from the financiers through the Forum Group to FGFS and sanctioned, and tracked, payments made from FGFS, including payments that were channelled back to the financiers as cloaking payments.
416 In his affidavit, Mr Bouchahine gave evidence that he had weekly meetings with Mr Papas throughout the whole of his period as Forum CFO. He said that Mr Papas would review and approve all proposed payments to be made by and on behalf of the Forum companies and later, from about 2018, by or on behalf of the Iugis entities, as well as the various entities involved in Mr Papas and Mr Tesoriero’s private projects. Mr Bouchahine said that it was only after obtaining Mr Papas’ approval in the weekly meetings that he directed employees to make payments, which were made in accordance with the directions he was given by Mr Papas. He acknowledged that he made any payment from FGFS that Mr Papas asked him to make.
417 Mr Tesoriero was closely involved in the process by which the tainted funds were distributed after receipt by FGFS. Between at least August 2018 and February 2021, Mr Tesoriero and Mr Papas regularly received from Mr Bouchahine, or Mr Chin who reported to Mr Bouchahine, excel workbooks which were comprised of spreadsheets which recorded outstanding payments, recurring payments and/or cash flow summaries for both FGFS and various other entities in which Mr Tesoriero and Mr Papas were interested. The workbooks recorded the expenses incurred by Mr Papas or Mr Tesoriero for their personal investments, businesses and assets. The evidence in relation to these spreadsheets is addressed below.
418 In cross-examination, Mr Bouchahine candidly acknowledged that from at least September 2018, the distribution of funds from FGFS for what he described as the “personal projects” of Mr Papas and Mr Tesoriero was to fund projects which were purely for the benefit of Mr Papas and Mr Tesoriero and were not projects undertaken in the course of, or for the benefit of, the Forum business. Mr Bouchahine regarded FGFS itself as a personal project of Mr Papas and Mr Tesoriero, as indeed it was.
419 Mr Bouchahine gave evidence that he has known Mr Papas in a professional context since 2003 and described his relationship with him as being “purely a working relationship”. During Mr Bouchahine’s examination-in-chief, he described working “very closely” with Mr Papas since 2003 in three different organisations in a professional capacity. He said they worked together during their employment at Ricoh Business Centre (Mr Papas as sales manager and Mr Bouchahine as financial controller) and subsequently Upstream Print Solutions (Mr Papas as sales director and Mr Bouchahine as finance manager). Mr Bouchahine described Mr Papas as "a successful businessman”. Mr Bouchahine did not socialise with Mr Papas outside work.
420 In cross-examination, it was put to Mr Bouchahine that he was loyal to Mr Papas “personally”, Mr Bouchahine responded by saying that he was “loyal and trusting to Bill”. It was put to him that he did not ask Mr Papas any questions and just went along with what Mr Papas proposed, he responded by confirming that he trusted Mr Papas.
421 He said he never questioned whether Mr Papas or Mr Tesoriero were acting in the best interests of the companies of which they were directors in the Consolidated Group. It was clear that Mr Bouchahine did not turn his mind to this at all, rather, as he frankly acknowledged, he never questioned what Mr Papas and Mr Tesoriero were doing even when they caused substantial funds to be diverted from companies in the Consolidated Group into FGFS, their private company, and thence to fund their own personal projects. He knew that the accounts of the Consolidated Group were audited, whereas the accounts of FGFS were not. He accepted that he understood at the time that both Mr Papas and Mr Tesoriero were under a duty to act in the best interests of the companies of which they were directors. Mr Bouchahine’s evidence as a whole, demonstrated that Mr Bouchahine acted exclusively according to the personal fealty he felt to Mr Papas, and to a lesser extent, to Mr Tesoriero.
422 One of the themes in the defences of each of Mr Tesoriero and Mr Bouchahine is that they each trusted Mr Papas and were not aware of the fraudulent scheme, whether in terms of actual knowledge (Baden categories (1) to (3)) or constructive knowledge (by which they mean Baden category 4). In substance, they each conducted their defences on the basis that while they may well fall within Baden category (5), they were not seized with knowledge sufficient to attract liability. Mr Tesoriero went so far as to say that from his perspective, there were never any “flags”.
423 In closing, Mr Bouchahine submits that he “squarely falls within the fifth category of Baden knowledge: knowledge of circumstances which would put an honest and reasonable man on enquiry”. Mr Bouchahine contends that having been put on inquiry, he did in fact make enquiries and in response to his enquiries Mr Papas provided an explanation that was sufficiently plausible to satisfy Mr Bouchahine and “put him off the scent”.
424 Mr Bouchahine’s evidence was that the explanation given to him by Mr Papas, that he says he accepted, was to the effect that the equipment financing arrangements were, in practice, subject to an advance funding arrangement. Mr Bouchahine’s understanding as to the advance funding arrangement was referred to in the evidence variously as a forward invoicing arrangement or a future funded/funding arrangement.
425 The advance funding thesis is central to Mr Bouchahine’s and Mr Tesoriero’s submissions on why they should not be held to have requisite knowledge to attract liability. It also features in Mr Papas’ mud map of the fraud made during the period when difficulties, that proved to be irreconcilable, emerged in the relationship between Forum and Maia. The advance funding thesis is addressed in detail in: Section I.18.2.7 (Mr Papas); Sections I.18.2.12 and I.8.2.13 (Mr Tesoriero); and Section I.19 (Mr Bouchahine).
426 Mr Tesoriero takes a similar position to Mr Bouchahine in the main, including in relation to taking his assertion that he took solace from his understanding that the Forum equipment financing arrangements were underpinned by a future funding mechanism. Mr Tesoriero’s defence informed by his purported contemporaneous acceptance of the future funding mechanism is addressed in detail in Section I.18.2.12.
427 The Maia episode and Mr Papas’ notebook entries are significant when it comes to assessing both Mr Tesoriero’s and Mr Bouchahine’s knowledge. They are addressed in detail below.
428 Separately to the defensive themes advanced by Mr Bouchahine, Mr Tesoriero advances a positive defence, which after several permutations, settled on an assertion to the effect that Mr Tesoriero understood at all relevant times that the funds received by him and his associated companies were a legitimate “return” on his investment in the Forum business. In short, he submits that his expectation that he would receive a substantial financial return on his significant investment in the Forum business, which he believed had enjoyed stratospheric success, defeats Westpac’s contention that he had the requisite knowledge of the fraud so as to render him, or through him, and the Tesoriero Entities, liable.
429 Mr Tesoriero points to the significant sums that he caused entities under his control to invest in the Forum business in the period from late/November 2012 to at least May 2017 as an indicia of his trust in Mr Papas and his belief in the legitimate success of the Forum business. Mr Tesoriero’s investment in the Forum business, principally through TIG, is addressed below.
430 Mr Tesoriero like Mr Bouchahine seeks to draw an analogy between himself and the third parties who were taken in by the fraud, submitting that he was simply unaware of the fraudulent conduct of Mr Papas and that he was not at any stage armed with the knowledge to suspect it. As will be seen, that submission is a particularly difficult one for Mr Tesoriero to make good given his close relationship with Mr Papas, his role in the relevant Forum entities, FGFS and the Tesoriero entities which received and distributed funds, as well as the part he played in dealing with various financiers, including in relation to the demise of the Maia arrangements. Similarly, it is an ambitious submission by Mr Bouchahine given his role as CFO of the Consolidated Group and also, as CFO of FGFS, and as a result of his close involvement with Mr Papas and his objectives in, at least, the early stages of the Maia dispute.
431 Both Mr Bouchahine and Mr Tesoriero seek to support the submission that they, like so many others, were taken in by Mr Papas, and did not have sufficient knowledge to be liable to Westpac, by giving evidence of their respective relationships with Mr Papas and pointing to the trust they say they placed in him. Both seek to place themselves as just another person in the Forum office swept up in the runaway success of the business. They do not grapple with the fact that they were each senior people in the operation of the Forum business, who enjoyed a vantage point that few others, apart from Mr Papas himself, had. Mr Tesoriero and Mr Bouchahine contend that they each had good reason to trust Mr Papas based on what they say they knew. Mr Tesoriero and Mr Bouchahine contend that they each believed that the Forum business was very successful and diversified. Mr Bouchahine submits that he, like everyone save Mr Papas, was working within his role in what he believed to be Forum’s legitimate business, unaware that superimposed on top of it was Mr Papas’ fraudulent scheme. Mr Tesoriero and Mr Bouchahine submit that they trusted Mr Papas and believed in the “stratospheric”, “meteoric” and “notorious” rise of the Forum business.
432 Counsel for Mr Bouchahine submitted that as someone who worked in the Forum office, Mr Bouchahine “could not help but absorb the celebratory atmosphere every time one of these real or forged contracts were signed”.
433 Both counsel for Mr Bouchahine and Mr Tesoriero sought to illustrate the celebratory atmosphere created by Mr Papas in which they say they were caught up by pointing to an email that Mr Papas sent on 20 December 2018. The email was sent to a select number of recipients, not including Mr Bouchahine or Mr Tesoriero, and celebrated the execution of a distribution agreement with Veolia for 1,000 ORCA units.
434 Counsel for Mr Bouchahine described the email as the “memorable email with that meme from The Wolf of Wall Street, unironically placed in it, celebrating the 1000-unit contract with Veolia”. In fact, and perhaps ironically, the embedded meme is from the 2013 film version of The Great Gatsby starring Leonardo DiCaprio in the titular role of the fraudster:
435 Attached to this email is a Distribution Agreement between Orca Enviro Systems Pty Ltd (OES) and Veolia dated 19 December 2018. It was not suggested in the proceedings that this contract was a forgery. Nor did the evidence demonstrate the extent to which the distribution targets in the agreement were met.
436 The distribution agreement provided for Veolia to commit to sell or lease 1000 units of ORCA products over an 18-month period, commencing 1 February 2019. Under the Distribution Agreement, Veolia acquired the exclusive rights to enter into contracts for the supply of ORCA products with third parties within Australia and New Zealand. There was no financial penalty if Veolia did not meet the product distribution commitments, save that Orca Enviro Systems Pty Ltd could engage other distributors and not deal exclusively with Veolia or in certain circumstances terminate the agreement with Veolia. The Distribution Agreement was signed by Mr Kozlovic on behalf of Veolia and Mr Papas on behalf of OES. Mr Kozlovic was one of the Veolia representatives, who provided an affidavit in the proceedings in relation to, amongst other things, the forgery of his signature on some of the Fraudulent Transaction Documents. He was involved in initial discussions and negotiations regarding the distribution relationship, but did not take part in the day-to-day processes under the Distribution Agreement. The sale transactions under the Distribution Agreement were managed by Veolia’s sales team, who had a designated Veolia representative for the ORCA equipment, and Waste leadership team.
437 Mr Tesoriero says he became very close friends with Mr Papas as a result of what Mr Tesoriero described as his investment in Forum and their shared interest in sports cars and boats. The relationship between Mr Papas and Mr Tesoriero developed into a close business relationship. They also socialised together and developed a close personal relationship. By the time Mr Papas fled Australia he was living in a property acquired by one of Mr Tesoriero’s SPVs – 23 Margaret Street. The purchase had been settled using tainted funds channelled through FGFS. Through another two of the jointly owned SPVs, they had adjacent waterfront holiday rental houses, north of Sydney. In his evidence in chief, Mr Tesoriero said of Mr Papas:
I trusted him. I had been partners with him. It was like, you know, for a number of years by that point, and I had never really had any signs of any fraud in the past and any issues and – you know, he always had a great reputation. I – I didn’t see any cause for concern. There was never any flags.
438 The strength of the close personal relationship and Mr Tesoriero’s devotion to Mr Papas is reflected in Mr Tesoriero’s communications with Mr Papas. By way of example, Mr Tesoriero professed his brotherly love for Mr Papas in an email in which he sought approval for the disbursement of Forum funds to pay his personal expenses:
“Gran prix week…Big night for me in case you can’t tell by the email…I Love you brother…there’s a lot more BUT I need to tell you in person…”.
439 There are other emails of Mr Tesoriero’s in similar tone.
440 Mr Tesoriero repeatedly described Mr Papas as a “great salesman” who was “always doing well” and “always had a great reputation”. Mr Tesoriero’s evidence as to talking “constantly” to Mr Papas about the performance of the business and the information that he gleaned in that regard is addressed below. It is sufficient for present purposes to note that Mr Tesoriero’s recount of the basis upon which he accepted that the business was expanding and performing extremely well was expressed in euphemistic generality, even in his evidence in chief, as the following passage demonstrates:
… And so if we look at – so early 2013, you invested in Forum?
Late 2012, I think it was.
Late 2012?
Yes.
Just looking at the time period, as you recall, when did these acquisitions start to occur?
2013.
And then throughout?
And throughout, yes.
Okay. So you told us you made this initial investment and you were made a director. Can you describe your involvement in the Forum business at that time?---At the start I would regularly attend board meetings, probably once a month or once every second month, but typically once a month I would fly to Sydney and then in between I would probably catch up with Billy, he was coming down quite frequently to Melbourne then, but it was mainly Melbourne and Sydney, sometimes to Brisbane.
Right. And when you met Bill, what would you discuss?
Mainly how the guys were going with sales and other acquisitions to just keep growing the business.
And I think you said you went up to Sydney for the board meetings?
Mainly Sydney, yes.
And so where were they?
They were at Pyrmont. We had a little office at Pyrmont.
All right. So you visit the office?
Yes.
And I think it was once a month or so?
Typically once a month, yes.
And aside from attending the board meetings, what else did you do on those visits?---I mainly just – I – I’m still working on some of my own stuff down in Melbourne, so I go to the office. I probably spend two/three days at most and then work out of the office with – with my own stuff, catch up with Bill, maybe, for a lunch or a dinner, in between, and fly home.
And did you speak with other employees of Forum?
Yes, yes, of course. I talk with the sales guys and just get their – get their story as well, what was going on.
And what was your understanding of what was going on?
They were sales guys. Everything was great.
Yes?
Yes ..... good.
441 Mr Tesoriero’s repeated references to Mr Papas’ prowess as a salesman are telling. Mr Tesoriero was clearly impressed by Mr Papas’ salesmanship. The superficiality of Mr Tesoriero’s explanation as to his understanding of the success of the Forum business is consistent with the superficiality of his explanation of why he invested in the Forum business in the first place. Mr Tesoriero’s description of the inquiries he made before committing to invest $1,000,000 in the business is addressed below. It suffices to note at this stage, that even by his own account, his investigation of the investment opportunities presented to him by Mr Papas were specious at best. The foundation for Mr Tesoriero’s decision to risk his family’s assets by leveraging against those assets to invest in FGOC was flimsy.
442 Mr Tesoriero’s evidence in relation to the development of Forum’s business in respect of waste management/disposal equipment and other environmentally driven product development was similarly superficial.
443 The evidence establishes that early in their relationship Mr Tesoriero was in thrall of Mr Papas. He was clearly enamoured with Mr Papas and aspired to be part of his world. He was keen to be a part of what he thought was Mr Papas’ burgeoning business. Mr Tesoriero, with his family’s wealth, and based on how he chose to reveal himself in his evidence, his relatively basic commercial acumen, may well have been a soft target for Mr Papas but that does not answer the question of whether over time Mr Tesoriero gained the requisite knowledge to render him liable to Westpac.
444 The depth of the relationship between the two men, and Mr Tesoriero’s position as Mr Papas’ most trusted ally, excluding perhaps, Ms Agostino, is best illustrated by two things.
445 First, the incorporation of FGFS outside the Consolidated Group, as the entity through which the vast majority of the tainted funds was diverted, was set up so that it was owned and controlled by Mr Papas and Mr Tesoriero, with Mr Tesoriero’s family’s accountant appointed as its accountant.
446 Secondly, as mentioned, after difficulties emerged with the Maia arrangements in March 2018, Mr Papas literally went back to the drawing board, drafting notes which recorded the anatomy of the fraudulent scheme and which included a notation which read “tell Vince everything you need to tell him”. In these notes, he also sketched out his escape plan which centred on having “money here & overseas” and “overseas escape”. Mr Papas made these notes in April 2018. He enlisted Mr Tesoriero to assist him in keeping Maia at bay until Maia was eventually paid out by Forum Enviro in October 2022. In September 2018, Mr Tesoriero guaranteed the obligations of Mr Papas, Forum Enviro, FG, FGOC and FGFS under the standstill arrangements that were agreed with Maia. The guarantee given by Mr Tesoriero had a limit of in excess of $58.5 million. The events in relation to Maia are addressed in detail in Section I.18.
447 The findings I have made as to the relationship between Mr Papas, Mr Tesoriero and Mr Bouchahine provide the context for considering Mr Tesoriero’s and Mr Bouchahine’s evidence on the issue of what they knew and whether they had actual or constructive knowledge of the fraud, that is knowledge in Baden categories (1), (2), (3) or (4).
448 Against that broad overview in relation to Mr Papas, I now return to the chronological sequence of events.
I.6 Mr Papas and Mr Bouchahine’s work before Forum
449 Mr Bouchahine holds the equivalent of a Diploma in Accounting from TAFE NSW, which he obtained in approximately 1987. He was a member of the Professional Institute of Accountants from that time until June 2022. He does not hold any other accountancy qualifications.
450 Mr Bouchahine held various accounting roles throughout his career, including being employed by Brambles, Adelhill Pty Ltd, FallShort Body Supplies, AIICorp Cleaning Services and Ricoh Business Centre North West (later acquired by Upstream Print Solutions in or about 2005, which was then later acquired by FUJI Xerox). Mr Bouchahine held the role of Financial Controller with each of these companies, with the exception of Upstream Print Solutions, where he became the Finance Manager in 2006.
451 Mr Bouchahine first met Mr Papas in or about 2003 when he commenced working with his former employer, Ricoh Business Centre North West. Upstream Print Solutions provided office equipment which was sold under finance arrangements, which were along similar lines to those purportedly offered by Forum Finance.
452 Mr Papas’ employment with Upstream Print Solutions as Sales Director was terminated in 2011 when it appears that he was made redundant. In or about September 2012, Mr Bouchahine’s employment with Upstream Print Solutions was also terminated and he was made redundant.
I.7 Establishment of the Forum Group
453 The facts in relation to the establishment of the Forum Group are set out in Section I.5 above. The following is a brief recap. Mr Tesoriero’s involvement is addressed in detail separately below.
454 FGOC was registered on 7 July 2011. Mr Constantinidis, against whom the Westpac Proceeding settled, was initially appointed as the sole director and secretary, positions he held until 30 August 2011. Amongst other individuals, Mr Papas was appointed as director and secretary on 28 September 2011.
455 Forum Finance was registered on 19 September 2011. Mr Papas was appointed as director and secretary of Forum Finance from that date. Forum Finance is owned directly by FGOC, which holds all of its issued shares. Shortly after Forum Finance’s incorporation, on 21 September 2011, FG was registered. Mr Papas was appointed as director and secretary of FG from that date. FG is owned directly by FGOC, which holds all of its issued shares.
456 Forum Enviro was registered on 24 March 2014 and Forum Enviro (Aust) was registered on 5 August 2015. Mr Papas was appointed as sole director and secretary of those entities from their respective dates of incorporation. FGOC holds 100% of the shares in each entity.
457 On 3 April 2017, Mr Papas was appointed as director of Imagetec Solutions. The whole of the issued shares in Imagetec Solutions are indirectly held by FGOC through Imagetec Solutions Australasia Pty Ltd.
458 I now backtrack in the chronology to address Mr Bouchahine’s commencement with FGOC.
459 As mentioned, Mr Papas and Mr Bouchahine were previously colleagues at a number of companies. Following the termination of their respective employments with Upstream Print Solutions, in or about September 2012 Mr Papas offered Mr Bouchahine a role as Financial Controller of the Forum Group. In or about October 2012, Mr Bouchahine commenced employment in that role on a salary of $100,000. Mr Bouchahine’s salary increased over time. Whilst his job title changed throughout his employment, from his commencement at the Forum Group until June 2021 Mr Bouchahine was the most senior finance executive in the Forum Group. He reported directly to Mr Papas.
460 At the time of his commencement, the accounting team consisted of Mr Bouchahine, a staff member responsible for debtors, and another administrative staff member. Mr Bouchahine’s duties included management of the accounting team, who were responsible for:
(1) monthly management reporting (including monthly profit and loss statements, balance sheets and management accounts);
(2) keeping track of debtors and creditors;
(3) payroll;
(4) stock management; and
(5) liaising with relevant businesses and personnel on behalf of the Forum Group, including various finance broking firms.
461 As mentioned, in or about early 2017, after the Forum Group acquired a business entitled “Image Tech”, Mr Bouchahine became the CFO of the Consolidated Group.
462 Mr Bouchahine says that he only obtained the title of CFO of ImageTec Pty Ltd because, after the acquisition of ImageTec, the Forum Group had two people with the title of Financial Controllers (because ImageTec already had a Financial Controller). Mr Bouchahine deposed that although his title changed, his duties and responsibilities as CFO continued to be the same as when he had the title of Financial Controller (being those extracted above). The evidence demonstrates that throughout the relevant period, Mr Bouchahine was involved in preparing management accounts, expenditure and cash flow spreadsheets in relation to the activities of the Forum Group (which included detailing the amounts purportedly due under the financing arrangements the subject of the fraud).
463 By September 2018, Mr Bouchahine had approximately twenty employees in the accounting team who reported to him, and he continued to report to Mr Papas. Mr Bouchahine confirmed that he and Mr Papas were the only individuals who could access the Forum Group’s bank accounts, and cause payments to be made by and on behalf of the Forum Group. However, he maintained that he never authorised payments from Forum Group’s bank accounts without Mr Papas’ approval, including those requested by Mr Tesoriero.
464 Mr Bouchahine was also a shareholder in FGOC. In or about 2016, Mr Bouchahine used $170,000 of his superannuation to purchase 109,678 ordinary shares in FGOC in the name of “Bouch Investments Pty Ltd” in its capacity as trustee of his self-managed superannuation fund. “Bouch Investments Pty Ltd was an entity owned and controlled by Mr Bouchahine.
I.9 TIG becomes a shareholder in FGOC and Mr Tesoriero becomes a director
465 I now turn to trace Mr Tesoriero’s involvement with the Forum business. In doing so, I note that Mr Tesoriero’s evidence was not precise. He tended to refer to the Forum business as if it were an entity itself. He also gave different accounts at different times of the extent of, and basis upon which, he invested. It will be necessary to return to consider those differing accounts in the context of considering Mr Tesoriero’s positive defence concerning his expectation of a return on his investment. The following account of his involvement prefers what is revealed by the contemporaneous records and corporate searches over the account given by Mr Tesoriero.
466 As mentioned, Mr Tesoriero had personal and familial wealth which pre-dated his involvement with Mr Papas and Forum. Mr Tesoriero worked as a builder, real estate manager and property developer between 2002 and 2012. He was a director of many companies involved in the family property development ventures. He also worked with his father on the family’s real estate properties and associated developments. As mentioned, the Westpac Proceeding against Mr Tesoriero Snr has resolved.
467 In late 2012, an entity known as LeaseIt (with the logo “lea$eit”) issued a prospectus. Mr Tesoriero said that LeaseIt was intended to be a listing vehicle for FGOC. It was through LeaseIt that Mr Tesoriero made his initial Forum-related investment.
468 Mr Tesoriero met Mr Papas in late 2012, at a meeting which was arranged through mutual friends who worked at Upstream Print Solutions. Mr Tesoriero’s evidence about his decision to invest with Mr Papas was given in broad and generalised terms. Mr Tesoriero says he first met Mr Papas in a coffee shop in St Kilda and that Mr Papas went through the LeaseIt prospectus with him. He said that LeaseIt was a company similar to Upstream Print Solutions but it had a couple of extra products that it was selling. He said it was “going to go to a listing” and that some other people including “a Macquarie banker and a few other lawyers and stuff like that” had invested. He said they discussed the prospect of Mr Tesoriero making an investment and he was given a copy of the LeaseIt prospectus to take away.
469 Mr Tesoriero said that Mr Papas had “sold out of Upstream and had gone off with a group of guys that used to work at Upstream and were looking at some funding to [start Forum]”. By way of contrast, Mr Bouchahine, who worked at Upstream Print Solutions with Mr Papas, said that Mr Papas did not have a stake in Upstream Print Solutions. He said Mr Papas was employed as a Sales Director before he was made redundant in 2011. In the LeaseIt prospectus Mr Papas is described as follows:
470 Apart from Mr Papas, the “Key Business Builders” listed in the LeaseIt prospectus were Mr Kirk Tsihlis, Executive Chairman, Mr Michael Levin, CEO & Director of Finance, Mr David Barnett, Director – Legal and Compliance. Apart from Mr Papas, the only one of these gentlemen that Mr Tesoriero mentioned in his evidence was Mr Tsihilis, who he described as “a partner with Bill in the LeaseIt prospectus”. Mr Tesoriero did not remember his surname. He said he only met him a couple of times.
471 The LeaseIt prospectus appears to have been self-issued. The cover page has the statement:
472 It does not include the details of any professional advisers. It is replete with marketing hyperbole. The “Investor Proposition” is outlined as follows:
473 The parameters of the offering and timeline were described as follows:
474 In his evidence in chief, Mr Tesoriero said:
… So what happened after that meeting with Mr Papas?
I took that prospectus away, I had a look at it, I chatted to a few of my friends who were still currently working in the Upstream business and just to get an idea of what was going on with Bill and the other guys that had gone off and they said that, you know, this was over a period of weeks probably that – they said they were doing really well, they were signing a lot of new contracts and – yes – and that was about it, I spoke to my accountant about it and, you know - - -
Sure. And then you invested, did you?
No. I met with Bill another time, then he came down to Melbourne. I had spoken to him maybe once or twice on the phone in between and then met with him again and then discussed that if I was to invest a certain amount – I had said to him I wanted to be a director on the company if I was going to invest and then we discussed how that would look.
And how was it going to look? What did you discuss?
He said if I put a minimum of a million dollars in, then he could talk to the other partners to most likely put me on as a director.
Okay. And did that happen?
That did happen, yes.
Yes. So you invested a million dollars?
Yes.
And where did that money come from?
It came from properties that myself and my family have to – leveraged property developments
475 TIG is an entity jointly and directly owned by Mr Tesoriero and his father. It was incorporated on 5 November 2012, over a year after FGOC was registered and Mr Papas was appointed a director of FGOC. Mr Tesoriero and Mr Tesoriero Snr were appointed as the directors and secretaries of TIG. TIG is the trustee of the Tesoriero Investment Trust pursuant to a trust deed dated 5 November 2012. The appointors of the Tesoriero Investment Trust are Mr Tesoriero and Mr Tesoriero Snr. They are also corpus beneficiaries, alongside two other immediate family members.
476 Mr Tesoriero says that he caused TIG to be incorporated and the Tesoriero Investment Trust to be settled for the purposes of making an investment in FGOC.
477 Consistently with the conversation with Mr Papas that Mr Tesoriero recounted in his evidence, he said that a condition of TIG’s investment in shares of FGOC was that he be made a director of FGOC, which is what ultimately occurred.
478 On 11 October 2012, Mr Papas and Mr Tesoriero exchanged emails in relation to Mr Tesoriero’s investment in Forum. Mr Tesoriero forwarded to Mr Papas an email he had received from Westpac dated 10 October 2012, with a subject heading “Wish List”. In that email, Mr Neil Bower, Senior Relationship Manager, Westpac Commercial Banking, sought further financial information in respect of a “new deal” which had been the subject of a discussion between Mr Tesoriero and the Westpac representative that day. The information that Westpac requested was as follows:
1. Provision of the last Three Financial Years Profit & Loss, Balance Sheet for the proposed borrowing entity (The full trading since the business has been operating given you advised it has only been operating for "1 Year")
2. Trading business as at 30th June 2012
3. Provision of Current Taxation Portals being "All Accounts and Integrated Accounts" as at 30th September 2012
4. Interim Trading results (Profit & Loss and Balance Sheet) of the Trading Business to 30th September 2012
5. Details of the business ie Business Plan , Organisational structure, Ownership structure, History of the individuals involved in the business, What does the business do?
6. What is the expectation for the business in 1 year, 2 years or 5 years
7. Previous business operation details (given they have been out of the industry for 3 years)
8. Three way Projections for the current financial year, split into Monthly Profit & Loss, Balance Sheet and Cashflow
9. Details of the business being purchased. Copy of Information Memorandum for the Acquisition.
10. Details of your proposed investment and proposed pay back period
11. Will you be actively involved in the business? If yes in what capacity? Or are you providing only a "Passive" investment!
12. Certified Copies of any trust deed applicable
13. Who are the key people in the New Business
14. Who are the key customers, suppliers and competitors? Has a SWAT analysis been undertaken?
15. How much are you looking to invest? Do you have an investment timeframe and if so what is your exit strategy?
16. How much of your investment are you looking for Westpac to fund. If we are to fund is there a Special Purpose vehicle being created?
17. Does the business need to borrow funds? What is the borrowing required to support an asset purchase or business purchase?
18. Is there an on going funding requirement for the business
19. Is the proposed purchase a "merger or a takeover"
20. Are the individuals in the business being purchased remaining involved or do they have a non compete clause if they are leaving the operations.
21. Who is the current bank providing facilities to the business. Are there any existing banking facilities if so what are they?
479 Mr Tesoriero said that his discussion with Mr Bower related to procuring a loan of $1,000,000 to subscribe for shares in FGOC.
480 In his email forwarding Mr Bower’s email to Mr Papas on 11 October 2012, Mr Tesoriero stated “[i]f you can send through to me whatever you can. I realise the list is extensive and don’t expect everything, just enough to make them feel comfortable. I will call you later to discuss”, to which Mr Papas confirmed that he would “get onto it right away”. Mr Tesoriero did not himself appear to be particularly interested in reviewing the information that he had requested from Mr Papas for the purpose of forwarding it to Westpac. In his evidence, he did not appear to have much recollection of this email. He said he thought that Mr Papas would send Mr Bower “enough to start the discussion”. He said that there was nothing set in stone at this point.
481 On 6 November 2012, Mr Tesoriero was provided with documents in connection with becoming a shareholder of FGOC, including:
(1) a Shareholders Agreement entered into between FGOC, Aramia in its capacity as trustee of the Papadimitriou Family Trust, Halifax Capital Pty Ltd, Malton Enterprises Pty Ltd in its capacity as trustee of the Malton Enterprises Family Trust, and Popescu Investments Pty Ltd in its capacity as trustee of the Popescu Family Trust dated 21 October 2011;
(2) an undated deed of variation to the Shareholders Agreement adding the following additional shareholders: SJR Ventures Pty Ltd (in its capacity as trustee of the Reid Family Trust), HNAC Holdings Pty Ltd (in its capacity as trustee for Casey Family Trust), TNCFS Pty Ltd (in its capacity as trustee for the Casey Family Superannuation Fund), and ANHER Pty Ltd (in its capacity as trustee for The Herrmann Family Trust);
(3) an undated draft subscription deed to subscribe for shares in FGOC; and
(4) an undated draft undertaking by deed poll for new investors in FGOC.
482 Mr Tesoriero’s evidence in relation to the Shareholders Agreement was that he probably would not have read it but might have skimmed over it. He said he probably shared it with his accountant. I note that there is nothing in the above documents that Mr Tesoriero seeks to rely on in respect of his various accounts of the basis on which he expected to capitalise on his investment in FGOC.
483 Tesoriero was also provided with the details of the FGOC bank account into which payment for his FGOC shares was to be deposited.
484 On 14 December 2012, Mr Papas and Mr Tesoriero exchanged emails regarding Mr Tesoriero's investment in FGOC, in which Mr Tesoriero stated that ownership would be held in the name of TIG acting as trustee for the Tesoriero Investment Trust.
485 On 20 November 2012, Mr Tesoriero Snr paid $100,000 to a Forum entity. This was the first investment by TIG in FGOC. Mr Tesoriero’s evidence was that he would invest in Forum progressively as the opportunity to do so arose. He financed his investments in Forum by borrowing money from the bank on security of real property held by his associated entities. He said his investments in Forum were “typically” timed to coincide with property acquisitions by Forum entities. He said he “would have to leverage existing properties that [he owned] to attribute that equity into those properties or when we were doing acquisitions of different business, there was always money that needed to be put in by either myself or by Bill or by the business”. He said that the amount of money he invested varied “but several times and normally of a million dollars or more as we progressed, you know, sometimes a couple of hundred thousand, sometimes – but typically a million dollars or more” over about 10 years.
486 On 20 December 2012, Mr Tesoriero was provided with a subscription deed and shareholders agreement in relation to his investment in FGOC. On 21 December 2012 Mr Tesoriero was provided with a notice of acceptance of appointment as a director of FGOC.
487 Mr Tsihilis emailed Mr Papas and Mr Tesoriero on 7 January 2013 regarding Mr Tesoriero’s investment in LeaseIt, in which he said that Mr Tesoriero was committed to making the investment, and had bank funds cleared. Mr Tsihlis noted that Mr Tesoriero had certain questions prior to completion, and that they had agreed they would turn to finalisation upon Mr Papas’ return from a family holiday.
488 Mr Tesoriero gave vague evidence about having a discussion with Mr Tsihilis after he had given his word to make an investment:
And you wanted to satisfy yourself of certain matters before you caused TIG to make an investment; is that correct?
I don’t recall exactly. I think it was just to clear the air with everyone and just so that everyone was on the same page as what was – what was the journey.
Well, when you give that answer – I’m sorry, had you finished?
What was the journey that as actually going to go on, the two year 10 time multiplier sort of by ..... and that sort of stuff, just to clarify it all. But I had made my - - -
Well, you’re just guessing about that, aren’t you?
Sorry?
You’re just guessing. You’ve got no clear memory as to what was going to be discussed, having caught up with Kirk?
That’s what was discussed. The prospectus, and we went through that and – and Bill was away, and I just wanted to clarify, but I had given my word to – to make the investment and I just wanted to further clarify some points.
What’s Kirk’s last name?
I – I – I would have to double check from the prospectus, again. I only met him a couple of times.
489 The listing of FGOC as contemplated by the LeaseIt prospectus did not eventuate.
490 On 27 January 2013, Mr Tesoriero was appointed a director of FGOC, a position he held continuously until 24 April 2020.
491 On 20 February 2013, Mr Papas emailed FGOC shareholder, Mr Jason Hoen, copying Mr Tesoriero and Mr David Pinker (both FGOC directors at that time), a PowerPoint presentation for a shareholders meeting of FGOC on that date. Amongst other things, in the presentation Mr Papas outlined his vision for the purpose and role of FGOC, including to “[d]ifferentiate itself from other players in the market by using its complete service and product range to leverage the ability to provide a total package from a single vendor from finance to service”. The presentation noted that “[o]ur mission is to be a strong growing business creating value to shareholders, customers and our people”.
492 The presentation also referred to the “original path: the 12 months” which targeted the raising of $2,000,000 in capital under the proposal contained in the LeaseIt Prospectus. The presentation then set out a “fresh start”, which involved the appointment of a board and a business restructure (including shareholding changes)..
493 The contemplated shareholding changes were described as follows:
KT converting to coupon 840,000 original shares
All remaining shareholders increase % holding
Issuing of share certificates to now be done by end of March
Total shares on issue aprox [sic] 5.7million [sic]
494 The proposed restructuring was described as follows:
Consolidate the businesses/ Structure
• TT sold back to KT
• Forum has negotiated Key Dealer arrangement
• Lease[I]t has agreed to provide ongoing wholesale funding arrangement
• goal of achieving our own funding paper
• Complete acquisitions
• Melbourne business
495 The reference to “TT” is a reference to TT Fleet which was a business owned by LeaseIt, which was subsequently known as Forum Security. The reference to “KT” is a reference to Kirk Tsihilis.
496 This “fresh start” plan is exceptionally vague. It plans for the “key focus for sales growth”:
Consistent sales results
Direct sales in midmarket customer relationships with cross selling [sic]
Lead generation/Telemarketing /Online
Increase of sales head count
Evolution
Value Proposition
Service delivery
The Customer Experience
Expansion of geographical locations
• Sydney → Melbourne → Brisbane
497 The presentation included a very optimistic projected revenue for FGOC for 2013 to 2015, which is attached below, demonstrating limited analysis, not obviously linked to audited accounts.
498 The overall “investment overview” that concludes the slides is described in vague and somewhat confusing terms as:
Current Capital Raise
Directors Valuation for Capital raise @$6.9milllion [sic]
$1.0 Million raise (completed 30th Nov 2012)
Further $1.5 Million “special” capital raise offer for VT & JH
Strategy Moving forward
Potential acquisitions
• Capital raise & debt
Finance
Internal Funding book
499 I infer that the reference to “VT & JH” is a reference to Vince Tesoriero and Jason Hoen.
500 On 1 February 2013, Mr Tesoriero forwarded to Mr Papas an email he had received from Ms Karin Borg of Westpac confirming a drawdown of $1,000,000 from a facility in the name of TIG. Shortly after, on 5 February 2013, Mr Tesoriero Snr made a payment of $900,000 to an entity in the Consolidated Group. This took the cumulative investment by TIG into FGOC to $1,000,000 in total. In making this payment TIG appears to have completed its subscription in FGOC as required by the subscription deed.
501 On 7 February 2013, Mr Papas and Mr Tesoriero exchanged emails regarding Mr Tesoriero’s investment in FGOC, including a confirmation from Mr Tesoriero to Mr Papas that “[a]ll funds have now been cleared”.
502 Mr Tesoriero’s initial investment in FGOC, through TIG and the Tesoriero Investment Trust, was the beginning of the close business relationship between him and Mr Papas that endured until mid-2021, when the financiers uncovered the fraud and Mr Papas absconded.
503 Mr Tesoriero’s increasing investment in Forum over the period from 2012 to 2021 was reflected in his growing involvement in the Forum business, and his interest in various subsidiaries in the Forum Group, both as director and as shareholder. Mr Tesoriero was vague in identifying precisely what he invested and what form the investment took. Such contemporaneous records as were in evidence did not produce a consistent picture. Based on my review of the evidence, I find that his investments direct and indirect were made as follows:
Date | Amount | Cumulative Investment | Description |
20.11.2012 | $100,000 | $100,000 | Mr Tesoriero Snr makes payment to entity in Consolidated Group |
05.02.2013 | $900,000 | $1,000,000 | Mr Tesoriero Snr makes payment of $900,000 to an entity in Consolidated Group. The withdrawal follows a deposit into the account of $1,000,000 organised by Mr Tesoriero |
04.10.2013 | $200,000 | $1,200,000 | $200,000 withdrawn from account in the name of TIG and paid to an entity in the Consolidated Group |
02.06.2014 | $1,500,000 | $2,700,000 | Mr Tesoriero Snr makes payment of $1,500,000 to an entity in the Consolidated group |
05.09.2014 | $100,000 | $2,800,000 | Mr Tesoriero Snr makes payment of $100,000 to an entity in the Consolidated Group |
02.05.2017 | $2,000,000 | $4,800,000 | Telegraphic transfer from TIG in the amount of $2,000,000 to FGOC |
Total Investment | $4,800,000 |
504 Of the total investment of $4,800,000, $2,600,000 was held by TIG in the form of FGOC shares. TIG consistently reflected an investment in FGOC shares in that total amount for the financial years ending 2017, 2018, 2019 and 2020 in its financial records.
I.10 Mr Tesoriero’s status as an office holder in the various entities
505 Mr Tesoriero’s status as an officer bearer in the entities which are relevant to these proceedings is addressed in Section D above. By way of summary:
Company | Directorship start | Directorship end | Category |
Forum Finance | 1 April 2017 | continuing as at time liquidators were appointed on 9 July 2021 | Consolidate Group Entity and Primary Recipient |
FGFS | 13 November 2018 | 30 April 2020 | Jointly Owned Entities |
64-66 Berkeley Street | 26 August 2020 reappointed on 2 November 2020 | 27 August 2020 continuing as at time liquidators were appointed on 2 November 2022 | Jointly Owned Entities |
26 Edmonstone Road | 20 November 2017 | 1 May 2020 | Jointly Owned Entities |
5 Bulkara Street | 1 March 2019 | 30 April 2020 | Jointly Owned Entities |
6 Bulkara Street | 13 March 2020 | 27 October 2020 | Jointly Owned Entities |
14 James Street | 14 January 2020 | 1 May 2020 | Jointly Owned Entities |
23 Margaret Street | 9 January 2018 | continuing as at time liquidators were appointed on 2 November 2022 | Tesoriero Entities |
1160 Glen Huntly Road | 2 June 2020 | continuing as at time liquidators were appointed on 16 December 2022 | Tesoriero Entities |
14 Kirwin Road | 2 June 2020 | continuing as at time liquidators were appointed on 16 December 2022 | Tesoriero Entities |
Canner | 2 February 2018 | continuing as at time liquidators were appointed on 2 November 2022 | Tesoriero Entities |
123 High Street | 20 March 2020 | continuing as at time liquidators were appointed on 16 December 2022 | Tesoriero Entities |
160 Murray Valley | 2 June 2020 | continuing as at time liquidators were appointed on 16 December 2022 | Tesoriero Entities |
31 Ellerman Street | 2 June 2020 | continuing as at time liquidators were appointed on 16 December 2022 | Tesoriero Entities |
4 Cowslip Street | 20 March 2020 | continuing as at time liquidators were appointed on 16 December 2022 | Tesoriero Entities |
55 Nolan Street | 2 June 2020 | continuing as at time liquidators were appointed on 16 December 2022 | Tesoriero Entities |
89 Betka Road | 2 June 2020 | continuing as at time liquidators were appointed on 16 December 2022 | Tesoriero Entities |
9 Gregory Street | 2 June 2020 | continuing as at time liquidators were appointed on 2 November 2022 | Tesoriero Entities |
9 Main Street | 20 March 2020 | continuing as at time liquidators were appointed on 16 December 2022 | Tesoriero Entities |
286 Carlisle Street | 8 November 2017 | continuing as at time liquidators were appointed on 2 November 2022 | Tesoriero Entities |
275 High Street | 20 March 2020 | continuing as at time liquidators were appointed on 16 December 2022 | Tesoriero Entities |
193 Carlisle Street | 25 May 2016 | continuing as at time liquidators were appointed on 2 November 2022 | Tesoriero Entities |
8-12 Natalia Avenue | 26 August 2020 | continuing as at time liquidators were appointed on 2 November 2022 | Tesoriero Entities |
TIG | 5 November 2015 | continuing as at time liquidators were appointed on 2 November 2022 | Tesoriero Entities |
Mangusta | 8 February 2019 | continuing as at time liquidators were appointed on 2 November 2022 | Tesoriero Entities |
506 In cross-examination, Mr Tesoriero, after initially sparring with the cross-examiner, gave the following evidence in relation to his role in the Forum business:
You were wishing to understand all aspects of the Forum business throughout the period of your involvement with it from 2013 up until June 2021?
Yes, I would say that’s the case; yes.
Now, could you – as I think you mentioned this morning, you then attended board meetings?
That’s correct, yes.
And you also attended – we will come through to this, but what were called executive meetings; you remember that?
Not particularly. I remember the board meetings, but I don’t really remember executive meetings. Maybe they overlapped.
Now, you received copies of accounts that had been prepared on behalf of Forum from Mr Bouchahine on a regular basis. Correct?
What do you mean by “regular basis”?
Well - - -?
Once a year or - - -
From time to time – well, and for other – for various reasons, you would receive accounts from Mr Bouchahine?
Yes.
507 Mr Tesoriero attended board meetings for FGOC and what were describes as “Executive Meetings” for Forum, including an executive meeting of FGOC held in Brisbane on 30 October 2013.
508 In the period from January 2013 onwards Mr Tesoriero was involved in the Forum business, and regularly received financial and other information about FGOC via email from Mr Bouchahine.
509 As early as 3 May 2013, Mr Bouchahine had provided Mr Tesoriero with FGOC management accounts for financial years 2013 and 2014. On 2 April 2015, Mr Tesoriero exchanged emails with Mr Bouchahine regarding financial documents for FGOC, in which he requested, amongst other things, a profit and loss statement for 1 July 2014 to 28 February 2015. Shortly after, on 7 April 2015, Mr Bouchahine provided Mr Tesoriero with a workbook containing management accounts for FGOC. On 27 July 2017, Mr Bouchahine provided Mr Tesoriero the management accounts as at 30 June 2017. On 10 September 2018, Mr Bouchahine sent an email to Mr Stefanetti, which was copied to Mr Tesoriero, in which he attached management accounts for FGOC as at June 2018.
510 Mr Tesoriero received the FGOC company structure and its financial statements for the financial years 2014, 2016, 2017, 2018, 2019 and 2020. On 1 October 2014, Mr Tesoriero was provided by Mr Papas with consolidated financial statements for FGOC for the financial year ended 30 June 2014. On 21 September 2017, Mr Bouchahine provided Mr Tesoriero with draft consolidated financial statements for FGOC for the financial year ended 30 June 2017, and on 3 October 2017 Mr Bouchahine provided Mr Tesoriero audited consolidated financial statements for the financial year ended 30 June 2017. Following a request by Mr Papas and Mr Tesoriero, on 31 May 2018 Mr Bouchahine provided Mr Tesoriero with audited consolidated financial statements for FGOC for the financial year ended 30 June 2016. On 3 October 2019, Mr Bouchahine provided Mr Tesoriero the audited accounts of FGOC for the financial year ended 30 June 2018. On 16 October 2019, Mr Bouchahine provided Mr Tesoriero the audited accounts of FGOC for the financial year ended 30 June 2019. On 10 March 2021, Mr Bouchahine provided Mr Tesoriero the audited accounts of FGOC for the financial year ended 30 June 2020.
I.11 Mr Tesoriero’s employment with FGOC
511 Mr Tesoriero’s involvement with FGOC was not limited to being a substantial shareholder and a director, he also appears to have been an employee of the business. The issue of whether Mr Tesoriero was a Forum employee informed one of the lines of attack on his credit. Beyond the significance of the evidence on this topic to Mr Tesoriero’s credit and the general reliability of his evidence, it also illustrated Mr Tesoriero’s preparedness at the relevant time to misrepresent the true position where he perceived it would be to his advantage to do so, and to do so by commissioning and deploying documents that were false in their content.
512 In his cross-examination, Mr Tesoriero gave the evidence, rather emphatically, that he was not ever an employee of Forum and had never been paid wages by any Forum entity:
Now, were you employed by the Forum Group subsequent to TIG’s investment in it?
It was a discussion that we had at one point in time but I don’t think it ever eventuated.
Were you paid any wages?
No.
So when you say there was a discussion, was this – if you go to FOG.1000.0001.7041, it says you were employed in the position of general manager. See that?
Yes.
And you say that that didn’t ever eventuate?
No.
This is an unsigned document, I should say to be clear?
Yes.
You say it didn’t eventuate?
That is correct. Yes.
And you’re clear that you were never paid wages by either the Forum Group of Companies Pty Limited or any other company in the Forum Group - - -?
That is correct. Yes.
- - - throughout the period of your involvement from 2013 to June 2021?
That is correct. Yes.
Is that correct?
That is correct. Yes.
513 In an affidavit which he swore in the Westpac Proceeding on 8 November 2021, on which he was cross-examined in the final hearing, Mr Tesoriero said that he did not receive any payments at all from the Forum Group until around 2017, whether by way of dividend, interest payment, or any return on or of his capital. He also said that he was not paid a salary by the business and did not receive any remuneration as a director. In his cross-examination, Mr Tesoriero insisted he never received any funds from Forum until 2017 which in his own words was “when the – the money started to flow back”. I will address separately below Mr Tesoriero’s positive defence based on his expectation of a return on his investment. At this point, I am focussing on Mr Tesoriero’s evidence as to whether he in fact received any form of remuneration for services from Forum.
514 Mr Tesoriero’s evidence as to his employment and receipt of wages from Forum was directly contradicted by the contemporaneous documentary record.
515 On 14 May 2013, Mr Bouchahine emailed Mr Tesoriero a “[r]evised employment contract as requested”. The email was copied to Mr Papas. The attached document titled “Employment Contract Vince” was an employment contract for the position of General Manager of FG commencing on 1 June 2013. The contract included an execution clause which provided for execution by Mr Papas and Mr Tesoriero. The only copies in evidence were unsigned. Mr Tesoriero gave evidence under cross-examination that his employment in the role of General Manager of FG did not eventuate. Mr Tesoriero said that whilst it was discussed that he may be employed by the Consolidated Group subsequent to TIG’s investment, that did not ultimately eventuate. The evidence did not demonstrate whether Mr Tesoriero in fact executed this contract.
516 However, the evidence did establish that Mr Tesoriero, aided by Mr Bouchahine, represented to third parties that he was employed by, and renumerated by Forum. Notwithstanding that Mr Tesoriero’s evidence was that he was “clear” that he was never paid wages by FGOC or any other Consolidated Group entity throughout the entirety of the period of his involvement with Forum from 2013 to June 2021, he filed individual tax returns for the period from 1 July 2015 to 30 June 2018 in which he identified income that he claimed to have received from FGOC, which was identified by him in his tax returns as the relevant payer.
517 For the 2016 tax year, Mr Tesoriero declared an income of $398,054 from FGOC as salary for “Director – advertising”, claiming an additional $509,626 from “share of net income from trusts less capital gains, foreign income and franked distributions”. For the 2017 tax year, Mr Tesoriero declared an income of $669,035 from FGOC as salary for “Director – advertising”, claiming an additional $219,700 from “share of net income from trusts less capital gains, foreign income and franked distributions”. For the 2018, 2019 and 2020 tax years, Mr Tesoriero declared incomes of $125,000, $135,450 and $148,955 respectively from FGOC as salaries for “Consultant – management”.
518 It was not only in his tax returns, that Mr Tesoriero held himself out as being a remunerated employee of Forum. Mr Tesoriero also requested, and obtained from Mr Bouchahine, documents which stated that he was in receipt of an income from Forum for the purpose submitting applications for finance. Contextually, these applications were made in the period leading up to the establishment of Forum’s relationship with Maia and continued in the period when the Maia relationship entered the period of end game.
519 On 21 August 2017, Mr Tesoriero received an email from a finance broker, Mr Gabriel Yanes, Principal, Healthcare Capital Partners, in the following terms:
Hi Vince,
We just need something like below on company letter head signed by CFO:
________________________
To Whom it may concern:
Vincenzo Tesoriero
We confirm that the PAYG income from The Forum Group of Companies Pty Ltd for financial years ending 30 June 2017 to Mr. Vincenzo Tesoriero, will be same or higher that PAYG income recorded on Financial years ending 30 June 2016 ($398,054).
________________________________________
Cheers
Gabriel Yanes B. Sc
520 Mr Tesoriero forwarded the email to Mr Bouchahine, and asked him to arrange for the requested letter to be prepared, stating “[i]t’s to refinance the current loan we have with nwc” (NWC being a financier). Mr Bouchahine, who was about to travel overseas, forwarded Mr Tesoriero’s request to Ms Kathleen Wang (a “company accountant” in the Consolidated Group), and requested she follow up on the request. On 22 August 2017, Ms Wang provided the requested letter to Mr Tesoriero, which he then forwarded to Healthcare Capital Partners.
521 Under cross-examination, Mr Tesoriero said that although he did not recall the circumstances regarding this particular attempt to obtain finance, Healthcare Capital Partner “did do a lot of finance for us”. When cross-examined on the exact correlation between the amount of his 2016 income received from FGOC referred to in the exchange of correspondence with Mr Yanes and in his personal tax return for 2016, Mr Tesoriero denied that he was lying when he said that he had never received income from Forum. He temporarily sought refuge from the line of questioning by introducing into his answer that he did not recall, before rebounding to a positive assertion that he did not receive the income:
So yesterday, when you said that you – when you assured the court that you had not received any income or wages from the Forum Group of Companies Pty Limited in that whole period of 2013 through to 2021, you were telling lies; correct?
No, that’s not correct.
Now - - -?
There’s no way that I received that income, Mr Stoljar.
All right. Now, could I, before we explore that comment, can I take you to a – well, I suppose, just pausing there before I leave 2016, you say you didn’t receive the income; is that right?
No, I don’t recall receiving the income of 2016.
You don’t recall?
No.
Well, you may have done, but you don’t recall one way or the other; is that it?
No. No. I didn’t receive that income.
522 When it was put squarely to Mr Tesoriero that if he did not receive the income, then it follows that he was prepared to lie to a financier for the purpose of obtaining the refinancing that he was then seeking, he equivocated and did not answer the question.
Okay. So you didn’t receive the income, but you were prepared to tell a financier that you did; is that right?
I’m not sure how it was done on Forum’s books if it was done internally, but me receiving income personally, I did not - - -
If you could answer my question, you now say that you didn’t receive the income, and well, the question I’ve put to you was that you were prepared to tell a financier for the purposes of a refinancing that you did?
I don’t recall supplying this to the financier, no.
523 He was then taken to the email in which he forwarded the requested letter to the broker:
So you remember now that you did forward a letter in relation to your PAYG income to the broker for use in the refinance?
Yes. It would appear that way, yes.
And you did that according to you, knowing it to be false; correct?
Not knowing it to be false, I’m not sure how Tony would have been treated it on the books at Forum.
Well, you just told the court - - -?
But the income didn’t come to me.
- - - on your oath that you didn’t receive any income?
No, I didn’t.
And you’ve sent a letter to the broker asserting that you did, in effect; correct?
I’m not sure it would appear that way, but, yes.
And you can see now that the letter’s false, can you? To the extent you say it’s suggested that you received any income?
I would have to clarify with how it was treated on Forum’s books to see - - -
And you - - -?
- - - how – if whether I received them, but I - - -
And you knew - - -?
- - - did not - - -
- - - it was false when you sent it to the broker on 22 August 2017 at 11.35; correct?
No, I did not.
524 I interpolate to note that the above extracts from Mr Tesoriero’s cross-examination demonstrate a number of recurrent features of the way in which Mr Tesoriero gave evidence. He gave evidence which was emphatic on issues that he perceived as important to his defence. That he was actuated by self-interest was palpable. It was demonstrated by the malleability of his evidence on a range of topics. It was also demonstrated by the fact that when confronted with contemporaneous documents which contradicted his evidence, including his own documents, he did not make appropriate concessions. When caught out in a lie, his acknowledgement was mealy-mouthed.
525 When it was put to him, that it was impossible to reconcile his evidence and the evidence on this issue at the final hearing, he repeatedly doubled down on his assertion that he did not receive income and repeatedly sought to exculpate himself by referring to how Forum may have recorded things in its books:
I – I never received funds until 2017. Again, as – as – as it was treated on Forum’s books is – is a different situation. But from me receiving funds, I did not receive anything until 2017, where I received funds to make interest payments on debt that was put into the Forum business.
526 Mr Tesoriero’s reference to how “it” was treated on Forum’s books was a prime example of his attempt to evade answering questions by introducing irrelevancies. Whether Mr Tesoriero received payments from Forum is a question of fact which does not turn on how any such payments were treated in Forum’s books. He was emphatic that he did not receive such payments.
527 The next relevant exchange on the theme of Mr Tesoriero’s credibility as tested on the material relating to his employment and remuneration occurred in relation to correspondence in the second quarter of 2018. It is in this period that Mr Tesoriero contends that he received a regular monthly payment of $50,000 to make interest payments on various loans and properties.
528 Later, on 9 April 2018, Mr Bouchahine forwarded to Mr Tesoriero an email from Mr Yanes of Healthcare Capital Partners in which he noted that an unspecified lender requested “[p]ayslips that match the account that the funds are deposited to”.
529 Mr Yanes sent a further email to Mr Bouchahine, copied to Mr Tesoriero, on 19 July 2018 in which he noted that the Commonwealth Bank of Australia was “doing a new transaction for Vince and require an updated on his [30 June 2018] annual income”. Mr Yanes requested a similar letter to the letter prepared the previous year, noting that Mr Tesoriero’s income for the 2018 financial year would be the same or higher than the income of $410,000 for the 2017 financial year. The letter noted Mr Yanes’ understanding that the current annual income distributed to Mr Tesoriero was circa $600,000 per annum (since the acquisition of additional shares into the Consolidated Group). Mr Tesoriero forwarded that email to Mr Papas and noted that he was “working on getting [him and Mr Papas] increased funding” and asked for Mr Papas to call him. That same day, Mr Bouchahine sent the relevant proof of income letter to Mr Yanes, copied to Mr Tesoriero, confirming that Mr Tesoriero’s annual income distribution from FG was $600,000. The relevant part of Mr Tesoriero’s cross-examination is as follows:
Now, if you then come to FOG.1000.0001.6313, there’s an email from Mr Bouchahine to the broker to which you were copied?
Yes.
It says:
Hi, Gabriel. Hope you’re well. Please find attached proof of income for Vince as requested.
And to anticipate what you’re probably going to put to me, Mr Tesoriero, if you want to see the attachment, it says – you see it’s an attachment, scan PDF?
Yes.
If you go to FOG.1000.0001.6314, Mr Bouchahine attached a letter saying – of the same day, 19 July 2018:
To whom it may concern, this letter will confirm that Vincenzo Tesoriero annual income distribution from Forum Group Pty Limited is 600,000 per annum. If you require any further information, please call me.
Do you see that?
Yes, I do see that
And you received that?
It would appear I did receive that, yes.
And did you get back to Mr Bouchahine and say, “No. That’s false. I’m not getting any income from Forum Group.” This says Forum Group Pty Limited?
I was receiving the $50,000 a month from Forum Group, but it wasn’t treated as income, it was treated as the interest payments, but for the purpose of the broker wanted it to be shown as income. It was not a - - -
So you say now do you that you were receiving 600,000 per annum - - -?
But not as income.
- - - but you were not receiving it as income; is that right? Is that what you’re now saying?
That is correct, yes. That is what I’ve always said.
But you were happy to tell the broker that it was income; is that right?
It was to be shown how it was coming into the account, yes.
You were happy to tell the broker that it was income; correct?
To cover the interest, yes. It was income - - -
You were happy to tell the broker you were receiving income in the amount of $600,000 per annum; correct?
I’m a little confused, Mr Stoljar because it’s different to the 398, so - - -
It’s because we’re now in the 2018?
Right. Okay.
It’s the next year; do you understand that? You understand that very well, don’t you, Mr Tesoriero?
Yes, I do understand how the years go up, one after the other.
530 This was a fairly typical example of Mr Tesoriero’s approach to giving evidence which informs the findings I have made in Section I.4.1.
531 On 20 July 2018, Mr Yanes asked Mr Bouchahine whether it would be possible for the proof of income letter to be amended to increase Mr Tesoriero’s income as being in the amount of $800,000 per annum, instead of $600,000, as this “would help speed up the process for this and future transactions with CBA”. Mr Bouchahine responded confirming that he would get the information to Mr Yanes on Monday. That email was copied to Mr Tesoriero. On 24 July 2018, Mr Bouchahine sent an email to Mr Yanes, copied to Mr Papas and Mr Tesoriero, with the subject “Income” which attached a revised proof of income letter dated 19 July 2018, confirming that Mr Tesoriero’s annual income distribution from FG was $800,000.
532 The relevant portion of Mr Tesoriero’s cross-examination was as follows:
So it has been increased – there’s a replacement letter of 19 July 2018 where the amount of your income has now become 800,000 rather than 600,000 because that would assist in the negotiations with the CBA; you see that?
It would appear that way; yes.
And you receive both the email from Mr Bouchahine and the attachment which is on the screen now, being the document dated 19 July 2018 FOG.1000.0001.6312; correct?
That would be correct; yes.
And you plainly knew that the assertion that you were receiving 800,000 per annum by way of income was false; correct?
That was how the broker treated it, as income, but it was coming into our account to be paying the interest payments that he was referring to the funding that was required. So how Tony treated it when he ..... on the other side.
Mr Tesoriero, yesterday you said you didn’t receive any income at all. This morning you said you were receiving 600,000 a year in income, as I understand your evidence this morning, now, on either version you knew as at 19 July 2018, that the letter that Mr Bouchahine had provided to the broker was false; correct?
No, I don’t believe it to be false. It was – it was a way the broker explained the money coming into the account.
You were prepared to say anything at all to suit your purpose; correct?
No, that is not correct, sir.
533 In the scheme of what is in issue in the Westpac Proceeding against Mr Tesoriero, it is not necessary to determine whether Mr Tesoriero was in fact employed and remunerated in respect of his employment, or for services rendered to FGOC. If Mr Tesoriero is to be believed on his sworn evidence in these proceedings to the effect that he never received any payments at all from the Forum Group until around 2017, whether by way of dividend, interest payment, or any return on or of his capital and was not paid a salary and did not receive any remuneration as a director, then what is clear on the evidence before me is that he was happy to represent to third parties that he was in fact so employed and being remunerated accordingly. If, on the other hand, the contemporaneous representations that he made at the time in relation to his employment and remuneration were in fact true, then it is clear that in giving his evidence in these proceedings, he has been untruthful, over a prolonged period of time, culminating in his sworn oral evidence given at the final hearing. It does not much matter which, if either, of the two scenarios represents the truth, regardless of what may be the true position I find that Mr Tesoriero has demonstrated himself to be dishonest in his business dealings. His evidence is not reliable unless it is supported by legitimate contemporaneous documents or is against interest.
534 Mr Tesoriero and Mr Bouchahine were prepared to mislead the broker for the purposes of obtaining additional finance. Mr Bouchahine admitted that he created the letter and sent it to Mr Yanes knowing it to be false and knowing that it was to be used to facilitate the provision of finance. Mr Tesoriero’s refusal to admit that fact was not credible. His evidence in relation to his employment and remuneration demonstrates that he was dishonest in his dealings with financiers. He was dishonest for the purpose of obtaining financing, which was his objective. It is not necessary to determine whether he would have achieved that objective absent his dishonesty, although the fact that he was asked to provide evidence of his income suggests that the evidence required was material to the financier’s decision as to whether to lend and if so, on what terms. His preparedness to maintain his lies in this section of his sworn oral evidence was one of the most powerful indications that he was not telling the truth on the issues that he perceived to be adverse to the story he was pushing as part of his defence of the Westpac Proceeding. Had it been relevant and necessary to decide whether in fact Mr Tesoriero performed work for FGOC and the Consolidated Group, I would conclude that the weight of the evidence demonstrated that he did not. His activities were concentrated on and directed to the furtherance of the work associated with what Mr Bouchahine accurately described as Mr Tesoriero’s and Mr Papas’ “personal projects”.
I.12 Mr Tesoriero’s knowledge of being a director of Forum Finance
535 As mentioned, Westpac relied on this section of Mr Tesoriero’s evidence as another demonstration of the fundamental difficulties inherent in his evidence, particularly with respect to his refusal to make appropriate concessions. In his cross-examination, Mr Tesoriero said that he only became aware that he was a director of Forum Finance in about 2021. He adhered to that evidence notwithstanding being confronted with contemporaneous documents to which he was privy at the time.
536 The contemporaneous records demonstrate that on 22 June 2017, Mr Papas emailed Mr Bouchahine requesting that Mr Tesoriero be made a director of Forum Finance “urgently”. Mr Bouchahine then emailed Mr Tesoriero a consent to act as a director of Forum Finance that he was required to sign and by further email, an updated company extract for Forum Finance. On 23 June 2017, Mr Bouchahine emailed Mr Papas and Mr Tesoriero confirming Mr Tesoriero's appointment as a director of Forum Finance (with effect from 1 April 2017). The corporate register maintained by ASIC records that Mr Tesoriero was a director of Forum Finance from 1 April 2017. Mr Tesoriero and Mr Papas were the directors of Forum Finance throughout the period of the fraud. Notwithstanding that he was appointed as a director in 2017, Mr Tesoriero apparently forgot or failed to apprehend that he had been so appointed. On 18 November 2018, Mr Tesoriero and Mr Bouchahine exchanged emails in which Mr Tesoriero indicated that he did not know if he was a director of Forum Finance and Mr Bouchahine responded that he had already been appointed as a director. In the face of these contemporaneous records, Mr Tesoriero refused steadfastly to accept that he knew before June 2021 he was a director of Forum Finance.
537 On 6 July 2017, Mr Bouchahine and Mr Tesoriero exchanged emails following an enquiry made by a mortgage broker with whom Mr Tesoriero was then dealing. The broker had queried whether income flowed from FGOC to the Tesoriero Investment Trust. Mr Tesoriero asked Mr Bouchahine whether he could “provide something” to that effect. Mr Bouchahine responded by saying that no income flowed from Forum to the Tesoriero Investment Trust. This contemporaneous exchange is significant in two respects. First, it is another example of Mr Tesoriero fishing for information to provide to the financiers that he is courting. Secondly, it is a contemporaneous record of Mr Tesoriero being told that TIG, in its capacity as trustee of the Tesoriero Investment Trust, was not receiving a direct return on its investments in FGOC in the form of an income stream as at July 2017.
I.13 Mr Tesoriero’s belief in the success of the Forum business
538 Mr Tesoriero’s defence to the allegation that he relevantly knew of the fraud is predicated on his alleged belief of the success of the Forum business. The contemporaneous documents paint a picture of the Forum business as experiencing considerable growth and success. Many of the documents proclaiming and celebrating Forum’s expansion and success emanate from Mr Papas. For example, Mr Papas circulated what appears to have been an email to the staff of the Forum entitled “Friday Forum” in which he set out an update on the latest Forum business developments and client dealings. In the 28 July 2014 edition, Mr Papas said that Forum had grown its revenue from $14 million to $34 million in the most recent financial year. He recounted new businesses which had been “brought into the Forum family” and thanked new staff members who had joined Forum as a result of its business acquisitions. Mr Papas included in the email circular photographs of staff attending the “Forum Sales Conference” of July 2014, appearing to engage in team building activities. Mr Tesoriero did not attempt to demonstrate that the “Friday Forum” emails were sent regularly, and if so, over what period. So far as I could ascertain there were very few examples in evidence and they dated from 2014, with one in 2015.
539 Another illustration of Mr Papas’ ambition for expansion of the Forum Group appears in an email from Mr Papas to Forum shareholders 30 September 2014 in which he says "[l]et’s go boys. How quickly can we get to 350Mil book??" In his evidence, Mr Tesoriero said that he understood “350Mil book” to be a reference to the “finance book” for Forum’s business. When asked to explain how Forum made money Mr Tesoriero said by “clipping everything that was sold through the finance”. He said that Mr Papas regularly discussed the size of the book with him. Mr Tesoriero did not in his evidence point to any evidence to support what he was told by Mr Papas.
540 Mr Tesoriero described in his evidence what he understood to be the “rapid rate” of growth of Forum’s business. Although he was a director and drew a wage from Forum, his explanation of for his understanding of Forum’s rapid growth was based on superficial and highly generalised observations. He said that each time he travelled from Melbourne, where he resided, to the Sydney offices of Forum which occurred about “every months [sic] or two months, there was always a new face or – or a few new faces in the office, and the guys were always talking about deals that they signed up, and our revenue was constantly on – on the rise”. He said Forum’s revenue “was getting rolled back into the business”.
541 Westpac submitted forcefully that Mr Tesoriero knew that the large amounts of money that he was able to extract from FGFS for his personal projects was, to put it plainly, too good to be true and that Mr Tesoriero either knew that or wilfully shut his eyes. Mr Tesoriero’s assertions about his belief in the apparent growth of Forum’s business were not supported by anything resembling even a rudimentary business analysis. In his evidence he was able to point to little other than a superficial veneer of success. He said when he visited the office there were more customers, more office space and more employees. Although the evidence demonstrates that he received the Forum financial accounts from time to time and he received detailed cashflow spreadsheets after FGFS was established, he did not attempt to demonstrate in any meaningful way why it was that he believed the business was so successful.
542 I do not accept Mr Tesoriero’s evidence that he believed during the period of the fraudulent scheme that the Forum business was being operated in a way which legitimately supported the significant sums that he, and to his knowledge, Mr Papas, were extracting from FGFS to apply to their personal projects. I address this in greater detail in addressing the Maia events of 2018.
543 I now turn to the development of the various overseas “Iugis” entities which were a significant part of the expansion of the Forum Group from 2017 onwards. By way of recap, in terms of the fraudulent scheme, Iugis NZ was one of the four Primary Recipients of the tainted funds. Iugis NZ was the only one of the Primary Recipients that was not part of the Consolidated Group. Iugis NZ was the Primary Recipient for all funds advanced by WNZL, being in total NZD $58,763,505.
544 There were eight other Iugis entities. They were Iugis, Iugis (UK), Iugis Holdings UK, Iugis GFS UK, Iugis Finance UK, Iugis Greece, Iugis Energy Greece and Iugis Waste. Iugis Holdings UK is the parent company of Iugis, Iugis Finance UK and Iugis Energy Greece. Iugis, Iugis (UK), Iugis Greece and Iugis Energy Greece are all active parties to the Westpac Proceeding and SMBC Proceeding. Iugis Holdings UK and Iugis Waste are active parties to the SMBC Proceeding only.
545 On 28 April 2017, Iugis (UK) was registered in England and Wales. Mr Papas was appointed as the director and was also the sole shareholder. On 22 December 2017, Iugis Holdings UK was registered in England and Wales, with Mr Papas as a director and the sole shareholder. Also on that date, Iugis Finance UK was registered in England and Wales, with Mr Papas appointed a director (with Iugis Holdings UK the sole shareholder). On 21 March 2018, Iugis NZ was registered. Mr Papas was appointed the director, and was the sole shareholder.
546 In around September 2018, Mr Papas was making arrangements to shift away from the ORCA machines manufactured in Canada by a company called Totally Green Inc to similar machines manufactured in Greece and supplied to customers through the Iugis entities. There is contradictory evidence as to the reason why this shift occurred. Mr Bouchahine gave evidence that the relationship with the Canadian manufacturer began to break down due to a disagreement between Mr Papas and the Canadian manufacturer. Mr Tesoriero gave evidence that the production of the ORCA machines by the Canadian manufacturer could not keep up to meet the volume of sales and as a result, Mr Papas explored other options for producing the machines.
547 Mr Bouchahine could not remember exactly when this shift occurred, however it appears that few or no funds were paid to the Canadian manufacturer after September 2018. Mr Bouchahine said that he understood that the first batch of Iugis machines from Greece did not work, resulting in a lag of machines being brought into Australia at the time. I was not taken to any evidence on this issue.
548 In December 2018, Mr Papas met with a Greek metalworks manufacturer, Mr Giamouridis, in Thessaloniki, Greece about making Iugis waster digestor machines. There is something of a lacuna in the evidence about the role of the Giamouridis parties. As mentioned at the outset, Westpac settled its claim against the Giamouridis parties during the hearing before the Giamouridis parties went into evidence.
549 On 12 April 2019, Iugis was registered in Australia. Mr Papas was appointed sole director and secretary. Mr Bouchahine gave evidence that Iugis was set up as the Australian entity of the Iugis entities and was for the purpose of supplying Iugis machines to customers.
550 Mr Tesoriero described going to Greece with Mr Papas in around 2020 where he said he observed the factory where the Iugis machines were being built and tested and saw warehouses storing the Iugis machines. Mr Tesoriero’s evidence on this issue was not supported by any contemporaneous documents. It was also contradicted by his own evidence in which he later rejected any involvement with Iugis or the ORCA machines as he was “not across this division of the business”. Having regard to the conclusions I have drawn in relation to Mr Tesoriero’s credit, it would be unsafe to rely on this evidence. It is exceedingly vague in any event.
551 Eqwe assisted Mr Papas in obtaining funding from various banks, including Westpac and Societe General, for the ostensible purpose of purchasing Iugis machines. Bouchahine. Mr Bouchahine recalls that in around late 2018, representatives from Eqwe were meeting with Mr Papas almost on a daily basis. Around the same time, Mr Papas was also meeting with Rothsay accountants and a tax partner at Ernst & Young on advice for setting up local and international Iugis entities and advice on where the Iugis head office should be located. I infer based on the timing of the activity that Mr Bouchahine recounts in relation to Mr Papas’ activity in relation to the Iugis machines that this occurred in the context of the proposed international funding proposal that was under discussion with Maia at around this time.
552 Mr Bouchahine recounted in his affidavit that Mr Papas told him that Iugis was ineligible to receive funding as it was relatively newly incorporated and accordingly Forum was being used to secure funding on its behalf until Iugis had sufficient credit history to obtain funding in its own right. In paragraph 39 of his affidavit, Mr Bouchahine recounted the conversation as follows:
39. Bill Papas also explained to me that lugis Entities required finance for its customers, but was ineligible to receive funding as it was relatively newly incorporated. Accordingly, Forum Finance was being used to secure funding on behalf of the lugis Entities until the lugis Entities had sufficient credit history to have the funding transferred to it in its own right. Bill Papas and I would have conversations to the following effect:
Bill Papas said: lugis needs equipment funding for its customers but I can 't use lugis at the moment for funding, so we 're going to fund the contracts under Forum Finance, until we can get funding lines under the name of lugis. This is because [the lugis Entities] haven't been established yet for at least two years which is the timeframe required to be approved for funding.
Bill Papas also said: As the funding all relates to lugis, I don 't want any of those numbers to appear under the Forum banner. So just transfer the money out of Forum Finance, into FGFS, for the time being, until we can establish credit lines for Iugis.
553 In cross-examination Mr Bouchahine accepted that he moved money from Forum into FGFS to conceal from financiers the fact that Iugis, an entity which would not qualify for funding, was in fact being funded with their funds. Although Mr Bouchahine insisted that at the time he did not think that in doing this, they were deceiving the financiers, he conceded that, in hindsight, the true effect of the arrangement was clearly to deceive funders. He conceded that if he had properly considered the arrangement at the time, he would have realised this.
554 On 23 November 2017, FGFS was incorporated at the instigation of Mr Papas and Mr Tesoriero. Critically, despite its name it was not part of the Consolidated Group. Its accounts were not prepared by the accountants responsible for the audited consolidated accounts of the Forum Group. Rather, its accounts were prepared by Mr Stefanetti, the accountant for the Tesoriero family, and were not audited. Mr Papas and Mr Tesoriero were the only directors and shareholders of FGFS. Mr Papas was a director from 23 November 2017 onwards. Mr Tesoriero was a director from 13 November 2018 to 30 April 2020.
555 As mentioned, Mr Bouchahine readily conceded in cross-examination that FGFS was a personal project of Mr Papas and Mr Tesoriero and that it carried on no legitimate business. FGFS provided loans to various entities which Mr Bouchahine described as personal projects of Mr Papas and Mr Tesoriero. No loan agreements were ever in place, the loans were not secured and Mr Bouchahine was not aware of any due diligence having been carried out by FGFS in respect of those entities’ ability to repay the borrowed funds. No PPSR registrations were put in place by FGFS to secure its position. The funds appear to be handed over by FGFS on completely unclear terms, without any formal written record or security. Mr Bouchahine’s evidence on this issue is significant. He was uniquely placed to assess the operation of FGFS and its relationships to companies in the Consolidated Group by virtue of his function as the senior finance officer in both FGFS and the Consolidated Group. His evidence on this issue was unequivocal. I accept it.
556 Mr Tesoriero’s position in relation to FGFS was markedly different. Mr Tesoriero’s account of the arrangement between him and Mr Papas underwent several evolutions during the life of the Westpac Proceeding, each of which is addressed below. The third and final iteration advanced by Mr Tesoriero, centred on FGFS. Mr Tesoriero maintained that the context for the establishment of FGFS was that Mr Papas was continuing to look to him to provide material financial contributions to the Forum business, leveraged against his family properties, and that he had consistently continued to answer Mr Papas’ calls.
557 Mr Tesoriero said that from around 2015, he had discussed with Mr Papas his constant lament that there had been much expansion of the Forum business by acquisitions and by the rollover of funds including the funds he had contributed, with no money coming out and that this was contrary to the original plan under the LeaseIt prospectus of a sell out at a 10 times multiplier within a two-year timeframe.
558 For the first time in his oral evidence in chief , he said that in about August or September 2017, shortly before FGFS was incorporated on 23 November 2017, he had a discussion with Mr Papas in Queensland, in which Mr Papas explained that:
(1) Mr Papas was setting up FGFS;
(2) Mr Papas was going to put some seed capital into it;
(3) FGFS would fund some in-house deals itself;
(4) FGFS would otherwise act like a funder for the group, taking a “clip” on funds received from financiers on contracts and funding those contracts on behalf of the Forum group; and
(5) profits received from the activities of FGFS would offer some return on the capital Mr Tesoriero had put into the Forum business.
559 It is convenient to pause at this point to examine each iteration of Mr Tesoriero’s explanation of the arrangement he says he had with Mr Papas whereby he would receive a return on his investment in the Forum business.
I.16 Mr Tesoriero’s claims regarding return on investment
560 As mentioned, Mr Tesoriero advances a positive defence, which after several permutations, settled on an assertion to the effect that Mr Tesoriero understood at all relevant times that the funds received by him and his associated companies were a legitimate “return” on his investment in the Forum business. He relies on his expectation of receiving a substantial financial return on his significant investment in the Forum business to defeat Westpac’s contention that he had the requisite knowledge of the fraud so as to render him, or through him, and the Tesoriero Entities, liable. He contends that his belief about receiving a return on his investment forms the context in which Westpac’s allegation of Baden category 4 knowledge falls to be assessed.
561 In his defence filed on 20 April 2022, he pleaded that “the Tesoriero Return” was money received by him or his related entities (the Jointly Owned Entities, the Tesoriero Entities, 275 High St and 286 Carlisle St) by way of a return on a capital investment made in the Forum group of companies by him or others on his behalf. He otherwise did not admit receipt of money derived from the Westpac Fraudulent Transactions and denied that he had any knowledge whatsoever of any monies received being derived from tainted funds.
562 In his amended defence filed on 31 October 2022, he reframes his position on the Tesoriero Return by asserting that he expected to receive investment returns by way of interest and capital repayments; that the funds advanced to each of the entities were by way of loan; that he believed that investment returns, when made available by the Forum group of companies, would be and were, in part, used to offset and therefore repay the loans advanced by FGFS to the Tesoriero Entities and to the Jointly Owned Entities. Subsequent references to the “Tesoriero Return”, including in the context of payments from FGFS and funds held on trust, are deleted from the ASOC. The topic of Mr Tesoriero’s belief concerning the advances recorded in the records of FGFS as loans is addressed in Section I.17. The short point for present purposes is that in his oral evidence at the final hearing he disclaimed any awareness of the funds being advanced by FGFS by way of loan.
563 In closing submissions Mr Tesoriero submitted that:
Insofar as FGFS directed expenditure to projects or assets concerning Mr Tesoriero, that was consistent with his understanding and expectation that, having invested such substantial sums of money into the apparently very successful Forum business and with a sale of that business having been delayed (seemingly indefinitely), he would receive some returns from his investment by way of profits made by FGFS.
564 It is worth noting that the final expression of the arrangement as pressed in Mr Tesoriero’s closing submissions focussed on Mr Tesoriero receiving a return on his investment “by way of profits made by FGFS”. In this way, Mr Tesoriero seeks to circumvent the oddity of an arrangement whereby he would be paid returns on his investment in FGOC, the holding company of the Consolidated Group, by FGFS, Mr Papas and his private company, which sat outside the Consolidated Group.
565 The positive return on investment defence advanced by Mr Tesoriero appears to be relied on in two respects, although it is not completely clear. The first function of the defence may be addressed relatively quickly. If it is the case that Mr Tesoriero contends that the funds which flowed from FGFS to his associated entities were in fact not funds that were tainted by the fraudulent scheme but were instead profits legitimately earned by FGFS, then I reject that contention. As has been made plain from the outset of these reasons, Mr Tesoriero conducted his defence of the Westpac Proceeding on the basis that the fraud was established but that he did not have the requisite knowledge so as to render him liable. I did not understand him to be pursuing the return on investment defence on the basis that the funds received by him and his associated entities were other than tainted. The second function of the defence, which I did understand Mr Tesoriero to be running, was to defend against a finding of constructive knowledge on his part.
566 Mr Tesoriero was cross-examined on his varying explanations of the parameters of his investment in Forum. He gave three different versions, each of which was used to explain his expectation of receiving, and indeed, his entitlement to receive, a return on the investment that he had made in Forum. By way of shorthand, I will refer to the various permutations of Mr Tesoriero’s positive defence as his investment theses.
I.16.1 First version of investment thesis
567 The first version of the investment thesis that Mr Tesoriero put forward was in his affidavit sworn on 8 November 2021. This version did not feature in his examination-in-chief at the final hearing. At the final hearing, he advanced in his oral evidence in chief what I have described below as the third version of his investment thesis. The second version was contained in the outline of evidence that he provided before the hearing.
568 On this version, Mr Tesoriero says that he invested on the basis of the LeaseIt prospectus. He says that:
I thought Forum Group sounded like a good investment, given Bill's track record of growth and sale and his partner record with leasing finance. My expectation was that I would invest in the company, oversee its growth within the first few years, and then exit with my investment capital, and a return on that investment, and then invest elsewhere.
I invested in Forum Group at the very beginning of the Group, with an initial investment of $1 million. When put together with investments from Bill and a few other early employees, I ended up owning a little over a third of the company. My exact shareholding percentage fluctuated up and down over the years, as I and others made further financial contributions to the business.
I made my initial $1 million investment in Forum Group with funds that I borrowed against the property referred to in paragraph 13 above. Between 2012 and 2019, I made further financial contributions to the business of approximately $6-$9 million, again borrowing against properties I owned.
At the outset, the plan I discussed with Bill and the other investors was for Bill and his associates to grow the business quickly, and then for me to exit the business on the business being valued at around $50-60 million, after it was publicly listed by Bill through one of his contacts at Macquarie Bank.
However, after the first couple of years, Bill's plan for the business changed to a strategy that involved acquiring a range of other businesses, and growing the business to a much larger size. At this point Bill started talking about targeting a $1 billion listing. It became clear in around 2014 that it wouldn't be possible for me to exit my investment as initially intended. But the idea of a sale kept getting pushed out, and the size of the business grew beyond what I initially had in mind. At the same time, I continued to incur interest at a rate of approximately 10% on the funds that I had borrowed to invest in the Group. This was frustrating for me as I was significantly further in debt than when I first made my investment.
569 I pause at this point to note that there is a contemporaneous document in July 2015 that cuts across Mr Tesoriero having an understanding at that point in time that he had an entitlement to access the profits of the Forum business. On 24 July 2015, Mr Darren McCoubrie (using the email signature CFO of the Forum Group) emailed Mr Tesoriero copied to Mr Papas and Mr Bouchahine, under the subject line “Further Investment in Forum Group”. Mr Tesoriero said that Mr McCoubrie worked alongside Mr Bouchahine. The email opened by referring to a conversation between Mr McCoubrie and Mr Tesoriero. In the email, Mr McCoubrie outlined information relating to “P Class Redeemable Preference Shares” with a view to allocating Mr Tesoriero’s investment into an “income producing instrument”. Amongst other things, Mr McCoubrie described the relevant preference shares as providing priority rights to the profits of FGOC at an interest rate of 10 per cent. The email concluded with Mr McCoubrie’s recommendation that “I would also avoid any restructure of your existing holding in FG to avoid any potential CGT trigger event”. No such preference shares were ultimately issued.
570 Mr Tesoriero was cross-examined on this email. Mr Tesoriero’s position was that he “genuinely” did not recall discussing the matters described in the email with Mr McCoubrie. He said that “maybe at a higher level about – we might have discussed about the income producing instrument.” The following exchange then occurred:
…you understood that you had no automatic – or TIG, I should say, had no automatic right to any income or distribution merely by virtue of being a shareholder in the Forum Group of Companies; correct?
No, I wasn’t aware of that.
Well, you’re obviously looking with Mr McCoubrie at getting, or converting, TIGs investment into what was described as an income producing instrument; correct?
I wouldn’t have been having these – any discussions like that about income coming from the business would have been had with Bill. I never met Darren. I – you know, I had one phone conversation with him.
It’s perfectly obvious from this email, Mr Tesoriero, that you had discussed with Mr McCoubrie converting TIGs investment in shares in the Forum Group of Companies Pty Limited into what he describes as an income-producing instrument. See that?
I – I see that, but I – I see the email being written by Darren McCoubrie. I don’t see it being written by me, so – again, if you would like me to be specific - - -
Well, did you write back to him and say “I don’t know what you’re talking about”?
I don’t know. Is there – is there a response?
And he has copied in Mr Papas and Mr Bouchahine. Do you see that?
I can see that. Is there a – is there a response to this email, Mr Stoljar?
You were concerned at that time because you knew that TIG could only get a return on its investment if a dividend was declared or there was some return of capital to shareholders; correct?
No, not correct. I – I did not know.
And you wanted to have some entitlement to income, correct, on the part of TIG; correct?
No, not correct. No.
571 This email suggests that prior to mid 2015, Mr Tesoriero’s expectation of obtaining a return on his investment was dependent on a liquidity event rather than his investment generating an income stream based on a right to participate in the profits of the business other than by way of a dividend being declared, which would in the ordinary course be subject to any such profits being retained and reinvested in the business instead of being distributed as a dividend.
572 Moving forward to 2017, Mr Tesoriero then that in around 2017, when Mr Papas asked him to contribute “a further few million”, he made his frustrations known to Mr Papas, namely that he had contributed up to about $5 million to the business over a period of five years and had not received any return on his capital contributions. He says that this led to a discussion with Mr Papas in which they struck a deal that if Mr Tesoriero made further financial contributions to the business at that point in time, he would “very soon begin to receive a return on my financial contributions to the business.” He says that on this basis he agreed to make a further financial contribution to the business “in the amount of a few million dollars” because he believed he would soon be getting a return.
573 On this version of the investment thesis, Mr Tesoriero contends that it was agreed between them that Mr Tesoriero would receive his “return” by Forum:
(1) covering loan payments in respect of the loans that Mr Tesoriero had taken out in order to raise the for funds which he had invested in Forum and that were secured against properties owned directly or indirectly by Mr Tesoriero prior to his investment in Forum; and
(2) providing him with funds as needed for the purpose of making new property acquisitions through SPVs.
574 Mr Tesoriero said that the provision of funds to acquire new property was particularly helpful to him due to the difficulties he had in obtaining finance for properties purchased through SPVs as the majority of these loans were secured against the properties themselves.
575 On this first version of his investment thesis Mr Tesoriero swore that:
between 2012 and 2019 I made financial contributions of between $7 and $10 million to the business. Since 2017, I have received approximately $12 million from the business, …, either directly or through entities I control, as a return on and/or of my financial contributions to the business.
576 In his cross-examination Mr Tesoriero was taken to this passage of his affidavit. He said:
When it says the 12 million that has come back, we’re referring to – across all of the different entities, property entities and the business entity. It’s not specific to Forum Group.
Mr Tesoriero’s reference to “we’re referring to” in the context of his own affidavit is odd.
577 When cross-examined on his affidavit, Mr Tesoriero adhered to his evidence that until 2017, he did not receive any payments from the Forum Group (in the form of a dividend, interest payment, or return on or of capital contributions). His cross-examination on this topic is addressed above.
578 On Mr Tesoriero’s first version of the investment thesis, he received a return that exceeded his investment.
579 As with much of Mr Tesoriero’s evidence, Mr Tesoriero’s first account of his investment thesis is somewhat ambiguous. Mr Tesoriero could not confirm the exact amount invested as a further contribution after striking the deal with Mr Papas in 2017, he ultimately agreed that it was around $2 million. Mr Tesoriero could not confirm precisely when the further contributions were made. Mr Tesoriero closed his case on the basis that he made “at least” $4.8 million worth of investment in “Forum up to May 2017 by way of equity contributions”. All of Mr Tesoriero’s alleged further contributions after May 2017 took the form of contributions to various property purchases. He made no investments in Forum whether directly or indirectly in the form of share subscription or capital contribution after May 2017.
580 A significant anomaly, to put it neutrally, in the first version of Mr Tesoriero’s investment thesis is the complete absence of any reference to FGFS being established as a private company of Mr Tesoriero and Mr Papas as a means of effecting the 2017 deal reached between them. In his first pass over his investment thesis, Mr Tesoriero was completely silent on his later contention that FGFS was established for the purpose of, and in order to, deliver to Mr Tesoriero the return on his investment that he had been expecting, from the inception of his investment in Forum in 2013, and ultimately as a result of the deal that he says he struck with Mr Papas in 2017. This aspect of Mr Tesoriero’s investment thesis lay dormant until he came to give oral evidence at the final hearing. This aspect of his evidence is addressed below under the subheading third investment thesis.
I.16.2 Second version of investment thesis
581 The second thesis was presaged in Mr Tesoriero’s outline of evidence dated 20 January 2024 served on the other parties in advance of the hearing. Mr Tesoriero was cross-examined on his outline of evidence, which forms part of the Court Book. I have only relied on such parts of Mr Tesoriero’s outline of evidence as he was cross-examined on.
582 In order to follow Mr Tesoriero’s cross-examination on his proof of evidence, it is necessary to first contextualise his proof of evidence. Orders were made for the filing and service of evidence. As is not unusual in cases such as the present involving serious allegations that if established may result in criminal prosecution, Mr Tesoriero took the position that if he elected to give evidence he would give evidence orally. Mr Tesoriero was then ordered to serve an outline of the evidence that he was likely to give if he elected to give evidence at all. The outline was prepared by Mr Tesoriero and signed by his legal representative. When he gave oral evidence, it was put to him, and he confirmed, that he had carefully reviewed the outline of evidence and confirmed its accuracy prior to it being filed and served on the other parties:
And I take it you checked through a copy of this before it was served on the other parties?
I would say that I did, yes
And you were checking through to ensure that it was accurate; correct?
Correct.
583 The version of Mr Tesoriero’s investment thesis embodied in his proof of evidence has one core similarity with the first version in that Mr Tesoriero says that, directly or through his family, he invested $4.8 million into the Forum business between about late 2012 (or 2013) and 2017 and had not received any return (in the very broad way in which Mr Tesoriero uses that expression). That is the extent of the similarity between the first and second versions of the investment theses.
584 In the second version, Mr Tesoriero says that:
(1) in the course of a discussion with Mr Papas in 2017 about Mr Tesoriero’s investments, Mr Papas raised with Mr Tesoriero a proposal that returns on their respective investments in Forum could be used to finance the acquisition of real properties to develop and sell or manage together, given Mr Tesoriero’s background in property development; and
(2) he understood that the properties that they would buy would be bought in the name of the Jointly Owned Entities or the Tesoriero Entities using funds from the accumulated profits of Forum.
585 Mr Tesoriero does not identify which of the properties in issue in these proceedings he says were purchased pursuant to the arrangement he reached with Mr Papas as a result of this agreement.
586 Notwithstanding common themes, there are significant inconsistencies between this second iteration of the investment thesis and the first iteration (and, also the third iteration which is addressed below). A material difference between Mr Tesoriero’s first expression of the investment thesis and the second is no reference to the deal being premised on Mr Tesoriero or his associated entities making further contributions post 2017. Another point of distinction is that there is no reference in the second iteration of Mr Tesoriero’s investment thesis to the establishment of FGFS, as a new private entity, or to FGFS being the vehicle by which the returns would be delivered. As mentioned, that thread remained dormant until Mr Tesoriero revealed the third version of his investment thesis when giving oral evidence at the final hearing.
I.16.3 Third version investment thesis
587 I now return to the third version of Mr Tesoriero’s investment thesis, which emerged in his oral evidence at the final hearing. It was revealed progressively in the course of examination-in-chief and then evolved in cross-examination. One of the distinguishing features of the third expression of Mr Tesoriero’s investment thesis was that the establishment and operation of FGFS emerged as fundamental to the deal allegedly struck between Mr Tesoriero and Mr Papas in 2017, which saw the vast majority of the funds fraudulently obtained from the financiers diverted to FGFS.
588 Mr Tesoriero in his evidence in chief said that at a breakfast meeting in around August or September 2017, Mr Papas and Mr Tesoriero discussed a proposal to enable Mr Tesoriero to “get some money out” of the business, rather than it being “rolled in” to facilitate the growth of the business. Mr Tesoriero said that Mr Papas told him that he was setting up a new entity to act like a “funder” or “treasury for the group”. This entity proved to be FGFS.
589 In his examination-in-chief, Mr Tesoriero was asked to describe the circumstances surrounding the establishment of FGFS. Mr Tesoriero said:
Bill met with me and said, “I’m setting up this entity”. It’s going to work like a funder for the business. I didn’t know too much about it, it just explained that, you know, be a division that would be set up to clip all these contracts that we will go through, take a percentage and roll them back into the group.
590 Mr Tesoriero explained:
He said, and I asked – he said it was going to act like a funder for the group?
Like a funder for the group; yes.
And did he say what he meant by that?
So basically, money would come into it, it would make its percentage clip, like – like all brokers do. And then on top of that, it would make money on deals from the seed capital that he had put in, the money that would be regurgitated from this percentage clip.
Okay. So it would make a clip like all brokers do. Did you discuss with him what he meant by that?
Not in infinite detail, but basically, like a brokering house does, where they take one or two per cent depending on the deal.
591 In cross-examination, Mr Tesoriero said:
It was going to act as the treasury for the group, and funds would come into that, that were borrowed by Forum Finance. It would then go back through Forum Group Financial Services. Forum Group Financial Services would make a clip, and pass it back through the group again, is what I understood, and it would act as the treasurer, and take a fee for doing that service.
Take a fee from who?
I don’t know. From the contract, from the customer.
592 Later in cross-examination, Mr Tesoriero said:
So is this – tell me if I’m getting this right; you’re saying that, in sense, FGFS is going to be a new business. This what you said yesterday, “Mr Papas is going to put his own seed capital into it”, correct?
Correct, yes.
You don’t know how much?
No.
Never asked him?
No. Never asked him, no.
And it was going to generate its own funds?
Generate its own funds, how do you mean?
By taking, as you put it, a clip from the customers, correct?
Correct, yes.
And, what, return those funds to the shareholders, is that right?
To the shareholders of FGFS, yes.
Yes?
Yes.
Which would be yourself and Mr Papas, is that the idea?
That’s correct, yes.
593 Mr Tesoriero said:
And then, having – the funds having arrived at FGFS, they would then be disbursed by yourself or Mr Papas and used to fund the acquisition of assets. Correct?
A small portion of regurgitated funds would be used, but the majority would go back through Forum Group.
594 Mr Tesoriero clarified that the term “regurgitated funds” was in reference to “profits made on contracts that were put back in”.
595 Mr Tesoriero could not explain how FGFS would legitimately pull off the operating model that he described, of receiving funds without incurring liabilities in relation thereto and then generating an income by its unfettered use of these funds to take a “clip” as the funds transited through its accounts. He never asked how much seed capital Mr Papas intended to, or had, invested. He could not recall the details of any other discussions about the structure of FGFS. He said he did not hear much about the arrangement after the initial discussion in August 2017. Mr Tesoriero did not record or request that the arrangement be recorded in writing. That he did not is odd to say the least if what he is saying is true. The alleged arrangement was, on Mr Tesoriero’s evidence, significant to him in that it represented a means of opening the sluice to the substantial flow of funds he believed to be his due as a return on his substantial investment in Forum. On his account, the arrangement was struck following years of constant lament on his part to Mr Papas following his initial expectation, based on the LeaseIt Prospectus, of a liquidity event within two years that would enable a 10 fold return. Yet, he made no note of the new deal and asked for nothing in writing from Mr Papas.
596 This third version of the investment strategy does not feature in Mr Tesoriero’s pleadings, outline of evidence, or his 8 November 2021 affidavit. Mr Tesoriero accepted that this was so in his oral evidence.
597 When challenged, Mr Tesoriero gave evidence that he believed all three versions of his evidence were consistent. They are not. Each version represents a Darwinian adaption of Mr Tesoriero’s story in response to a change in Mr Tesoriero’s perception of the prevailing conditions. I do not accept Mr Tesoriero’s evidence that he held an understanding at any of the relevant times in terms of the explanations he gave about the amorphous notion of an entitlement to a return on his investment. Specifically, I do not accept that Mr Tesoriero understood that the funds that flowed from FGFS to entities in which he had an interest were derived from profits earned by FGFS’s clipping activities and represented a return on his investment in FGOC.
598 The affidavit he swore on 8 November 2021 was sworn relatively shortly after the fraud was discovered and proceedings were commenced. It was sworn at a time when Mr Tesoriero knew he had been personally joined as a respondent to the Westpac Proceeding and that many of the companies he was associated with had also been named as respondents. He and his companies were subject to extensive freezing orders. One would expect that his recollection, if it be truthful, would be more accurate and comprehensive at the earlier point in time, given the relative proximity in time and what was at stake from Mr Tesoriero’s perspective. Mr Tesoriero asks the Court to accept that the version that he proffered in his oral evidence which was not disclosed or referenced in his earlier affidavit or his outline of evidence, and in respect of which he made no note, is truthful. While it may well be true that when Mr Tesoriero made his affidavit he did not have access to a complete suite of documents, the revisions and elaborations that he has since made in his second and third versions are not the product of him locating documents from which he has refreshed his memory. His account of what, if he is to be believed, was an important conversation he had with Mr Papas and of which he has no contemporaneous record, has materially altered. It has the hallmark of recent invention. I reject Mr Tesoriero’s evidence led in support of his positive defence based on his expectation of a return on investment.
599 It will be necessary to return below to Mr Tesoriero’s evidence in relation to FGFS and what he understood about the way in which it operated.
600 In his amended defence in the Westpac proceeding, Mr Tesoriero pleads at various points that FGFS “advanced funds to the Tesoriero Entities and the Jointly Owned Entities by way of loan” (the Loan Defence). This defence is replicated for 64-66 Berkeley Street, 14 James Street, 26 Edmonstone Road, 5 Bulkara Street, 23 Margaret Street. Other Tesoriero Entities are described as receiving funds “by way of loan”, although not from FGFS specifically. These include 1160 Glen Huntly Road, 14 Kirwin Road, Canner, 123 High Street, 160 Murray Valley, 31 Ellerman Street, 4 Cowslip Street, 55 Nolan Street, 89 Betka Road, 9 Gregory Street, 9 Main Street, 275 High Street, Mangusta, 193 Carlisle Street and 8-12 Natalia Avenue. I will refer to these defences when referring to them in the context of both Mr Tesoriero and the relevant entities’ defences as the Loan Defences.
601 Mr Tesoriero’s Loan Defence, and by extension the Tesoriero Entities’ Loan Defences, is directed to defeating the allegations made against him regarding his knowledge. The pervasive circularity of Mr Tesoriero’s evidence makes it difficult to coherently describe the effect of his evidence.
602 Mr Tesoriero relies on the Loan Defence as one of the counterpoints to Westpac’s “free money” thesis — that the implausibility of free money is a strong factor in favour of finding at the least that Mr Tesoriero was fixed with Baden category 4 knowledge. Mr Tesoriero contends that the fact that the funds were advanced by way of loan undercuts Westpac’s contention that his knowledge should be assessed on the basis that the funds were “free money” — that if something is too good to be true, it probably is not true.
603 Mr Tesoriero further contends that, because the amounts disbursed from FGFS to the Tesoriero Entities and the Jointly Owned Entities were recorded as “loans”, an honest and reasonable person in his position would not relevantly have known that the payments involved tainted money. The hypothetical honest and reasonable person in Mr Tesoriero’s position would be taken to be a director of both FGFS (the purported lender) and the Tesoriero Entities (the purported borrowers) who received the financial statements of the relevant entities and who disclaimed execution of the underlying loan documents. Seen in that light the Loan Defences do not weigh against drawing a conclusion of at least Baden category 4 knowledge on the part of Mr Tesoriero, and by attribution, the Tesoriero Entities.
604 In addition, Mr Tesoriero submits that the fact that the payments were openly recorded as loans in the books and records demonstrates that there was no attempt at concealment. Mr Tesoriero submits that the lack of concealment weighs against a finding that Mr Tesoriero relevantly knew that the payments involved tainted funds. An available counter proposition would be that the advances were recorded in this way as a means of providing an explanation for the fraudulent advances. Indeed, Mr Tesoriero’s muted suggestion that Mr Papas may have recorded the advances in that way, is close to an implicit suggestion by Mr Tesoriero that Mr Papas may have consciously directed for the advances to be so recorded as a means of creating a veneer of legitimacy. This is not a point that I need resolve in the dealing with Loan Defences. In order for Mr Tesoriero to establish that the recording of the loans in FGFS records demonstrated relevantly a lack of concealment on Mr Tesoriero’s part, he would have to establish that he was involved in, or otherwise aware, of the recording of the loans. As will be seen, he expressly disavows this.
605 The central premise of the Loan Defences is that Mr Tesoriero understood at the relevant time that the funds were being advanced by FGFS as loans. Although Mr Preston was cross-examined by counsel for Mr Tesoriero on this issue, it is not contentious that funds received by the Tesoriero Entities and the Jointly Owned Entities from FGFS were recorded as loans in the FGFS business records. The Loan Defences are not concerned with what is recorded in the FGFS books but rather what Mr Tesoriero understood about that fact at the relevant time. The Loan Defences necessarily fail because Mr Tesoriero’s evidence establishes that he held no relevant understanding at the crucial time, or if he did, he disclaimed it in his evidence at the final hearing. He has denied having the requisite awareness of the accounts repeatedly, in both an affidavit he swore in December 2021 and in his oral evidence at the final hearing. Mr Tesoriero’s evidence about his own purported understanding at the relevant time is against his interest insofar as it undermines the pleaded Loan Defence.
606 Notwithstanding that in Mr Tesoriero’s opening submissions he seemed to rely simultaneously on both the return-on-investment defence and the Loan Defence, it will be immediately apparent that the Loan Defence is inconsistent with the defence based on the third iteration of his return-on-investment thesis. If the funds were advanced by way of loan and were thus subject to a repayment obligation, then they were not paid as a return on investment. The tension between the two ways in which Mr Tesoriero sought to resist an adverse finding on the issue of knowledge may explain why he did not attempt in his evidence to substantiate the Loan Defence. Alternatively, the explanation may be simpler, in that Mr Tesoriero having failed to set aside the statutory demands which were based on the said loans, now seeks by hook or by crook to avoid the consequence of the advances being acknowledged as loans, namely that his related entities are obliged to repay the loans.
607 In cross-examination, Mr Tesoriero denied that there was ever a loan between FGFS and any of the Tesoriero Entities. He also denied that he ever entered into any loan agreements. When shown a loan agreement for 23 Margaret Street that bore his electronic signature, he denied the veracity of the document, saying that he did not authorise his electronic signature being affixed to the document. He said that he was uncertain of how the advances from FGFS were treated in the books of FGFS. That assertion, of itself, is fatal to his Loan Defence given that it is predicated on his asserted understanding at the time that the advances were loans. The following exchange is illustrative of Mr Tesoriero’s evidence on this topic:
MR STOLJAR: Now, just to jog your memory, Mr Tesoriero, I took you to the financial report for FGFS, and it has come back up on the screen, and this is the balance sheet for 30 June 2019, at a time when you were a director of FGFS, and it records a loan held by FGFS so money advanced by FGFS to 23 Margaret Street in the amount of $338,637. Now, what I’m trying to understand is do you accept that that is an accurate record or not?
No, I don’t. I don’t recall this.
You what, sorry?
I don’t recall this but - - -
You don’t recall it. All right. And could you go, please, to FOG.1000.0008.4868. And you will see there’s an email from your accountant Mr Stefanetti to yourself and Mr Papas:
Hi, Bill. FGFS attached for your review.
Do you see that?
Yes, I do see that.
And did you receive that email at the time it was sent?
I don’t recall, but I would say that I did.
And it was marked “importance high”. Do you see that?
Yes. Yes, I do.
And do I take it that you would have read through the attachments, including the FGFS financials?
I don’t recall reading through it, no.
Well, you may not recall it as you sit here today, but your ordinary practice would be to read emails. Is that fair?
Yes.
Particularly when it says “importance high”. Is that fair?
It was – it was addressed to Bill. I was merely cc’d on it, Mr Stoljar, I didn’t really go across the financials of that business, as I’ve said.
608 Mr Tesoriero deposed in an affidavit sworn in the Statutory Demand Proceeding on 23 December 2021 that he had no recollection of FGFS ever advancing the said loans. The Statutory Demand Proceeding was an application to set aside statutory demands based on the relevant loans initiated by some of the Tesoriero Entities, 64-66 Berkeley Street and 22 High Street Rushworth Pty Ltd. In his affidavit, Mr Tesoriero denied the existence of the loan between FGFS and 23 Margaret Street. His oral evidence was to similar effect. He denied the existence of the loan between FGFS and 23 Margaret Street and denied signing the deed of loan. He said that Mr Papas may have treated advances as a loan. Yet, when he received the FGFS financial report for the year ended 30 June 2019 which records the existence of that same loan, he did not query it. He said that he did not recall ever seeing the 2019 financial report which recorded the payments as loans but he accepted that he likely read the email which attached the report. He did not attempt to explain the inconsistency between the pleaded Loan Defence and his evidence in relation to the 2017 arrangement that he says he reached with Mr Papas in relation to FGFS funding a return on Mr Tesoriero’s investment in FGOC.
609 Mr Tesoriero appeared to walk back from his initial assertion that there was no loan between FGFS and any of the Tesoriero Entities by stating shortly thereafter that:
on the books and records there is a loan, but I did not expressly enter into a loan agreement and I don’t think there is documents to show that I did.
610 Mr Tesoriero was then cross-examined on the FGFS 2019 Financial Report. In that document the statement of current assets includes the following loans:
611 When questioned about this part of the 2019 FGFS Financial Report in combination with his affidavit given in the Statutory Demand Proceeding (in which the relevant companies were the plaintiffs), Mr Tesoriero’s evidence was as follows:
So this is an affidavit that you swore on 23 December 2021?
Yes.
And that was in proceedings in this court VID778/2021, but it was about – you were seeking to set aside some statutory demands?
Yes.
And when I say “you”, the plaintiffs were, and you were swearing evidence on behalf of the plaintiffs?
Yes.
You remember that?
Being the companies you’re - - -
Yes?
- - - you’re referring to it, is it, Mr Stoljar.
Yes?
Yes, I do remember that.
And I take it that you read carefully through your affidavit before you swore it?
Yes. I don’t recall it in its entirely, but yes. I would say I would have.
Well, you wanted to ensure it was accurate, I take it?
Sure.
And you knew that it would be relied upon by this court?
Sure.
And if you come through to para 9, you say:
At all relevant times, I’ve been the sole director and shareholder of 23 Margaret Street.
See that?
Yes.
And you say:
It’s my understanding that the claim –
that’s the claim for payment that had been made against 23 Margaret Street, among others –
is based on a deed of loan.
?
Yes. You can see that’s consistent with everything I’ve just said, is it not?
And then it says – you say:
I did not sign the deed of loan.
And then if you come through to (f), you say:
Further, at no time on or about 1 July 2020 did 23 Margaret Street borrow from FGFS the amount of 364,638.17.
?
That’s correct. That’s - - -
Is that a true statement?
Yes. That’s what I’ve said, isn’t it.
And if you come back in your affidavit to para 5, you say:
At all relevant times, I was a director of the plaintiffs, and I’ve no recollection of the plaintiffs ever accepting the loans as alleged from FGFS.
See that?
Yes.
And then at 6:
I was a director of FGFS from 13 November 2018 until 30 April 2020 and have no recollection of FGFS ever loaning the alleged amounts to the plaintiffs during this time.
See that?
That’s correct, yes.
So if we come back to the accounts FOG.1000.0008.4875 and we go back to the balance sheet. Do you accept that what’s recorded under the heading Assets and more particularly the entries identified as loans – do you accept that those are accurate records, or do you reject them and say they’re not accurate?
From my point of view, when they were done I had no knowledge of this. I don’t – did I sign this, Mr Stoljar? Have I signed this financial - - -
Can I just ask you to answer my question, please, Mr Tesoriero. Looking at those entries under the heading Assets - - -?
Yes.
- - - and more particularly the ones identified as loans – if it makes it easier, just look at the 23 Margaret Street. Just focus on that one. Do you accept that that’s accurate, or do you reject it?
Do I accept that that’s accurate. No, I reject that that’s accurate.
You reject it. And same for 26 Edmonstone Road, do you accept it or reject it?
I think there’s confusion around that one. That amount would be money that I put into the particular asset.
Do you accept it, or do you reject it?
I reject that one.
And what about the loan from FGFS to Intrashield? Do you accept that’s accurate?
I’m unsure of that one because that’s not a wholly owned company that – for myself but - - -
You owned that with Bill, didn’t you?
That’s correct, yes.
And then what about Canner Investments?
I would reject that one.
And 5 Bulkara Street?
Again, I’m unsure of that one because I, you know, owned that with Bill, but I will ultimately reject it.
612 In the face of those strident denials, Mr Tesoriero was taken to his pleading. As the Loan Defence was drawn to his attention, his evidence became more equivocal — he appeared to accept that there was a loan although he rejected that he knew of the loan when it was recorded (and I infer when the loan was made):
… you’ve pleaded that FGFS advanced funds to the Tesoriero entities and the jointly owned entities by way of loan?
I acknowledged the loans that were presented to me and said that if the money was borrowed, and it was owed, that I would acknowledge it.
Well, do you accept - - -?
But at the - - -
- - - or do you reject the proposition that FGFS advanced funds to the Tesoriero entities and the jointly owned entities by way of loan?
At the time when it was recorded and done on those books and records that you showed me earlier, I – I rejected, but at – at this point in time, when it has been shown to me by your clients that it was a loan, that it was done in that – such a manner, then I accepted it and was willing to pay that money back.
613 Similarly, although his answer tapered off, he appeared to accept that the Tesoriero Entities and the Jointly Owned Entities were liable to repay the loans recorded in the FGFS accounts:
… you accept, do you, that if there are accounts which record FGFS accounts which record loans having been taken by either the Tesoriero entities or the jointly owned entities, that that money has to be repaid?
From those entities, then – then I would say yes.
And the same goes for - - -?
If it can be shown to me forensically that it can be traced, then - - -
614 Mr Tesoriero’s evidence in his affidavit and cross-examination is broadly consistent insofar as he denies having a recollection or knowledge of the relevant loans at the time they were made. This fundamentally undercuts the premise of the Loan Defences. If Mr Tesoriero’s evidence in cross-examination is to be believed, then the Loan Defences fail because there is no basis for him to assert that he understood the advances were loans and not stolen money. The top note of his evidence in cross-examination is that he denies any involvement in either signing the relevant loan documents or reviewing the financial reports which reference the said loans at the relevant time. On the other hand, if Mr Tesoriero’s evidence in his affidavit and in the main part of his cross-examination on this topic is not believed, that supplies a further basis for an adverse credit finding against him, which in turn supports an inference that, even if he did know of the loans, his repeated denial of involvement or knowledge suggests that he may well have known that the funds purportedly loaned were fraudulently obtained. He is thus motivated to deny knowledge of the loans at the relevant time. In either case, regardless of whether Mr Tesoriero’s evidence is believed or not believed, the Loan Defences are not maintainable. To the extent that it is necessary to do so, I infer, having regard to the whole of Mr Tesoriero’s evidence on this topic, that he was in fact aware that the funds advanced by FGFS were recorded in its books as loans to the Tesoriero Entities and the Jointly Owned Entities and that he approved entry into the relevant loan agreements.
615 His evidence on this topic is a prime example of his chameleon-like readiness to colour his evidence to suit his shifting perception of what best advances his interests. Thus, his denial in his affidavit was directed to his objectives in December 2021 in the proceeding to set aside the statutory demands against his related companies. The Loan Defence was first advanced in Mr Tesoriero’s Amended Defence dated 30 October 2022. It did not feature in his Defence dated 20 April 2022. The Loan Defence was introduced at a point in time when, however misguidedly, Mr Tesoriero perceived it as being advantageous to him in defeating the knowledge allegations by pointing to the fact that the funds were advanced pursuant to loan agreements. His case was opened on that basis. In his opening written submissions, his counsel submitted that:
The evidence demonstrates that advances made by FGFS to the Jointly Owned Entities and the Tesoriero Entities were accounted for by FGFS as loans to those entities (and they have been the subject of demands and wind-up applications by the liquidators of FGFS). Inconsistent with a reasonable inference of knowledge or suspicion that these funds were stolen, there is no evidence of any attempt to conceal these advances.
616 And then, in his oral evidence at the final hearing, he changed course — denying any awareness at the relevant time of the facts that informed the Loan Defence. His change in position at that time is explicable by the fact that the existence of loans for the funds advanced would weigh against his then freshly unveiled third version of the return-on-investment thesis. As is clear from the extract above, he was vehement in his denial of his knowledge of, or indeed the fact of, the relevant loans. Yet, when he was taken to his Amended Defence, he, with evident discomfort, attempted to straddle the patent inconsistency in his evidence by acknowledging that the Tesoriero Entities and the Jointly Owned Entities were liable to repay the loans recorded in the FGFS accounts. But even as that door closed, Mr Tesoriero tried to open another window, by qualifying his answer by adding that his acceptance was conditional on it being “shown to [him] forensically” that the loans could be traced to the relevant entities.
617 For these reasons, I reject the Loan Defences. Mr Tesoriero’s evidence on this topic provides a powerful basis for the adverse credit findings that I have presaged above. Applying the nuanced observations made as to the value of oral evidence by Leggatt J (as his Lordship then was) in Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC (Comm) 3560 at [22] (so described when quoted by Bell P (as his Honour then was) in ET-China.com International Holdings Ltd v Cheung) the value of the cross-examination of Mr Tesoriero on this issue lies largely in the opportunity which the cross-examination afforded to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of Mr Tesoriero as a witness, rather than in his testimony of what he recalled of particular conversations and events. I am conscious that the fact that I have found that Mr Tesoriero has lied about some things does not automatically mean that he should be disbelieved about everything else. However, the nature of lies made by Mr Tesoriero in the various permutations of his evidence lead to the conclusion that he is prepared to say whatever he perceives will advance his position, untethered by truth. I am fortified in my conclusion that Mr Tesoriero’s evidence is to be approached with the utmost caution. The contemporaneous falsification of information that he caused to be included in documents relating to his dealings with financiers underscores that necessity.
618 March 2018 marks a significant development in the events giving rise to the proceedings. It was around this time that Forum’s relationship with, Maia, a previous financier came unstuck. Maia was known as Alleasing Pty Ltd until 27 November 2017.
619 In its supplementary written opening submissions, Westpac confirmed that it had notified Mr Tesoriero that it did not rely on paragraphs 2.4(b)(vi) to (viii) and (xi) of the Consolidated Particulars or the assertion of an earlier fraudulent scheme involving Maia as set out in paragraphs [36] and [49] of its Opening Submissions. That being so, it is not necessary to determine whether the arrangements that Forum had with Maia in the earlier period operated in fact to effect a fraud on Maia or its related company, ALLF Pty Ltd, which acted as the trustee of a trust known as the Alleasing Funding Trust.
620 Although Westpac confined its allegations in this way, the events surrounding the end of the relationship between Maia and certain Forum entities form a significant part of the way in which Westpac seeks to establish its case against Mr Tesoriero. Westpac’s primary case against Mr Tesoriero is that he devised and implemented the Scheme with Mr Papas, but its alternative case is that Mr Tesoriero knew circumstances, including those pertaining to the events relating to Maia, which would have disclosed to an honest and reasonable person in his position that amounts paid to FGFS were dishonestly obtained. As the evidence unfolded, the events in relation to Maia were also relevant to the claims against Mr Bouchahine and Ms Agostino.
621 The evidence before me does not permit comprehensive findings to made about the whole of the events that led to Maia and ALLF ultimately assigning to Forum Enviro all of their relevant interests in the equipment finance leases that they appear to have financed for Forum as undisclosed principals, through an intermediary, NMF. Such findings are not necessary in any event for the purpose of determining the knowledge issues in dispute in the present proceedings. I will limit my findings accordingly. The evidence, which largely comprises contemporaneous documents, some of which were the subject of evidence given by Mr Tesoriero and Mr Bouchahine, reveals the following relevant dealings and communications between Maia, ALLF, NMF, Forum Enviro, FG, FGOC, FGFS, Mr Papas and Mr Tesoriero.
I.18.1 The Maia Deed of Assignment – October 2018
622 To ascertain the relationships between the relevant parties involved in the Maia relationship in so far as it related to equipment financing arrangements involving waste management/disposal machines supplied to third party customers in Australia, it is convenient to start with the Maia Deed of Assignment (or Maia Deed) that appears to have been entered as a means of concluding the arrangements which had been in place. An executed copy of the Deed of Assignment is in evidence. The chapeau to the execution clause refers to it having been “Executed as a deed and delivered on October 2018”. Although the document is otherwise undated, the final executed version of the document was provided by email to Maia on 22 October 2018. The attachment is described as “Maia Deed of Assignment 22 Oct 2018 Print.pdf”.
623 The Maia Deed of Assignment was executed by the Assignors, namely Maia (Mr Joseph Fridman and Mr Daniel Blizzard as directors) and ALLF (Mr Fridman and Mr Blizzard as directors), Forum Enviro (in the dual capacity as Assignee and a Schedule 1 Party by Mr Papas as director) and FG, FGOC, FGFS, Mr Papas and Mr Tesoriero (as Schedule 1 Parties, with Mr Papas, Mr Tesoriero and FGOC also being Guarantors). Mr Papas executed the Deed in his capacity as director of FG and FGFS and on his own behalf. Mr Papas and Mr Tesoriero executed the Deed on behalf of FGOC and Mr Tesoriero executed the Deed on his own behalf.
624 In the Maia Deed of Assignment, the following parties are described as “Continuing Parties”: NMF, Mr Louis Triantafyllou and Mr Ellias Verginis. There is no provision for the Continuing Parties to execute the Deed.
625 In the Maia Deed of Assignment there is also a reference to:
(1) A “Sub-Agent Agreement (undisclosed principal) dated 7 September 2017” between Maia, ALLF, NMF, Mr Triantafyllou and Mr Verginis; and
(2) A Standstill Agreement between the Maia and ALLF as Assignors, the Forum Parties (collectively Forum Enviro, FG, FGOC and FGFS) and the Guarantors (collectively Mr Papas, Mr Tesoriero and FGOC) dated 18 April 2018, as varied from time to time, including without limitation, on 11 July 2018 and 3 September 2018.
626 The Standstill Agreement and the variations thereto are addressed below.
627 The Maia Deed of Assignment provides for the Maia and ALLF to assign all of their rights, title, interests, receivables, obligations and benefits arising from the Rental Agreements including but not limited to, those rights, title, interests, receivables, obligations and benefits arising under the Sub-Agent Agreement, and the Securities to Forum Enviro. The relevant Rental Agreements and Securities are listed in Schedule 2 to the Deed of Assignment. The end customers under the Rental Agreements listed in Schedule 2 are Veolia, ALH, CHC and Scentre Shopping Centre Management Pty Ltd. The “goods descriptions” given include various permutations of descriptions of waste management/disposal units. In respect of each of the listed 15 Rental Agreements, two or three “Securities PPSR numbers” are given.
628 The Maia Deed of Assignment recites that:
(1) The Assignors and the Continuing Parties are party to the Sub-Agent Agreement;
(2) NMF, as agent of Maia, entered into the Rental Agreements with end customers. Under the Rental Agreements, any one or more of the Forum Parties are noted as, without limitation, the suppliers of certain equipment;
(3) Events of default under the Sub-Agent Agreement have occurred entitling the Assignors to exercise certain rights and entitlements in relation to each Rental Agreement;
(4) The Assignors, the Forum Parties and the Guarantors entered into the Standstill Agreement. Subject to the satisfaction of certain terms and conditions, the Assignors agreed to refrain from exercising certain rights and entitlements relating to the Rental Agreements;
(5) Further to the terms of the Standstill Agreement, in consideration of the payment of the Settlement Sum, the Assignors agree to assign, and the Assignee agrees to take an assignment of, all of the Assignors’ rights, title, interest and obligations in the Rental Agreements and the Securities on the terms set out in this Deed;
(6) The Assignee agrees to assume the obligations of the Assignors under the Rental Agreements, to the Continuing Parties arising under the Sub-Agent Agreement, on the terms set out in this Deed.
629 The rights that Maia and ALLF agreed not to exercise during the currency of the Standstill arrangements, included the right to “step in” which would have permitted them to deal directly with the end customers who had accepted equipment pursuant to the Rental Agreements.
630 The Settlement Sum was defined to mean the amount of “A$42,147,201.14” (incl GST). By clause 3 of the Maia Deed, the Assignors acknowledged payment of the Settlement Sum had been made on or before 16 October 2018 in full in accordance with the obligations as set out in the Standstill Agreement.
631 The Maia Deed also included a non-joinder clause, by which, Forum Enviro undertook to Maia and ALLF that it would not at any time join, and would use its best endeavours to procure that no other person would join, Maia and ALLF in any claim in any way related to the Rental Agreements. Further, that Forum Enviro would not call as a witness or require any statement in any form from any of Maia’s and ALLF’s personnel without express written consent.
632 The Maia Deed represents the end of the arrangements in relation to the supply of waste management/disposal equipment in Australia between on the first part, Maia, ALLF, NMF and on the second part, Forum Enviro, FG, FGOC, FGFS, Mr Papas and Mr Tesoriero.
633 As its relationship with Maia was in its final stages, Forum progressively shifted its financing arrangements to the present financiers. WBC through Eqwe entered into the master sale of receivables and goods agreement on 31 August 2018. The 2018 MRASA was entered into on 2 August 2018. Negotiations with WNZL started in November 2018 with contracts being entered into in December 2018. Societe Generale entered into its first relevant agreement with Forum and Eqwe being the Receivables Acquisition and Servicing Agreement on 6 November 2020, but the first Offer Notice was not made until 2 March 2021.
634 I now turn to the evidence concerning the events that led to the Maia Deed of Assignment and the finalisation of the relationship between Maia and Forum in so far as it is relevant to knowledge issues in these proceedings.
I.18.2 Events leading to the Maia Deed of Assignment
635 The Maia arrangement appears to have been a progenitor of sorts of the arrangements which Forum subsequently entered with each of the present financiers. In the Maia Deed it is recited that NMF as agent for Maia entered into Rental Agreements with end customers under which one or more of the Forum Parties (as defined) were to supply certain equipment. The end customers under the Rental Agreements are listed in Schedule 2 of the Maia Deed — they are Veolia, ALH, CHC and Scentre.
636 It is not clear when the relationship between Maia and Forum in connection with the supply of waste management/disposal equipment in Australia commenced. In his evidence, Mr Bouchahine agreed that the arrangement was entered into in about September 2017 and had been on foot for about seven or eight months. What is clear is that by the time difficulties emerged in that relationship in around March 2018, Maia had advanced approximately $58.85 million to Forum entities. In the Standstill Agreement, this amount (including GST) was nominated as the estimated total amount owing by end customers under the Maia Rental Agreements in the period until expiry of their initial term.
637 In early 2018, Maia queried the arrangements in place with the Forum entities and, following receipt of unsatisfactory responses, demanded repayment of the $58.85 million that it had advanced. Maia was paid out by entities associated with Mr Papas and Mr Tesoriero. Mr Papas and Mr Tesoriero personally guaranteed the payout. FGOC also guaranteed the payout.
I.18.2.1 Mr Papas’ negotiations with Maia executives for the provision of larger funding lines for Forum’s international operations
638 There is limited evidence available in these proceedings about the events that led to Maia raising concerns about its arrangements with Forum. Based on what is in evidence I infer that from about December 2017 and into the first quarter of 2018, Mr Papas was attempting to negotiate a major new international funding program with Maia which was to operate on an exclusive basis. He was dealing with Mr Blizzard CEO, Maia, and Mr Cheal, Senior Director, Specialised Asset Solutions, Maia. On the basis of the evidence to which I will now come, it appears likely that the queries raised by Maia in relation to the funding it had provided in respect of Forum’s Australian business may have emerged in the course of due diligence being undertaken in respect of the proposed new international funding program.
639 In his evidence in chief, Mr Tesoriero said that NMF arranged “some bigger funding lines than what Forum had previously had” with Maia. He said that Mr Papas discussed this with him in late December 2017 when Mr Tesoriero was in Sydney for the Christmas party. He also said that the bigger funding lines “already in place and — and operating” by mid-2018 when he met with the “guys” from Maia in Sydney. Apart from Mr Tesoriero’s assertion, there is no evidence that the larger funding arrangement was in fact put in place. In fact, I infer from the following contemporaneous documents that it was not put in place and instead Maia severed its relationship with Mr Papas and his related entities involved in the present proceedings.
640 The proposed bigger funding lines with Maia may be traced by reference to a commercial in confidence letter from Mr Blizzard, CEO, Maia, and Mr Cheal, Senior Director, Specialised Asset Solutions, Maia to Mr Papas, CEO, FG dated 3 January 2018, in which Maia put forward a “Revised Indicative Term Sheet – International Funding Program for Orca equipment”.
641 The letter refers to a meeting between Maia and Forum Group on 3 January 2018. The proposal put forward in this letter is described as replacing the proposal and indicative term sheet dated 21 December 2017. The proposal is described as “a funding program for the rental of ORCA equipment across your international operations for clients of Forum Group Pty Ltd and its related entities (Forum Group) across United States of America, United Kingdom, Europe, the Middle East (limited to the Gulf Cooperation Council countries only), Australia and New Zealand”.
642 The purpose of the letter is to outline indicative but non-binding terms, which include “providing access to an initial amount of up to US$150,000,000. Further tranches of up to US$150,000,000 will be drawable at six-monthly intervals based on the utilization of each tranche, to assist with the acquisition of ORCA equipment.” The offer of finance was subject to review when the limit of US$450,000,000,000 was reached. The letter provides an indicative timeline which envisages the first tranche of funding of up to US$150,000,000 being available by 30 March 2018.
643 Importantly, and relevantly in the present context, the “indicative way forward” is expressly subject to satisfactory outcomes on Maia’s due diligence program. The due diligence requirements in respect of Forum Group, as defined in the letter, were outlined as follows:
Forum Group
a. Review of the audited consolidated accounts from Forum Group Pty Ltd its controlled entities inclusive of its overseas operations for 2015, 2016, 2017;
b. 5-year forward sales forecast of Forum Group Pty Ltd its controlled entities inclusive of its overseas operations;
c. Overview of the corporate structure, ownership structure and capital structure of the Forum Group (including its overseas companies);
d. Review and certification of Rental Agreements currently utilized by Forum Group Pty Ltd across the United States of America, United Kingdom, Europe, Middle East (limited to the Gulf Cooperation Council countries only), Australia and New Zealand with regard to the rental of the Equipment;
e. Review of service and maintenance agreements currently utilized by Forum Group Pty Ltd across the United States of America, United Kingdom, Europe, Middle East (limited to the Gulf Cooperation Council countries only), Australia and New Zealand with regard to servicing of the Equipment;
f. Confirmation of the ability to service and maintain the Equipment across the overseas geographies in which Forum Group operates in;
g. Information and in-depth insight into the Forum Group internal end-to-end processes in relation to the rental business including on-boarding, rent collection, recovery of overdue payments, enforcement, etc.;
h. Information in relation to the specific countries/states in the various jurisdictions that the Renters operate in; and
i. Any other information that we deem appropriate.
644 While the evidence in relation to the dealings between Maia and Forum is not comprehensive, having regard to the broad parameters of the proposed due diligence, and in particular, the desire for “information and in-depth insight” into Forum’s “internal end-to-end processes in relation to the rental business including on-boarding, rent collection”, it is plausible that the concerns raised by Maia in relation to the existing financing relationship emerged as a result of the due diligence process. It is not necessary to make a conclusive finding on that issue. The fact is that Maia raised serious concerns that went to the integrity of the way in which Forum conducted the equipment financing and leasing arrangements funded by Maia through NMF. Before turning to the concerns which Maia raised and the consequences which flowed therefrom, I will temporarily continue in the seam of evidence relating to the deal that Mr Papas was negotiating in 2018 with Maia to provide larger funding lines.
645 On 29 May 2018, Maia provided to FGOC a revised letter of offer. The letter was from Mr Blizzard, CEO, Maia and Mr Fine, Senior Director, Asset Management Services, Maia and addressed to Mr Papas, FGOC. The subject line of the letter was “LETTER OF OFFER – USD150m FACILITY FOR ORCA MANAGED SERVICES – FOR DISCUSSION” (emphasis in original). The offer described in the letter, which was for discussion purposes, was heavily caveated. The introductory paragraph read:
We are pleased to confirm that a USD150m capital facility has been approved by Maia Financial Pty Limited (Maia) for the ORCA managed services program (Facility), subject to the terms set out in the attached Term Sheet in Annexure A and, in particular, the Special Conditions and other Conditions Precedent. This Offer and indicative Term Sheet amends and varies the Proposal letter dated 5 January 2018.
646 The conditions precedent stipulated by Maia were extensive and onerous. They reflect a high degree of mistrust, or at least suspicion, about the Rental Agreements the subject of the existing Maia NMF arrangements.
647 The conditions precedent included, amongst other things, that Forum Enviro was to be acquired by a listed Canadian entity, Minus Waste Group, via share swap to achieve a reverse listing on the Toronto Stock Exchange by on or around 1 September 2018. That did not occur. In addition, another of the conditions precedent required strict compliance by Mr Papas and the “Forum Group Companies with all the obligations arising pursuant to the Standstill Agreement represents an overarching condition precedent to the availability of the capital facility described in this Offer.” A further condition precedent was that the existing rental agreements with end customers were to be rewritten as required by Maia and confirmed by all end customers being notified of the transfer/assignment of Rental Agreements and signing new technology license agreements. Further, the customers were to be directed to pay their rentals into lockbox collections account, with Maia to “exclusively control the account and sweep the collections”. Monthly reconciliations and tracing of payments to the locked box accounts were to be performed by Maia. All customers were to provide signed acknowledgements of the new lockbox bank account into which the payments are to be made. Maia was to be given extensive oversight rights of Forum’s side of the operations under the contemplated arrangements, including rights of management attendance, access and audit. Amongst other security arrangements, Maia required:
a first-ranking general security interest over Forum Enviro - the entity that is the equipment distributor and includes all service operations - and Newco, with strict financial and operational covenants that are customary for transactions of this nature. In the event of default by Forum, Maia requires step-in rights as well as the right to appoint a receiver to run the business on its behalf
648 The Letter of Offer included an outline of next steps and an indicative timeline that required Maia to commence “due diligence of Forum Group, with emphasis on operational systems for deal origination and variations, bill & collect and real time asset tracking, and performance of services” by 24 May 2018, locked box arrangements in relation to existing rental agreements to be in place by 29 May 2018.
649 It appears that the 29 May 2018 letter of offer sent for discussion purposes was finalised and sent as a letter of offer dated 22 June 2018. The offer contained therein remained heavily caveated by extensive and onerous conditions precedent, which in substance were relevantly and substantially similar to those that had been outlined in the discussion draft. It is clear that the conditions precedent were not met. The offer was expressed to be open for acceptance for a period of seven days. There is no suggestion in the evidence that the offer was extended or renewed in the same or similar terms.
650 For these reasons, I reject Mr Tesoriero’s evidence that the bigger funding lines with Maia were “already in place and — and operating” by mid-2018 when he met with the “guys” from Maia in Sydney. It was the one of the many parts of Mr Tesoriero’s evidence on the events relating to Maia where I find myself compelled to reject his evidence as untruthful.
651 What is clear is that the concerns raised by Maia were not assuaged by the continuation of the negotiations between Mr Papas and the Maia executives. Instead of larger funding lines being put in place, the existing Maia arrangement in relation to the financing of equipment supplied in Australia was finalised with Forum Enviro taking an assignment of all Maia and ALLF’s obligations in relation thereto and Maia being paid out.
I.18.2.2 Maia raised concerns in February 2018
652 Against that background I now turn back to the concerns that were raised by NMF and Maia, and the extent to which those concerns were known to Mr Tesoriero, Mr Bouchahine and Ms Agostino.
653 On 28 February 2018, Ms Lize Eggermont of NMF emailed her colleague, Mr Elias Thomas, also of NMF, noting that there were multiple duplicate serial numbers on invoices issued by Forum Enviro (Aust) to NMF in respect of supply to Veolia and Coles and that the bank account details on the invoices referred to the account for FGFS instead of the account for Forum Enviro. The concern raised in relation to duplicated serial numbers may be illustrated with respect to Veolia FG Invoice 610785 which was described in the email as follows:
Serial number:
OG1001449E – already financed under Veolia Environmental Services (Australia) Pty Ltd on FG invoice 610466 on 13/02/2017
OG1001599E – already financed under Veolia Environmental Services (Australia) Pty Ltd on FG invoice 310634 on 22/09/2017
Similar concerns were raised in relation to an FG invoice to Coles where three instances of duplicated serial numbles were identified on invoices going back to September and October 2017.
654 On the same day as he received the email, Mr Thomas forwarded the email to Mr Papas and Ms Agostino attaching copies of the Coles and Veolia invoices that illustrated the concerns that had been identified.
655 Ms Agostino and Mr Papas received the email from NMF on 28 February 2018 at 2.56 pm raising concerns about duplicated serial numbers in invoices from Forum Group to Veolia and Coles. Ms Agostino emailed Mr Papas at 3.31 pm with the subject “NEW AOD and Annexures” attaching transaction documents for Veolia, Coles and CHC. She then emailed Mr Papas at 4.16 pm saying “[u]se this for Coles” and attached transaction documents for Coles. I infer that the reference to “AOD” denotes “Acceptance of Delivery”. I was not taken to evidence that the AOD documents that Ms Agostino supplied to Mr Papas were sent to Maia or NMF. What is clear is that Maia’s concerns about whether the underlying assets had in fact been delivered were not assuaged, as subsequent events demonstrated. I infer that Ms Agostino was working closely with Mr Papas in the Maia period and was aware of the concerns that Maia were raising. Her subsequent involvement in creating fraudulent documents to supply to Eqwe and Westpac can not be seen as a product of naivety. As noted above, Ms Agostino held a senior role at Forum, and as at February 2018, used the job title, “Business Solutions Manager”.
656 Mr Tesoriero was not shown as a recipient on this email. He was cross-examined on this email. He said that neither Mr Papas nor Ms Agostino raised with him the concern expressed by NMF in relation to the duplication of serial numbers on the invoices.
I.18.2.3 Maia Sub-Agent Notice to NMF
657 On 9 March 2018, NMF was served by Maia with “Sub-Agent Agreement (Undisclosed Principal) – Notice” addressed to Mr Triantafyllou and Mr Verginis pursuant to the Sub-Agent Agreement between Maia and NMF. A copy of the notice and the covering email from Mr Cheal of Maia to Mr Triantafyllou and Mr Thomas was forwarded to Mr Papas on that same day. The email was not copied to Mr Tesoriero or Mr Bouchahine.
658 In the notice, Maia asserted that (emphasis in original):
(1) pursuant to clause 8 of the Sub-Agent Agreement, all Receivables and Residual Payments made under or in connection with any Finance Contracts are required to be paid directly into a dedicated “locked box” bank account by the Customer;
(2) Maia had become aware in early January 2018 that the relevant Receivables were not being paid directly into the dedicated “locked box” — instead NMF was receiving the Receivables into a different NMF account and then paying the Receivables into the “locked box” account;
(3) In the second week in January 2018, Mr Cheal, Maia, directed NMF to rectify this immediately and NMF provided assurances to Mr Cheal in that regard;
(4) Despite the assurances given, as at the date of the notice, Receivables were continuing to be received in that way in breach of the Sub-Agent Agreement; and
(5) On 8 March 2018, NMF had undertaken to Maia to ensure all Receivables and Residual Payments were made directly into the dedicated “locked box” bank account by the relevant Customers and that this situation would be rectified by the next payment date under the relevant Finance Contracts being 31 March 2018.
659 Maia required evidence of rectification of the locked box issue by 16 March 2018 and otherwise reserved all its rights under the Sub-Agent Agreement. The Notice was issued in the name of Mr Andrew Timm, Senior Director – Treasury, Maia and Ms Marie-Lyse Eliatamby, General Counsel, Maia.
660 Mr Tesoriero was cross-examined on this notice. He said that he was completely unaware of it and had seen it for the first time in the witness box. I was not taken to any contemporaneous documents that suggested that Mr Tesoriero saw the notice at the relevant time.
661 Mr Bouchahine is in a markedly different position to Mr Tesoriero in relation to the early Maia events. As the contemporaneous records to which I now come demonstrate, Mr Bouchahine was closely involved in the first line of communications with Maia at this time and was taken into Mr Papas’ confidence as to how Mr Papas intended to respond and Mr Papas’ ultimate objective in dealing with Maia in relation to the concerns that had been raised. It is a matter to which I regard as significant in assessing Mr Bouchahine’s knowledge. The contemporaneous evidence on this issue undermines Mr Bouchahine’s submission that, at best, he is fixed with Baden category five knowledge and not actual knowledge or constructive knowledge within the fourth Baden category. Mr Bouchahine’s role in relation to Maia undermines his contention that having been put on inquiry, he made enquiries and obtained from Mr Papas a satisfactory response that in effect put him off the scent. It forms part of the context in which Mr Bouchahine’s assertion about his suspicions being allayed by what Mr Papas is alleged to have told him in 2019 about the so-called advance funding arrangements falls to be assessed.
I.18.2.4 Maia Visit March 2018 and response
662 The issue in relation to direct payment into the locked box accounts does not appear to have been resolved by 14 March 2018. On 14 March 2018 at 5.55 pm, Mr Gavin Sher, Chief Financial and Operations Officer (CFOO), Maia, sent an email to Mr Bouchahine, copied to Mr Chander Gupta, Senior Director, Finance, Maia, with the subject “Maia Visit Tomorrow”, in which he said that:
As mentioned earlier in order to try make the process efficient tomorrow, I have listed some points below of what we aiming to achieve:
Understanding of the entire Bill and collect process and procedures
Rental invoices sent to all the customers for contracts financed by Maia Financial for the months of January and March 18 Rentals (collected on 2nd January and 1st March)
Copies of all the Forum service/asset management agreement relating to our 21 contracts
Any associated communication & correspondence with the customers regarding these invoices and locked box arrangements
Bank statements for the bank accounts where money against these invoices were collected
In addition & most importantly, we would like to work together on discussing the way forward on the arrangement for the customers depositing directly into our locked box bank account.
663 The meeting referred to did not take place on 15 March 2018. That is clear from an email that Mr Sher sent to Mr Bouchahine, copied to Mr Gupta, on 15 March 2018 at 4.24 pm, in which he said:
Hi Tony,
I hope the procedure/surgery went well this afternoon. We are confirmed to come in at 1pm, however would like to know if we can please come earlier in the morning?
Also, just to reconfirm how important it is for us to be able to complete all of this work tomorrow. Please can you ensure all supporting docs for the below (including copies for us) are there and having the ability to call up on system too which will help make the process very efficient.
See you tomorrow.
664 Minutes later Mr Sher sent a further email to Mr Bouchahine, again copied to Mr Gupta, attaching the list of contracts and requesting that the signed original contracts received from the customers for these leases be made available at the meeting on the next day. The request to sight the signed original contracts, coupled with the concern about the breach of the locked box requirement and the duplication of serial numbers across multiple invoices, indicates that Maia was concerned about whether there were authentic arrangements in place with customers in relation to the equipment that was understood to be the subject of the Rental Agreements.
665 The Maia visit was delayed until 16 March 2018. Mr Bouchahine confirmed that a meeting did eventually occur. It appears to have been on 16 March 2018. On 16 March 2018, after the meeting, Mr Sher emailed Mr Papas and Mr Bouchahine, copying Mr Blizzard, Director, Maia and Mr Gupta, and marked the email as “Importance: High”:
Hi Bill,
Thanks for the call earlier. As discussed, Chander Gupta (Senior Director, Finance) and myself will be returning to Forum Group this coming Monday (19th March) at 8am.
On our visit today we were unfortunately not able to get the information or docs to support the below requests, and as discussed we will now have full access to all information and your team on Monday to work through the below.
Tony – just to confirm Bill has confirmed full access to all info required, which from our side includes items such as:
bank statements to trace client receipts for each contract and payments to NMF
the original signed contracts in Bill’s office for all contracts
original Forum service agreements relating to these contracts
an up to date arrears report for all our contracts (including both billings from Xero & BMS)
sitting in on some client calls to confirm our contracts and arrears status, expected payment date etc correspondence from all the customers re locked box account and dates to change over
confirmation of the invoices that went to the customers (manual, trial BMS, live BMS)
Its vital we can achieve all of this on Monday, and therefore will be in 8am.
We look forward to building a great relationship together with Forum and appreciate, in advance, everyone’s time on Monday.
666 It is clear that by this stage Maia held serious concerns about the arrangements they had in place through NMF with Forum. The gravity of Maia’s concerns at this time is evident from the nature of the demands for access that Maia outlines as vital to achieve in full at the next meeting on Monday, 19 March 2018, including that:
(1) Mr Sher and Mr Gupta, as two of Maia’s most senior officers, be given direct access to bank records to trace client receipts for each contract and payment to NMF. The context for this is that they had discovered that the locked box requirements were not being honoured by NMF with the result that Forum Enviro (Aust) was ostensibly dealing directly with end customers, in effect cutting out the locked box control. Similarly, the demand for access to all correspondence with customers in relation to rectifying the breach of the locked box arrangements;
(2) Mr Sher and Mr Gupta be allowed to inspect the “original signed contracts” (which it would appear they were told at that meeting on 16 March 2018 were kept in “Bill’s office”) and the original Forum service agreements in relation to the said contracts; and
(3) Mr Sher and Mr Gupta sit in on client calls to confirm “our contracts and arrears status, expected payment date etc” and in addition proof of the invoices that were sent to customers.
667 The concerns articulated in Mr Sher’s email reflected serious questions about the integrity of the arrangements between Forum and Maia through NMF. That being so, it initially seems odd that Mr Sher would sign off an email raising these types of concerns by saying that “We look forward to building a great relationship together”. However, Mr Sher’s polite words at the end of the email must be seen in the light of the fact that Maia’s investigations were still at an early stage, and Maia was being stonewalled, and that Maia and Forum were then in negotiations for a potential new international funding program (as revealed by the various iterations of the conditional uncommitted letters of offer addressed above). In that respect I note that Mr Sher has copied this email to Mr Blizzard, who was the senior Maia executive engaged in those negotiations. Taking the relevant context into account, I do not regard Mr Sher’s polite expression of looking forward to building a great relationship with Forum as in anyway undermining the fact that Maia was at this time gravely concerned about the operation of the existing arrangements it had in place with Forum.
668 In his cross-examination, Mr Bouchahine resisted the suggestion that Maia was “extremely concerned” about the contractual arrangements at this time because they were still engaged with Mr Papas at this time in exploring what Mr Bouchahine described as a joint venture with Forum:
He – the fact is, to your understanding, Maia was extremely concerned about the – whether or not the contractual arrangements that it was financing were genuine. That’s right, isn’t it?
I – the contracts in question, I don’t know. That’s their major concern because I believe that – like I said, if they were majorly concerned about all the agreements that we had, why would they come back and do further discussions about doing a joint venture with us to fund stuff around the world and in Australia?
When do you say those discussions took place?
They took place, I believe, in New York between Bill Papas and Daniel Blizzard.
And have you dealt with that in your affidavit that you’ve put on?
Yes, I did. I mentioned in my affidavit that Maia and the CFO – the CEO and the owner actually caught up with Mr Papas and discussed the joint venture of doing world funding for Australia and overseas transaction for all ORCA machines.
669 Mr Bouchahine did not in fact address that issue in his affidavit but nothing turns on that. I do not accept that Mr Bouchahine did not appreciate at the time that Maia was raising very serious concerns for two reasons.
670 First, the evidence to which I will come demonstrates Mr Bouchahine was engaged in working over the weekend trying to work out how to respond to those concerns. He was getting detailed instructions from Mr Papas. Although Mr Bouchahine said that he did not recall “exactly”, I find that Mr Bouchahine understood by the time he wrote to Mr Sher cancelling the meeting that there was no serious prospect that Mr Papas would permit Maia to have access to the relevant records and to directly communicate with customers.
671 Secondly, I do not accept that Mr Bouchahine thought at the time that the concerns raised were not serious because of the larger funding deal that was then being explored with Maia. The evidence that I have referred to above demonstrates that the concerns raised in relation to the existing Maia contracts probably emerged during due diligence that was occurring in relation to the proposed larger funding deal and that negotiations in relation to that deal were ongoing until September 2018. The evidence demonstrates that Maia’s attempt to investigate the concerns it had with the existing arrangements continued in tandem with the new deal discussions. As Maia failed to attain satisfaction in relation to the concerns it had with the original arrangements, it progressively refined the terms of its indicative offer in respect of the larger deal — the limit of the offer was reduced, the terms were made stricter so as to afford Maia with a greater level of control and oversight of the Forum side of any future operations, including ultimately by having two directors on the relevant entity’s board and expansive step in rights. In addition, Maia’s offer was conditional on resolution, on Maia’s terms, of the dispute in relation to the extant arrangements (as provided for in the Standstill Agreement as varied).
672 In any event, the tenor of Maia’s concerns was not lost on Mr Papas. He immediately understood that his integrity was being questioned. He prepared a number of draft responses to Mr Sher’s email which he socialised with Mr Bouchahine before the final version was sent.
673 On Saturday, 17 March 2018, Mr Papas drafted a response to Mr Sher’s email, addressed to Mr Blizzard of Maia. He sent the draft to Mr Bouchahine for his review. In addition to attempting to explain why it would not be feasible to collate the relevant information for the meeting on 19 March 2018, and proffering explanations of sorts for the issues which Maia had raised, Mr Papas included the following attack:
I have to say from speaking to my team yesterday that the process undertaken by Gavin has been an aggressive and hostile approach which is not reflective of the engagement I’ve have had with Brett or yourself since we met. He even questioned our integrity to my team.
In all my 20 years I have never had my integrity brought into question and I find it a little offensive.
674 In this draft, Mr Papas, then made an offer of making some payments in the near term to restore trust, and followed this by making an appeal to the great opportunity on the horizon which he had been exploring with Mr Blizzard (original emphasis):
Based on how this is being addressed so far, if at this point you and your team feel uncomfortable with the circumstances of how all of this has come together and there is lack of trust, then I will commit to you the following to alleviate the issues of potential breaches and satisfy that action is being undertaken to rectify any of these breaches through the following options;
1. Forum will immediately pay you 2 months advance monthly payments for the purposes of
a. meeting all your requirements should we all be satisfied with your new terms with Forum and wish to continue with these contracts in place or
b. payout individual contracts where your terms can’t be met ie.
i. 5 day invoice payment terms
ii. Pay into locked bag by the 2 months
c. Re-sign contracts to where possible reflecting new terms agreed to between Forum and Maia
2. If you want to exercise stepping in rights then please prepare payouts for all these contracts and we will endeavour to finalise them within the 2 months of advance payments made to you as comfort to you and your ultimate underwriters
If we have failed to meet any of the above you are entitled to step in.
Understanding our business is critical for you to determine whether you are able to meet our requirements in delivering our Managed Services to our clients through your funding programs.
I have enjoyed our meetings and working with you Daniel to date and is very appealing dealing from a direct perspective on a potential P&A locally in Australia but also facilitating overseas.
675 In the penultimate paragraph of his draft Mr Papas said:
If as you’ve stated there needs to be trust for all of us to work with integrity and in a transparent manner then we will enjoy a great future together
676 On that same day, Mr Bouchahine emailed Mr Papas attaching the excel spreadsheet entitled “List of NMF Contracts.xlsx” that Mr Sher had sent earlier. Mr Bouchahine indicated to Mr Papas that he needed “to go through this one more time as I need to have clear instruction on each point before I come back tomorrow to do further work. I will call around 7 pm Sydney time.”
677 On Sunday, 18 March 2018, Mr Papas emailed a revised draft of his proposed response to Mr Blizzard to Mr Bouchahine, and also to Mr Thomas and Mr Triantafyllou (also referred to as Louis Trent) of NMF and requested feedback. Relevantly, the revised draft included substantially the same text as extracted above.
678 Mr Bouchahine emailed Mr Papas in response, noting “[g]reat email” and requesting that Mr Papas should inform him whether he ought to inform Mr Sher that the meeting on 19 March 2018 was cancelled.
679 On 18 March 2018, Mr Papas sent Mr Blizzard the finalised email which he then forwarded to Mr Bouchahine, noting “FYI made changes again and sent”.
680 The full email from Mr Papas to Mr Blizzard, not copied to any other Maia representative, was as follows:
Hi Daniel
After my hectic travel schedule, I have now had the opportunity to go through several of the email requests and information required by your team. Given the circumstances, unrealistic expectations have been set for an 8am meeting Monday.
In order to present some of the information you request below in a meaningful format, the team will need time mainly as I have been away and Tony [Bouchahine] has been on sick leave. I have disclosed to you that it is impossible for us to pass an audit based on how these contracts have been set up compared to the arrangements you have with NMF, which I have only recently become aware of.
Our billing and service agreements are separate to the finance agreements for the contracts associated to All Leasing due to the need to split the rental and the service to accommodate your product with NMF. Our customers only see one monthly bundled cost (service + rent) which is reflected on the monthly invoices in most instances as I’ve tried to explain.
The main reason is the way in which we invoice and the way we receive the payments on some of these. I am concerned that your team have already contacted (not authorised by me) Westrac and this goes against what we’ve been discussing, albeit I’m assuming the call was satisfactory even though your team was asking about ORCA’s when the Agreement is for Print. Our client called our local GM to question the call as this came across very unprofessional and brings into question how our clients perceive us as well. Not to mention your team are representing themselves as Forum.
I am more than happy as we’ve discussed, to demonstrate the below by finding a solution that we can both agree on. Forum have been delivering a Managed Service to clients for over 6 years and I was of the understanding that we had flexibility to deliver this through your product to our large enterprise clients. It has now become apparent that your product through NMF that was established is not flexible.
We also disclosed to you our arrears but, this has been normal practice for Forum on large enterprise accounts because of the nature of how, on an individual basis we deal with the Services we are delivering but have always good focus on managing these situations.
I have to say from speaking to my team yesterday that the process undertaken by Gavin [Sher] has been an aggressive and hostile approach which is not reflective of the engagement I’ve had with Brett and yourself since we met. He even questioned our integrity to my team.
In all my 20 years I have never had my integrity brought into question and I find it a little offensive. In the 6 plus years Forum have been delivering a Managed Service we have never defaulted on a single payment to our Underwriters and Financiers. I also committed to you and Joey that you have my absolute undertaking that we would fix anything that was not within your requirements with the NMF arrangements where possible but if not, we would payout the contract.
Due to the current position we are in there are 2 scenarios I feel we are dealing with (a) to re-establish a clean position in working together or (b) you and your team feel uncomfortable with the circumstances of how all of this has come together and the possibility there is lack of trust between both parties.
I suggest the following options to alleviate the issues of potential breaches that may have arisen due to the arrangements between All Leasing and NMF;
1. Forum will immediately pay you 3 months advance monthly payments for the purposes of
a. Establish a P&A Agreement between Forum and Maia with agreed terms to continue with these contracts in place or
b. payout individual contracts where your terms can’t be met (if these are in the new P&A) i.e.
i. 5 day invoice payment terms
ii. Pay into locked bag by the 2 months
2. Forum will re-sign all these contracts to a “typical’ Forum Managed Services Agreement (bundled rent + service) reflecting the client expectations which will be appropriately managed in our ERP/Billing Systems and Forum Finance Software. Maia will be required to buy off the approved Forum Finance Agreements with an agreed P&A Agreement with Maia. These are also the agreements that are being used overseas.
3. If you want to exercise stepping in rights because of your arrangements with NMF and your own funding sources, then please prepare payouts for all these contracts and we will endeavour to finalise them within 60 days. You have the 3 months advance payments made to you as comfort to you and your ultimate underwriters as security during this period.
In the event that we have failed to meet any of the above, you are entitled to step in.
I have a $100 Million private investor behind me and was going to use this as foundation for our international business endeavours but since speaking with him yesterday, we feel it appropriate to clean this situation first and start with a clean slate meaning, to amend the above and start our relationship fresh. This will also insure that your funding sources are protected and secure and our creditability with our customers and partners remains at its highest level.
Understanding our business is critical for you to determine whether you are able to meet our requirements in delivering our Managed Services to our clients through your funding programs.
I have enjoyed our meetings and working with you Daniel to date. I find it very appealing dealing from a direct perspective on a potential P&A locally in Australia but also facilitating overseas. We have a billion dollar plus global opportunity at our doorstep with an experienced team around it that will deliver amazing results through this exciting vehicle which is ready to go to market.
We both have a lot of great opportunities to look forward to that will not only deliver ultimately value to our respective businesses but also to our partners who are integral to our future. I want to also assure you that we can put things in place and I am certain during our time in New York we can further understand some of the possibilities.
The meeting between Gavin [Sher] and Tony [Bouchahine] will need to be postponed until after our meeting in New York with agreed next step.
Before our scheduled meeting on Monday in New York, you and I can meet for an hour. I will have copies of all the agreements along with client communication to present to you in person which will then allow us the opportunity to address any questions you may have. From there, if we agree to continue and you require your team to spend any more time with my team in Sydney, it will be on the basis that everyone understands the arrangements and the ultimate requirements so to not cause any misinterpretation and to meet with the team to put processors and procedures in place to meet our new P&A arrangements.
If as you’ve stated there needs to be trust for all of us to work with integrity and in a transparent manner then we will enjoy a great future together which I am fully committed to.
Feel free to call me as I will be leaving for New York 5pm my time making it 1pm in New York.
Look forward to seeing you in New York.
681 In addition to the points already made in relation to the drafts that Mr Papas had prepared before sending the final email, I note the following features of this email. First, Mr Papas’ asserts he has “a $100 Million private investor” behind him who he was going to use as the “foundation for our international business endeavours” but who Mr Papas says now agrees with him that it is necessary to “clean this situation first”. Mr Papas uses this to justify what appears to be a request to pause the negotiation of the proposed international funding (and by extension the due diligence process). The second point to note is that the explanations that Mr Papas gives in relation to the existing arrangements do not make any reference to the so-called advance funding arrangement or future funding arrangements, that Mr Tesoriero maintains were the reason for Maia’s dissatisfaction with the existing arrangements that resulted in the arrangements being terminated. Indeed, Mr Papas’ explanation of the billing and service agreements and the need “to split the rental and the service to accommodate your product with NMF” because Forum’s “customers only see one monthly bundled cost (service + rent) … reflected on the monthly invoices” is directly contrary to the advance funding arrangement thesis that Mr Tesoriero asserted that Maia was dissatisfied with.
682 On 18 March 2018, Mr Bouchahine emailed Mr Sher saying that he had been instructed by Mr Papas that the meeting with Maia had been postponed until Mr Papas and Mr Blizzard met.
683 Mr Bouchahine appears to have blind copied his email to Mr Papas. Mr Papas replied directly to Mr Bouchahine on 19 March 2018 saying “No stress Bouch. I’m going to fck these cunts!!”. Mr Bouchahine could have been left in no doubt as to Mr Papas’ objective with respect to Maia. Indeed, Mr Bouchahine replied “That’s the Papas I know”.
684 Mr Bouchahine’s close involvement in the above interaction between Forum and Maia is significant. He was taken into Mr Papas’ confidence and assisted Mr Papas in deflecting and delaying Maia in relation to the concerns Maia had raised about the absence of the locked box arrangements and the duplication of serial numbers. I am satisfied that at the time of these events, Mr Bouchahine understood that the concern regarding the locked box arrangements was a concern about Forum having direct (and from the perspective of Maia and NMF, opaque) access to customer funds that comprised the receivable in respect of which Maia had contracted. Further, that Mr Bouchahine understood that the concern raised in respect of multiple invoices being raised in relation to the same equipment (as demonstrated by the duplication of serial numbers) was a concern about whether the leased equipment that underpinned the Rental Agreements was in fact in place with the end customer. In this regard, I take into account Mr Bouchahine’s experience in the financial administration of businesses based on equipment financing leases both before and after he joined Forum. I also note that on his own evidence, Mr Bouchahine said that one of the functions of his role as Forum CFO was stock control and that he had this role throughout the period.
685 I further find that Mr Bouchahine appreciated at the relevant time that Maia’s desire to sight the original customer contracts (said to be locked in Mr Papas’ office at the relevant time), obtain new acknowledgements from the customers in respect of the locked box arrangements and to sit in on customer calls was borne of a concern that the contracts had been falsified and/or that Forum’s dealings with customers were not above board. When Mr Bouchahine was cross-examined on the events around the meeting with Maia, he was cautious but conceded that he understood that Maia were “pretty concerned to have a very close look at the Forum documentation” and that they wanted to see original documentation. He said that he did not know if Maia wanted to see original contracts so that they could check signatures but then agreed that he could not think of any other reason why Maia would want to sight original contracts.
686 Mr Bouchahine’s role in relation to Maia undermines his contention that having been put on inquiry, he made enquiries and obtained from Mr Papas a satisfactory response in 2019. I address Mr Bouchahine’s evidence in relation to the conversation he says he had with Mr Papas about advance funding in 2019 in Section I.19.
687 Mr Tesoriero was not copied on the emails concerning the Maia meeting and its sequelae to which I have referred. He was shown the emails when he was in cross-examination. He said that he did not see the emails and that Mr Papas and Mr Bouchahine did not raise the issues disclosed in those emails with him at the time. He said that Mr Papas did not tell him that Maia had questioned his integrity. I was not taken to contemporaneous records that demonstrated that Mr Tesoriero was provided with these documents at the relevant time.
I.18.2.5 Attempt to refinance for Forum/Maia book
688 However, by later in March 2018, Mr Tesoriero was enlisted by Mr Papas to assist in Forum’s response to the problems that had emerged in the Maia relationship. On 29 March 2018 Mr Papas emailed to Mr Tesoriero the Revised Indicative Term Sheet from Maia dated 3 January 2018 to which I have referred above. By early April 2018, Mr Papas and Mr Tesoriero were actively engaged in seeking to refinance the Maia book. I infer that the impetus for this was to enable Mr Papas to deliver on the indignant bravado of his offer to Mr Blizzard to make some payments to Maia in the near term to restore trust.
689 On 4 April 2018 Mr Papas emailed a contact at Fort Matilda an excel spreadsheet with the title “List of NMF Contracts”, copying Mr Tesoriero. The spreadsheet that was attached to the email listed equipment contracts with customers including Veolia, ALH, HWLE, WesTrac, Scentre and CHC. He described the attachment as “Deals attached”.
690 On 9 April 2018, Mr Ben Witten, a contact of Mr Tesoriero’s at Heritage Group, forwarded to Mr Papas and Mr Tesoriero an email which he had sent to Heritage Finance regarding Forum Finance refinancing their equipment loan book out of All Leasing. He attached to his email various management accounts for FGOC. In his email, Mr Witten said:.
Vince Tesoriero and Bill Pappas are looking at refinancing their equipment loan book out of All Leasing (I believe it is a white label book on a principal and agent agreement). See NMF Contracts attached.
The current debt amount is ~$40M.
Could be a deal for RedZed. Will arrange for Vince to come in over the next couple of days to meet with us.
Separately, there is also a smaller finance requirement for the Forum Business. This is more urgent. Looking for $1-$2M to fill a hole created by a recent property purchase in QLD. Vince can provide a bunch of properties as caveats for this – might be a private deal for Rupert? Most recent mgmt financials for Forum Group also attached.
691 Mr Tesoriero was taken to this email in cross-examination. It was put to him that he was clearly being brought into the Maia issue at this point and had been briefed in order for him to meet with proposed financiers in relation to the refinance of the Maia part of the book. He said he did not recall a discussion about Maia or NMF but that Mr Papas might have asked him to reach out to Mr Witten. He said he had not been briefed – “not particularly”. He said he did not think he met anyone about the refinancing the Maia part of the book. Mr Tesoriero said that he did not know that Maia wanted to be bought out until about August 2018.
I.18.2.6 The Standstill Agreement
692 The next relevant development was that on 18 April 2018, the Standstill Agreement was executed between Maia, ALLF in its capacity as trustee of the Alleasing Funding Trust, FG (by Mr Papas as director and company secretary), Forum Enviro (by Mr Papas as director and company secretary), FGOC (by Mr Papas and Mr Tesoriero as directors), FGFS (by Mr Papas and Mr Tesoriero as directors) and Mr Papas personally.
693 In cross-examination, Mr Tesoriero maintained that he could not remember signing the Standstill Agreement on behalf of FGOC and FGFS and went so far as to suggest that he could not be sure that the signature was his. He acknowledged that it was his practice to read and understand documents of this nature before signing. Further, that he understood at the relevant time that it was important for a director to fully understand the nature of an obligation before committing the company to undertake an obligation and that any contractual obligation to which a director agreed had to in the company’s best interests.
694 The Standstill Agreement bought Mr Papas and the Forum parties time to sort out the problem with Maia. The time for payment by instalments was as follows: $10,000,000 by 4.00 pm on 4 May 2018; $10,000,000 by 4.00 pm on 31 May 2018 and the balance of the amounts owing under the Rental Agreements by 4.00 pm on 15 June 2018. One of the rights that Maia agreed not to exercise on condition of being paid out was the right to “step in” — to communicate directly with the end customers and to directly receive the payments required to be made by them under the rental agreements. As originally executed, the Standstill Agreement included guarantees given by FGOC and Mr Papas for each of the payment obligations of Forum Group, Forum Enviro and Forum Group Financial as set out in the Standstill Agreement and FGOC granting Maia a security interest in the whole of its present and future property, assets and undertakings to secure its guarantee of the payment obligations.
695 Mr Tesoriero initially denied in his cross-examination that he had seen the Standstill Agreement but when shown his signature on the document, said that “It looks like I have signed it, yes. I don’t recall signing it.” He said that if he signed it he would have read it, but he did not recall signing it. He equivocated as to whether the signature was in fact his ⸻ “I’m not sure, to be honest. I do not recall signing it”.
696 The obligations of the Forum Parties under the Standstill Agreement were not met within the stipulated timeframe and the Standstill Agreement was varied to extend the timeframe, first on 11 July 2018, and then again on 3 September 2018.
697 Before I turn to address each of the variations to the Standstill Agreement, I will address the notes made in a notebook by Mr Papas which were discovered during the execution of a search warrant at Forum Finance’s Sydney office premises, very shortly after Mr Papas had fled the country.
698 For the reasons which follow I find that the notes were made in April 2018, proximate to the time when the Standstill Agreement was entered. In these notes, Mr Papas sketched key features of the fraudulent scheme and alluded to an escape overseas. This document is significant. It must be understood in the context of the Maia events that were unfolding at the time the notes were made. I will return to the balance of the evidence in relation to the finalisation of the Maia relationship after addressing Mr Papas’ notes.
699 From around or about at least April 2018, Mr Papas retained a notebook in which he made notes about, amongst other things, the Forum business.
700 At the hearing, Westpac sought to tender the notebook on the basis that it was a business record within the meaning of s 69 of the Evidence Act. I admitted the notebook into evidence over the objection of Mr Tesoriero on the limited basis that what was to be admitted were only those pages of the notebook to which I was taken by the parties in submissions, in examination-in-chief, or in cross-examination. The tender ended up being comprised of a copy of the cover of the notebook and seven pages, not all of which were consecutive.
701 In its oral submissions, Westpac directed me in particular to two pages from the original bound notebook. These two pages are reproduced in Annexure L to these reasons.
702 The first is a page with a hand-drawn diagram, which Westpac submit reflects the key components of the fraudulent scheme. The second is the page which immediately follows the first in the bound notebook, which has a series of handwritten numbered notations in list form, one of which reads “tell Vince everything you need to tell him”.
703 The hand drawn diagram on the first page is similar to a mud map of sorts – in the centre are the letters “BP” (Mr Papas’ initials) in a large circle. Situated around the large central circle are 12 smaller circles, each of which has been labelled with a numbered step. The same numbered steps apply to more than one circle. There are also other notes written outside the circles on the page. Finally, there are arrows and lines that link the circles to each other.
704 Chief amongst the numbered smaller circles for present purposes are:
(1) two circles corresponding with the number “1” and connected by a double-headed arrow, one of which has the words “false contracts?” and the other “advanced funding of contracts”;
(2) a second set of circles numbered “2” with the words “Edmonstone” and “Margaret St”, again connected by a double-headed arrow and with lines drawn towards the central “BP” circle;
(3) a circle numbered “3” with the words “family”, “Jen situation”, “boys”, “protect the house” and “income for boys” in list form connected to another circle numbered “3” that has the words “Property Settlement”;
(4) circles numbered “4” and “8” (but it may be a “5”) respectively and which referred to “money here & overseas” and “overseas escape” and are connected by arrows to the words “3 million USD”. Above the circle numbered “4” and connected by a line is an unnumbered circle in which the word inside is “Ike” (which I infer to be a reference to Theion Ike, a respondent in the Westpac Proceeding, which received tainted funds, and which did not defend the proceedings);
(5) a circle numbered “6” has the words “company structures”;
(6) a circle numbered “7” has the words “Directorships -Vince – D. Pinker”. This circle is linked to the “BP” circle. It also has a double headed arrow leading the heavily underlined word “disclose” and beneath that the word “simpler”; and
(7) finally, the circle numbered “9” has the words “reputation” and “credibility” in it and is linked by lines to circles for false contracts, advanced funding of contracts and company structures.
705 Westpac submits, and I accept, that each of these entries was made by Mr Papas in or around April 2018, approximately six months before Forum Finance entered into its first contract with Westpac. That the entries were made by Mr Papas and were made around that time is evident from the following context:
(1) the reference to the two properties, Margaret Street and Edmonstone Road, were both purchased at around April 2018;
(2) an entry which appears in the pages in the bound notebook which follow a few pages after the page with the diagram is dated 16 April 2018;
(3) some pages further on there is a note headed Maia meeting “30/5/18”. On the preceding page, there are notes that Mr Papas has made which appear to be made in preparation for the meeting with Maia on 30 May 2018. His notes include what appear to be rehearsed speaking notes for the meeting and include an argument for why any renegotiation of the Maia relationship should not include “stepping rights”; and
(4) certain figures which are recorded in the second annotation are referable to the figures which are recorded in other evidence from early April 2018 – namely, an email sent from Mr Papas to a business associate with a list of NMF’s contracts with customers on behalf of Maia. Westpac prepared an aide memoire of each of the NMF contracts listed in the spreadsheet attached to Mr Papas’ email, with the total amount of the NMF contracts for each of the relevant customers. The aide memoire also includes the total for each customer plus 10%, to account for GST. The totals (including GST) were: $17,477,373 for Veolia, $6,581,859 for ALH, $5,487,900 for Catholic and $3,511,318 for Scentre. These figures correlate to the rounded figures in the note, grouped together within a box, which state “17.5 Veolia”, “6.5 AHL”, “5.5 Catholic” and “3.5 Scentre”.
706 Westpac relies upon these pages to advance its case in two critical respects, which I will address in turn.
707 First, and perhaps less significantly, Westpac sought to rely upon the diagram as evidence of the fraudulent scheme. In particular, it submits that it established that the scheme was scrupulously planned by Mr Papas, was longstanding, and was pre-meditated. It also submits that it evidenced certain fundamental aspects of the scheme as pleaded, beginning with false contracts and advanced funding, and ending with Mr Papas’ “overseas escape”. On this basis, Westpac (and SMBC, who adopts Westpac’s submission on this point) submits that the diagram is further evidence of the fraud. Mr Tesoriero did not contest that the diagram can be relied on for this purpose.
708 The notes made in April 2018 by Mr Papas are not evidence of the fraudulent scheme that he subsequently orchestrated with respect to each of the present financiers. The notes were not made by reference to the arrangements in place with Westpac or with SMBC. They were made before those arrangements were within Mr Papas’ purview. Westpac abandoned that part of its pleading that sought to prove that there was an earlier fraudulent scheme involving Maia. In those circumstances, and having regard to the fact that Maia and ALLF were not parties to the proceedings and no witness was called from Maia or ALLF, it would be inappropriate for me to conclude that the notes record a fraudulent scheme involving Maia. For present purposes it is sufficient to find, which I do, that the circumstances surrounding the Maia transactions as revealed in the events leading to the termination of those arrangements are highly suspicious.
709 The notes were made at a time when Mr Papas was under pressure. They were made shortly after a serious attack was made on his integrity by Maia. That attack was based on concerns about the locked box arrangements and the duplication of serial numbers of the leased equipment on Forum’s invoices. Both were serious matters. The first went to the Forum entities’ ability to mimic payments from customers. The second went to whether the object of the finance, that is the leased equipment, was in fact in place. The notes were made proximate to the time the Standstill Agreement was executed under which substantial payments were due at fairly short intervals and under which the clock was running down on the standstill period. Mr Papas had given a personal guarantee and caused FGOC to give a guarantee. He was meeting with the senior executives from Maia around this time seeking to negotiate a major deal. He was also dealing with the onslaught of expenses flowing from the acquisitions spree that followed FGFS being set up (as discussed at Section I.15 above). At the same time, he and Mr Tesoriero were trying to hawk the Maia finance book to another financier. I infer from the context and content of the notes that Mr Papas made the notes as a means of processing the predicament he was then in with Maia and planning what his next steps might be.
710 As events turned out, Mr Papas managed to survive the collapse of the Maia relationship by arranging for the Maia contracts to be paid out and assigned to Forum Enviro. He managed to land three new financiers and the Forum show went on for another three years. The arrangements that were put in place with each of the present financiers in reality conformed with the mud map that Mr Papas had drawn in April 2018. Mr Papas (“BP”) featured at the centre of the arrangements just as he did in the mud map. Beneath the apparently legitimate veneer, each of the new funding arrangements was underpinned by “false contracts” with real people but faux customers and “advanced funding of contracts”, which was a euphemism that was used contemporaneously by Mr Papas in aid of Forum keeping up the façade of a receivables fund flow by making cloaking payments using the funds advanced by the financiers. By the time the fraud unravelled in mid-2021, Mr Papas had stowed “money here & overseas” and he managed to effect his “overseas escape”. For these reasons, although the notes were not made about the fraudulent schemes perpetrated against each of the present financiers, I accept that the notes are further evidence of the fraud as it was in fact put into effect by Mr Papas. Further, that the fraud was premeditated and carefully planned from the outset.
711 The second submission that Westpac makes is based on the notation “tell Vince everything you need to tell him” on the second page. Westpac says this notation is relevantly contextualised by the circle numbered “7” with the words “Directorships -Vince - D. Pinker with the double headed arrow leading the heavily underlined word “disclose” and beneath that, the word “simpler”.
712 Westpac submits that this notation gives rise to an inference that Mr Tesoriero had actual knowledge of the fraud. In other words, Westpac submits that, on the basis of the notation in Mr Papas’ diary, I should infer that Mr Papas did in fact “tell Vince everything” about the scheme. The essence of this submission is that, when read in conjunction with the mud map on the preceding page, the “everything” to which Mr Papas was referring was, in this context, the nature of fraud: the false contracts, the advance funding, and the deployment of funds to invest in property which would be jointly owned and controlled by Mr Tesoriero.
713 Mr Tesoriero submitted that Mr Papas’ annotation could not fairly be relied upon to draw the inference urged by Westpac — that Mr Tesoriero had actual knowledge of the fraud. He submits that there is nothing in the note to support the conclusion that Mr Papas did in fact tell Mr Tesoriero anything.
714 The Court may draw an inference where, on the basis of the primary facts, it is reasonable to draw the inference: Luxton v Vines [1952] HCA 19; 85 CLR 352 at 358 (Dixon, Fullagar and Kitto JJ); Seltsam Pty Limited v McGuiness [2000] NSWCA 29; 49 NSWLR 262 at [88] (Spigelman CJ). In this regard, a distinction is to be drawn between an inference and what is mere speculation or conjecture. Although the dividing line is often a difficult one to draw, the former is something greater than that which is merely plausible or ‘quite possible’: see Seltsam at [84]-[88]; Jones v Great Western Railway Co (1930) 47 TLR 39 at 45 (per Lord Macmillan); Sami v Minister for Home Affairs [2022] FCA 1513 at [157] (Mortimer J, as her Honour was then). An inference is a reasonable deduction from the evidence which has validity as legal proof. In Carr v Baker (1936) 36 SR (NSW) 301 at 306, Jordan CJ observed that:
The existence of a fact may be inferred from other facts when those facts make it reasonably probable that it exists; if they go no further than to show that it is possible that it may exist, then its existence does not go beyond mere conjecture.
715 Similarly, Lord Wright observed in a frequently cited passage in Caswell v Powell Duffryn Associated Collieries Ltd [1940] AC 152 at 169-170 that:
…there can be no inference unless there are objective facts from which to infer the other facts which it is sought to establish. In some cases the other facts can be inferred with as much practical certainty as if they had been actually observed. In other cases the inference does not go beyond reasonable probability. But if there are no positive proved facts from which the inference can be made, the method of inference fails and what is left is mere speculation or conjecture.
716 I am not satisfied that on the basis of Mr Papas’ note alone that I should infer that Mr Papas told Mr Tesoriero everything at about the time this note was made, that is in April 2018. In its submission, Westpac elides the qualification that is included in this portion of Mr Papas’ note — “tell Vince everything you need to tell him”. That begs the question of what Mr Papas considered he needed to tell Vince. I do not accept Westpac’s submission that this note viewed in isolation gives rise to an inference that may safely be drawn.
717 However, Westpac’s submission goes further. Westpac submits that read in conjunction with the mud map on the previous page, what Mr Papas needs to tell Vince, who will be a director, is how the arrangements using false contracts and advance funding of contracts are to work and how the funds gleaned in that way will be deployed to invest in properties which are jointly owned or controlled by the two of them. I am not satisfied that the inference that Mr Papas told Mr Tesoriero everything can properly be drawn based on that hypothesis. But that is not the limit of the evidence. In order to identify the other evidence that is relevant to whether Mr Papas actually told Mr Tesoriero enough so as to establish that he had knowledge about the fraud, it is necessary to return to the chronology in relation to Maia.
I.18.2.8 First Variation to, amongst other things, extend timeframe for payment the Standstill Agreement
718 On 11 May 2018, Ms Eliatamby, General Counsel, Maia, sent an email to Mr Papas which summarised the payments due to Maia on 31 May 2018 and 15 June 2018, and attached a spreadsheet setting out the remaining balance yet to be paid pursuant to the Standstill Agreement, a list of contracts and customers for NMF as at 3 April 2018, and a copy of the executed Standstill Agreement.
719 Contextually, I note that although the first offer accepted by SMBC which resulted in the first of the SMBC Fraudulent Transactions in the sum of $14,411,503 was dated 6 August 2018, Flexirent made its first payment of $4,435,587 to Forum Enviro (Aust) on 21 June 2018 in advance of receiving payments from SMBC in connection with the first offer letter (which was subsequently issued by Flexirent to SMBC on 6 August 2018). On 22 June 2018, the day after receipt of the payment from Flexirent, Forum Enviro paid an amount of $4,000,000 to Maia.
720 On 11 July 2018, the parties executed a variation to the Standstill Agreement (the First Standstill Variation). Mr Tesoriero and Mr Papas signed as directors of FGOC. Mr Tesoriero again, gave evidence that he did not recall signing this variation. The version of the First Standstill Variation emailed from Ms Phillips to Mr Blizzard, copying Mr Papas, on 11 July 2018 is not signed on behalf of FGFS. There is no execution block for FGFS. This differs from the original Standstill Agreement which was signed by Mr Papas and Mr Tesoriero as directors of FGFS. The First Standstill Variation recited that the relevant Forum entities had failed to comply with their obligations under the Standstill Agreement by not paying the requisite funds in the timeframe required. Further, that as a result, Maia was entitled to take enforcement action, including by exercising its step in rights. However, pursuant to the variation, the terms of the Standstill Agreement were amended so that the relevant Forum entities were given an extended timeframe in which to pay by instalments, and the standstill period was extended until the earlier of 24 August 2018 or the date when the relevant Forum entities failed to comply with their obligations under the amended timeframe.
721 In July 2018, when the first variation was entered, Mr Tesoriero and Mr Bouchahine were engaged in preparing documents which falsely confirmed that Mr Tesoriero derived an income of $800,000 for the purpose of obtaining increased funding. At this time, Mr Tesoriero told Mr Papas that he was “working on getting us increased funding” and asked for Mr Papas to call him. I have addressed this episode in Section I.11 above.
722 Later that month, on 31 July 2018, BHD Leasing approached Westpac about providing asset financing to existing Westpac Institutional Bank customers for assets sold to them by Forum Finance. This was the genesis of Westpac’s involvement with Forum.
723 On 1 August 2018, Mr Blizzard emailed Mr Papas and Mr Tesoriero summarising the outcome of what appears to have been a discussion on that day:
1 – Rental will paid on time today.
2 – The $7.0m standstill agreement payment will be extended to no later the 5.00pm Monday 6 August 2018.
3 – Post payment, the Veolia contracts will be transferred to Forum subject to the required due diligence requirements, most notably that the assets are in place and rental contracts are recognised by the client (for the avoidance of doubt the other payments noted in the current standstill agreement are due on the required dates).
As stated, we must focus on delivering on these commitments for the sake of retaining ongoing confidence in Maia Financial and the Forum Group.
724 Further to various emails between Mr Blizzard and Mr Papas, Mr Tesoriero sent an email on 3 August 2018 to Mr Blizzard in relation to the accommodation to the existing arrangements afforded to Forum by Maia — “[a]ppreciate you guys working with us”.
725 I interpolate to note that Mr Tesoriero submitted that I should infer that because the Maia Assignment Deed was executed in October 2018, I should infer that the requirement outlined at point 3 of Mr Blizzard’s email on 1 August 2018 was met — namely that “the assets are in place and rental contracts are recognised by the client”. I reject that submission. The events leading to the execution of the Maia Assignment Deed in October 2018 do not support the inference for which Mr Tesoriero contends and, viewed in sequence and in context, demonstrates that the concerns in relation to these issues were not dispelled. The circumstances that culminated in the severance of the Maia relationship remain, at the least, highly suspicious.
I.18.2.9 Mr Tesoriero’s evidence about dealings with Maia in August 2018
726 In his examination-in-chief, Mr Tesoriero said that he attended a meeting with Maia representatives in Sydney in the middle of 2018 at Mr Papas’ request:
MR RUDD: All right. And so the next event, you went up to the meeting?
So I went up to the meeting. Yes.
And so I think you said it was at their offices?
It was at their offices.
And what happened at that meeting?
And the guys discussed – there was a – a standstill agreement being put in place and that some of the contracts – I didn’t think it was all of the – but some of the contacts didn’t meet the criteria for the way they understood it had been sold to them by NMF and so they were going to need some of those paid out, and then I – it was a very high-level and not very long meeting, and they just really wanted to meet and greet to – to know the other partner in the business and – and that was it. I left that meeting and then discussed it with Bill, and he said, “Yes. Yes. I’m in the process of just funding it out. They just wanted to meet you to get some comfort around it all, but basically they didn’t like the way the forward invoicing model had worked,” or something to that effect.
Okay. So - - -
HER HONOUR: Just before you go on, you’ve referred repeatedly to “the guys” from Maia?
I beg your pardon, your Honour. Yes.
Who are you talking about?
Daniel – Daniel something was – Daniel Blizzard, I think, was one of them, and another guy was Joey somebody. I – I can’t recall his last name.
…
MR RUDD: So when you were describing that meeting with Maia, you said that the loans didn’t meet the funding criteria?
That’s what I was told. Yes.
And was that discussed at that meeting?
Yes, it was discussed. It – they didn’t like the way the process was operating, something about the forward – the way that money was coming back through Forum, and then, to them, they wanted to have access, direct, to the customers, so they had knowledge of the customers. They – they knew of the customers, but they didn’t like the way it was coming back through, for some reason.
Okay. And did they go on to describe the issue with that process?
Not – not particularly, no.
All right. And so, then, you referred – so after that meeting – you mentioned, a moment ago - - -?
Yes.
- - - that you had a discussion with Mr Papas?
Yes.
So can you just describe what you recall of that discussion?
Just Mr Papas said, “Yes. We – we – look, it will pay out through” – I knew our book, at that time, was quite sizeable, and – and it was just a small quarantined portion of it, and he – he, you know, kind of dismissed it and said there was no issue, and – and the guys were pretty relaxed and comfortable, too. They weren’t – didn’t give rise to any – any issues, and, the next think I knew, I think, in the next month or two, it got paid out. I think, at some point after that meeting, I – I subsequently signed a guarantee. I think there was another phone call, from me, and the guys reaching out and saying, “Would you mind just to sign a guarantee?” And, I think, at that point, Bill had paid down most of the debt. There was a small – a few million that was still remaining, and I said ..... no issue, you know. He has already paid out the balance of it. I didn’t – didn’t see any issue so signed the guarantee. Bill had – Bill had signed the guarantee as well, and then, the next thing I – I didn’t even give it a second thought until, I think, when I was up in Sydney next. I said, “How did you end up going with that?” And he said, “Yes. That’s all done and paid out.”
So this aspect of not meeting the funding criteria - - -?
Yes.
Did you discuss that further with Mr Papas?
Bill had explained to me something about forward invoicing which was, like, the industry thing where the – where the contracts are sold, and the money is paid to Forum Group of Companies, I think it is, upfront - - -
Right?
- - - and then – but there’s a lag there of – of a few months, was my understanding, I think, from when we should receive funds. I think the funder preferred that, once the invoicing was started, which could typically be three months after the order had been placed – and they didn’t like that process.
Right. Just explain that process?
I don’t know too much about it to explain it, but that’s – that’s - - -
That - - -?
That’s, kind of, a high level. From what I understand is a sales person goes out, sells a customer a contract – or sells a customer a product. Sorry. A contract is entered into. That contract is then presented to a financier who funds it - - -
Yes?
- - - over a number of years or whatever, and then there is a delay from when goods are ordered, maybe, with – if it’s printers, there might be a couple of months before they get from overseas to us and, maybe, a month or two after that where they’re actually in with the customer, and the customer is invoiced and all that.
Okay?
So there is a delay, and I – I – that was my understanding. I think they didn’t like that process, but - - -
Okay?
- - - I could be wrong, Mr Rudd, because I’m not entirely across it.
727 In his evidence in chief (and again in his cross-examination), Mr Tesoriero introduced into his evidence that:
since when all this blew up in – in – in – now in ’22 or whatever it was, I actually did reach out to the Maia guys again. I found their number on one of the emails, and I asked about this particular situation, and they reiterated the same.
In this extract, Mr Tesoriero’s assertion that the Maia guys reiterated “the same” – is a reference to his evidence that Maia wanted to be paid out because they had an issue with “the future funding”:
MR RUDD: So he told you there was an issue with the future funding?
Yes, yes.
And did he say what he was going to do about it?
That he was going to pay the contracts out.
All right?
They didn’t – they didn’t want them in that arrangement. I think Maia still remained with some contracts with us. I’m not 100 per cent sure of that, Mr Rudd, but these particular contracts didn’t meet the criteria, and they wanted them paid out.
728 In his cross-examination, he gave the following further evidence on this topic:
Well, you knew that Maia by this stage was looking to be bought out of its contracts; correct?
No. I think I knew that later in the year, I don’t think I knew that as of April.
Well, when did you find out about it, do you say?
I think it was – well, I think I sent an email around August.
You think it was around August?
I think it was around August.
And that was because Maia had very serious concerns; correct?
No. I met with Maia and they seemed fine. When I met with them there was no – none of this discussion about due to the contracts brought up with me when I met with them.
No one ever raised that with you?
No, they didn’t. No.
729 Mr Tesoriero’s evidence was captured in summary form in the following question and answer:
All right. So is this correct, and tell me if this isn’t accurate, you’re saying that you had, prior to Maia being bought out, you had no inkling that it had any concerns about the dealings it had had with Forum; is that right?
Even as of now, I have no inkling that they had an issue with the contracts.
All right. If you just focus on my question. As at the time that Maia was refinanced, you say you had no inkling that there was any problem with the Forum contracts; is that your evidence to this court?
Yes, that’s my evidence. They – they had an issue with the fact around forward funding, is what I was told.
I.18.2.10 Continued deterioration of relationship between Forum and Maia
730 Throughout August 2018, the relationship between Forum and Maia continued to deteriorate.
731 On 16 August 2018, Mr Blizzard sent an email to Mr Papas and Mr Tesoriero raising concerns about Forum’s ability to meet their obligations under the Standstill Agreement and the First Standstill Variation by 24 August 2018. Mr Blizzard said that, on the last occasion he had met with Mr Papas, they had agreed that the transfer of the Veolia contracts to Forum would be subject to the stipulated due diligence requirements being met, “most notably [that] the assets are in place and rental contracts are recognised by the client [Veolia]”. Further, that this was to occur by 24 August 2018. Mr Blizzard said that his view, following feedback from his team, was that a transfer would not occur by 24 August 2018. He said:
Noting that we have received A$32,531,667.90 in payments, a further A$26,322,217.74 is required to finalise the agreement. What I propose, subject to the transfer of Veolia contacts being delayed, is a payment of A$13,161,108.50 being paid by the 24 August 2018.
Subject to this being agreed, we can then confirm how to finalise the transfer of Veolia contacts and finalise the standstill agreement.
I.18.2.11 Second variation of Standstill Agreement
732 On 4 September 2018, Ms Eliatamby, General Counsel, Maia, emailed Mr Papas and Mr Tesoriero attaching a further standstill variation letter dated 3 September 2018 addressed to Mr Papas and Mr Tesoriero and a “Deed of Guarantee & Indemnity – Vince Tesoriero” (the Maia Guarantee).
733 In her email, Ms Eliatamby refers to recent discussions between Mr Papas, Mr Tesoriero, Mr Blizzard and Mr Fridman. The variation refers to “various telephone conversations, emails and meetings between Basile Papadimitrio, Vincenzo Tesoriero and Daniel Blizzard and others from Maia”.
734 In the further standstill variation letter, it was recited that Forum had failed to comply with its obligations pursuant to the Standstill Agreement. Clause 10 of the Standstill Agreement was varied to require instalment payments as follows: two payments of $6.5 million by 14 and 21 September 2018 with the balance of the purchase price to be paid by 5 October 2018. The variation provided, at clause 8(a), that in consideration of and as a condition of Maia entering into this variation:
at his request, Vincenzo Frank Tesoriero guarantees the payment obligations of Forum Group, Forum Enviro and Forum Group financial and agrees to execute the Deed of Guarantee and Indemnity by no later than 3:00 pm on 7 September 2018…
735 Pursuant to the draft guarantee, Mr Tesoriero was required to guarantee performance of all the obligations owed by each of the debtors, being Forum Group, FGFS, Forum Enviro, FGOC and Mr Papas, to the maximum amount of $58,583,885 plus interest and related costs and expenses including any indemnity costs, legal fees, stamp duty and GST. The scope of Mr Tesoriero’s guarantee captures the obligations of the debtors under the Standstill Agreement, each collateral security and the guarantees provided by FGOC and Mr Papas. Mr Tesoriero was also required to waive any right of first recourse and execute a legal advice waiver certificate. This guarantee was to continue to have effect for as long as the guaranteed money or any other amounts were outstanding under any of the transaction documents, including the Standstill Agreement.
736 Ms Eliatamby asked for the document to be signed and returned to Maia by 7 September 2018.
737 Despite Mr Tesoriero saying he did not remember signing the standstill documents and his faint suggestion that he was not sure that the signatures were his, there is nothing in the evidence to suggest Mr Tesoriero was surprised to receive this email and the attachments. When he signed the Maia Guarantee, Mr Tesoriero signed a waiver of legal advice certificate in which he expressly acknowledged that he had fully read and understood, amongst other things, the Standstill Agreement and the September variation. I do not accept Mr Tesoriero’s evidence that he did not recollect signing the Standstill Agreement and the variations. I do not accept his evidence in relation to the effect of the meetings he attended with representatives of Maia in this period and his role in dealing with Maia. I find that Mr Tesoriero was not prepared to tell the truth about his involvement in the negotiations that led to the Standstill Agreement and the variation of it. Further, that he was not prepared to tell the truth about his interaction with the Maia representatives.
738 On 5 September 2018, Mr Sheeran of BHO Finance emailed Mr Anderson requesting that Westpac “fast track” settlements with Forum. This was just one day after the second variation to the Standstill Agreement and Maia Guarantee had been sent to Mr Papas and Mr Tesoriero by Maia. In response, on 6 September 2018 Mr Anderson emailed Mr Sheeran noting that Westpac would fast track the Coles and Veolia settlements with Forum.
I.18.2.12 Maia Guarantee executed by Mr Tesoriero and Mr Tesoriero’s evidence regarding future funding
739 On 7 September 2018, Mr Tesoriero executed the Maia Guarantee, by which he guaranteed:
the due and punctual payment to the Financier [Maia] of the Guaranteed Money [all present and future debts and monetary liabilities (whether actual or contingent and whether owed jointly or severally or in any other capacity) of the Debtors to or for the account of the Financier] and the punctual performance by the Debtors [FG, FGFS, FE, TFGC, and Mr Papas] of all the Debtors' other obligations under the Finance Documents [including the Stand-still Agreement dated 18 April 2018]
740 The executed Maia Guarantee was provided by email to Maia on 7 September 2018. The executed version of the Maia Guarantee was in the same form as the draft emailed to him on 4 September 2018. Mr Tesoriero gave evidence in chief and was cross-examined on why he agreed to the Maia Guarantee by which he assumed personal liability for an amount in excess of $58.5 million. In chief, he said:
All right. And so you talked about how you entered into that guarantee?
Yes.
What was your understanding of why that guarantee was required?
I don’t know. I signed many, you know, funding agreements and bits and pieces over the years. It was – it’s not really something that I went through with any great, you know, concern or - - -
Did you have any - - -?
It was just a – just another guarantee, you know? It was – It had been done many times with properties and - - -
Did you have any discussions with Maia about why it was necessary?
No, I didn’t. No.
Were you told anything about why it was necessary?
No.
Now, why did you sign that guarantee?
Well, because I trusted Mr Papas, and I trusted what he told me, and I knew that he had already paid down most of that through, you know, selling – selling those receivables again, is what I understood, selling those contracts on again. I met the guys. There was no alarm with the guys. They were not, you know, in any way concerned, and - - -
When you say you “trusted Mr Papas,” what do you mean by that?
I trusted him. I had been partners with him. It was like, you know, for a number of years by that point, and I had never really had any signs of any fraud in the past and any issues and – you know, he always had a great reputation. I – I didn’t see any cause for concern. There was never any flags.
How did you satisfy yourself that the obligations under the guarantee would be met, that the money would be paid?
Well, Bill – Bill told me that it would be done - - -
And - - -?
- - - and I had no reason not to – not to believe him. There was no - - -
And when you say you had “no reason not to believe him,” why do you say that?
Well, there was – like I said, there was no history of, you know, anything like that.
And how did you satisfy yourself that Forum would have the money to meet the obligations?
It wasn’t Forum meeting the obligations. It was – it was another funder that would come in that would fit the criteria, like – like the rest of – I think our book might have been five or $600 million at that point, so it was another funder that was going to come in to take out this small portion of a similar funder that had the rest of the book.
Right. Okay?
So, obviously, I assumed that, you know, the other funders that were writing the other five or $600 million worth of deals were – we were meeting their criteria, and this was just a small percentage that – that didn’t fit the – tick the box.
Okay. In the sense of what you described as the “future funding”?
Correct, yes.
741 In his evidence in chief, he sought to draw a connection between the so-called future funding aspect of the Rental Agreements (which he said he did not really understand), Maia’s desire to be paid out and his execution of the Maia Guarantee:
MR RUDD: So he told you there was an issue with the future funding?
Yes, yes.
And did he say what he was going to do about it?
That he was going to pay the contracts out.
All right?
They didn’t – they didn’t want them in that arrangement. I think Maia still remained with some contracts with us. I’m not 100 per cent sure of that, Mr Rudd, but these particular contracts didn’t meet the criteria, and they wanted them paid out.
Okay. So just on this topic, you say you signed the guarantee, and what happened after that?
That – that was it. That was the last I saw or heard of it.
Okay. And I think you mentioned that – right at the beginning, you mentioned you had a discussion with Mr Papas about it afterwards?
Months – months later, I – I, just in passing, said, “How did you go with those? Did that all get sorted?” And he said yes.
And do you recall when that was?
No, I don’t. It would have been – would have been later in – later in the year, maybe, October or November.
742 In cross-examination, Mr Tesoriero acknowledged that he understood at the time he executed the guarantee it was important to fully understand the nature of the obligation that he was committing to in doing so. In the waiver of legal advice that he signed when executing the Maia Guarantee, Mr Tesoriero acknowledged that he had fully read and understood his obligations under the Maia Guarantee.
743 On 11 September 2018, Mr Blizzard emailed Mr Papas, copying Mr Tesoriero, in the following terms:
For your diary, please accept an overview of the payment dates agreed re the Standstill agreement. As stated, it is critical that these dates are met with Friday the first payment date!
Key dates under Variation to Standstill:
a. 14 September 2018 $6,500,000
b. 21 September 2018 $6,500,000
c. 5 October 2018 Balance $$
As part of the agreement, we also require a contact at Forum that will allow us to start planning logistically re the inspection of the assets. It is a key requirement of one of our funds and would provide great confidence if we could get this underway by Monday 17 September 2018.
I am available to assist in any way possible and its critical that we build confidence into October.
(emphasis in original)
744 At this late stage, Maia is still seeking to confirm that the “assets”, which I infer is a reference to the leased equipment, are in place.
745 Forum does not appear to have met its obligations for Maia to be paid out pursuant to the Standstill Agreement as varied. Instead, Maia, ALLF, the Forum Parties (as defined), Mr Papas and Mr Tesoriero entered into Maia Deed of Assignment.
746 I pause to observe that it was in the period between the second variation to the Standstill Agreement in September 2018 and execution of the Maia Deed of Assignment, that the Fraudulent Transactions involving WBC and SMBC gained momentum, the first tainted advance having been made by SMBC on 6 August 2018 (with an advanced instalment by Flexirent on 21 June 2018), as mentioned above. The table below sets out the relevant transactions for the period September to October 2018:
Transaction No | Funding Date | Payment date | Amount | Financier |
T1 | 13 September 2018 | $7,010,202.10 | Westpac | |
T2 | 14 September 2018 | $1,085,078.90 | Westpac | |
T3 | 19 September 2018 | $4,408,233.90 | Westpac | |
T4 | 20 September 2018 | $3,047,534.90 | Westpac | |
T5 | 21 September 2018 | $2,021,768.30 | Westpac | |
T6 | 25 September 2018 | $5,326,826.30 | Westpac | |
4 | 28 September 2018 | 2 October 2018 | $3,829,312.30 | SMBC |
T7 | 4 October 2018 | $2,707,584.60 | Westpac | |
T8 | 5 October 2018 | $2,940,985.20 | Westpac | |
T9 | 9 October 2018 | $2,588,731.20 | Westpac | |
T10 | 15 October 2018 | $2,515,302.60 | Westpac | |
T11 | 15 October 2018 | $4,979,169.40 | Westpac | |
$42,460,729.70 |
747 On 22 October 2018, the Maia Deed of Assignment was executed, as described in Section I.18.1.
748 When Mr Tesoriero was cross-examined on the Maia Assignment, he sparred with the cross-examiner, asserting that he did not understand that Forum was buying out Maia but rather insisting that Maia was being financed by a different financier, namely Westpac. Mr Tesoriero’s evidence was directly contradicted by the documents that he himself signed and acknowledged that he had read fully and understood at the time.
749 Even though Mr Tesoriero was dogged in his assertion that it was not Forum that was paying out Maia but rather that Forum was facilitating Westpac acquiring Maia’s receivables, Mr Tesoriero made the following concessions in relation to the counterfactual, namely that the arrangements required certain Forum entities to pay out Maia:
And do you agree that there could be no possible commercial basis for the Forum Group paying Maia $58 million to acquire receivables from Maia?
Yes.
That would be a crazy thing to do; is that right?
Well, we didn’t have 58 million of our personal money in the bank.
So it would be a crazy thing to do; do you agree?
Yes.
And no honest and reasonable person would ever do such a thing, correct?
Pay something with money they don’t have, is that what you’re suggesting?
Yes?
Yes, that’s correct.
And no honest or reasonable person would enter into a deal, on your evidence, whereby they pay $58 million to Maia to buy their receivables, correct?
Correct.
I.18.2.13 Conclusion on Mr Tesoriero’s knowledge as a result of dealings with Maia
750 By the time he executed the Maia Guarantee in September 2018, Mr Tesoriero knew that Maia and ALLF had been paid out by entities associated with Forum and not by customers. I reject Mr Tesoriero’s evidence that he understood at the time that the Maia Assignment was a means of facilitating a legitimate assignment of the Maia Rental Agreements to Westpac. The contemporaneous documents that he signed at the time are directly contrary to such an understanding.
751 Mr Tesoriero’s evidence in relation to his understanding of the so-called future funding mechanism is incoherent. Mr Tesoriero falteringly described the advance funding arrangement in his evidence in chief, struggling to give a coherent explanation of his own understanding of it. He said that he “could be wrong” in his understanding because he was “not entirely across it”.
752 While I do not regard Mr Tesoriero as revealing himself to be an astute, careful or honest businessman — either in his contemporaneous emoji-laden communications or in his presentation in the witness box — his inability to explain his understanding of future funding was striking.
753 If his evidence is to be believed, Mr Papas’ explanation of future funding must have been important to Mr Tesoriero at the time. His blithe acceptance of the explanation, which he acknowledged he did not really understand, even at the time, coupled with direct interaction with the Maia executives, his preparedness to assume extensive and substantial obligations as he did under the Standstill Agreement as varied, the Maia Guarantee, and the Maia Deed of Assignment simply because of his trust in Mr Papas beggars belief. Mr Tesoriero’s difficulty in explaining what he understood by future funding at the time demonstrated that he did not in fact believe that the Forum equipment financing model which was put in place during the Maia death throes was legitimate based on future funded contracts.
754 Mr Tesoriero’s conduct in relation to the finalisation of the Maia relationship is one of the key indications that he likely had actual knowledge of the reality of the fraud that lay at the heart of the arrangements with the incoming financiers. By actual knowledge, I mean knowledge within the first three Baden categories:
(1) In terms of first category knowledge — actual knowledge — it is likely that Mr Papas told Mr Tesoriero what Mr Papas thought he needed him to know, as Mr Papas’ presaged in his mud map, because Mr Papas regarded it “simpler” to “disclose”. In short, he needed Mr Tesoriero inside the tent. As a director of FGOC and FGFS, Mr Tesoriero was called on to execute the relevant Maia agreements (including the Standstill Agreement as varied and the Maia Assignment Deed). He was ultimately required to sign an extensive personal guarantee. Despite Mr Tesoriero’s claim that he signed guarantees all the time and the Maia Guarantee was just another one, I do not accept that. Mr Tesoriero’s own dealings with creditors demonstrated that he only gave up as much as he had to, to get what he wanted. He was directly involved in meetings with the Maia senior executive. If Mr Tesoriero was not adequately briefed by Mr Papas, he may have unwittingly contradicted the façade Mr Papas was protecting with Maia in those meetings. That risk would not have been lost on a fraudster of Mr Papas’ calibre;
(2) In terms of second category knowledge — wilfully shutting one’s eyes to the obvious — if I am wrong that Mr Papas told Mr Tesoriero the essential elements of the fraudulent scheme, then I find that the fact that Mr Tesoriero executed the Maia Standstill Agreement as varied and Maia Deed of Assignment and expressly declined to take legal advice on those documents is powerful evidence that he wilfully shut his eyes to the obvious fact that there could be no legitimate purpose served by executing these documents; and
(3) In terms of third category knowledge — wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make — I repeat the observations made in respect of the second category and add that if Mr Tesoriero’s evidence concerning the future funding is to be believed, then he wilfully and recklessly failed to make such inquiries as an honest and reasonable person would make in relation to the explanation which he says he was given and which he says he did not properly understand. He wilfully chose not to inquire and in the context of what he otherwise was aware of, I find readily falls within the third category of Baden knowledge.
755 The species of actual knowledge that Mr Tesoriero had within the Baden categories does not much matter. On the evidence before me, I have reached the conclusion that Mr Tesoriero had at least the third category of knowledge.
756 That he had actual knowledge from this earlier point in time is supported by what he let slip in his evidence-in-chief. Whether as a result of Mr Papas telling him about the fraudulent scheme or by his own process of deduction, it is clear that Mr Tesoriero understood that there was a connection between the problems that Maia had raised in 2018 and the problems that Westpac raised in June 2021 that ultimately brought down the house of cards.
757 In an unguarded and candid slip in his examination-in-chief, Mr Tesoriero described a conversation that he had with Mr Papas at around the time when Westpac was demanding to meet with Mr Papas about the equipment financing arrangements in June 2021:
“[Bill] wasn’t his usual self and was – and was stressed”.
Right. And did he talk about why, or?
He didn’t really get into it, he just said that there was some issues with contracts again, I think, and that was – yes.
Okay?
He didn’t – didn’t elaborate too much.
758 It was clear that Mr Tesoriero in referring to there being “some issues” with contracts again was drawing a link between the concerns which Westpac raised in June 2021 and those that Maia had raised in 2018, which precipitated Forum paying Maia out. Given that I do not accept that Mr Tesoriero had an operative understanding that the so-called future funding of contracts was legitimate, I do not accept that his reference to the recurrence of “issues” with the contracts again is a reference to future funding. Mr Tesoriero’s response to the second of the questions from his counsel extracted above is consistent with him retreating in his evidence when he realised that he had revealed too much in his first answer.
759 I find that Mr Tesoriero knew from the inception of the arrangements with the present financiers, that, at the very least, the so-called forward funding arrangement was a fig leaf for the fraud. It was another falsehood in which Mr Tesoriero joined which was told in pursuit of extracting funds from financiers. The evidence demonstrates Mr Tesoriero was prepared to be untruthful with those from whom he was seeking financial accommodation. His embrace of the future funding metaphor was yet another example.
760 What fell from Mr Tesoriero in his examination-in-chief strengthens my conclusion that Mr Tesoriero had actual knowledge from at or about the inception of the financing relationship with Westpac and SMBC, and thereafter he had that same knowledge at the later time when Societe Generale came on board. To be clear, I would have reached the same conclusion even if Mr Tesoriero had not said in evidence that immediately prior to Mr Papas fleeing that Mr Papas told him that the there was some issues with contracts again. As I have said, I am fortified in my conclusion as a result of this evidence, but my conclusion does not depend on it.
761 In the interests of completeness, and in the event that I am wrong in finding that Mr Tesoriero had actual knowledge, I now turn to consider whether Westpac has established on the evidence that Mr Tesoriero had constructive knowledge as described in the fourth Baden category —knowledge of circumstances which would indicate the facts to an honest and reasonable person.
762 Mr Tesoriero submits that the “essential question” for determination is whether he had knowledge of circumstances which would have indicated to an honest and reasonable person in his position that Mr Papas was perpetrating the fraud. Mr Tesoriero accepts that if he had such knowledge, and he continued to participate in the impugned conduct, or even if with such knowledge he failed to this take steps to stop the impugned conduct, then equity would regard his conscience as bound so as to render him liable to account to Westpac for its losses. Mr Tesoriero submits that Westpac must not demonstrate the mere possibility of some wrongdoing warranting further inquiry (ie Baden category (5)) but knowledge of circumstances which would have indicated, “then and there”, the fact of Mr Papas’ fraud to an honest and reasonable person and in Mr Tesoriero’s position (ie Baden category (4)). Mr Tesoriero submits that there is nothing to prove that he “knew of circumstances that would properly take him out of the category of persons who were deceived by Mr Papas’s fraud and place him in the unique category of being someone to whom Mr Papas’s fraud must have been apparent.”
763 Mr Tesoriero’s submissions engage meaningfully with the relevant legal principles, in respect of which there was no substantive dispute between Westpac and the active respondents, but they are wholly divorced from the evidence. For the reasons I have given the evidence demonstrates, indeed compels, the conclusion that Mr Tesoriero was uniquely placed in terms of his relationship and interactions with Mr Papas — he was a trusted insider who knew of circumstances that properly take him out of the category of persons who were deceived by Mr Papas’s fraud.
764 In his submissions, Mr Tesoriero poses two related rhetorical questions by way of submitting that he did not know of circumstances that which would indicate the facts to an honest and reasonable person.
765 Mr Tesoriero first submits that, unlike Mr Papas, he did not flee the jurisdiction, and relatedly, that he has stayed to defend the claims made against him. I do not accept the premise that underlies this submission. There is no basis upon which I can conclude that Mr Tesoriero was in a position to flee. Unlike Mr Papas, there is no evidence that he had taken steps to plan an overseas escape and had secreted funds overseas so that he was ready to flee. To the contrary, the evidence suggests that Mr Tesoriero’s family connections were in Melbourne and that the wealth to which he had access was derived from his ability to tap into his family’s assets. Mr Tesoriero’s dependency on his family’s assets, and perhaps such familial bonds as he may have had with them, was a strong disincentive for Mr Tesoriero from simply fleeing. Secondly, Mr Tesoriero was beholden to, and directed by, Mr Papas. Put simply, Mr Tesoriero was not the brains of the fraudulent enterprise. I am not satisfied that Westpac has established that he was the joint architect of the fraudulent scheme with Mr Papas. I do find that he had actual or fourth category Baden knowledge of the fraud. Given Mr Tesoriero’s relative lack of acumen and focus, I find that it is probable that Mr Tesoriero did not flee because Mr Papas did not cut him in on Mr Papas’ escape plan. Having brazened out the Maia difficulties with Mr Papas, Mr Tesoriero likely thought he could tough out the June 2021 crisis, with the fallback of putting the entities in the Forum Consolidated Group into liquidation, while preserving the assets he had siloed through the network of Tesoriero Entities that operated as asset holding SPVs. In this regard, I note that Mr Tesoriero gave evidence of attending a meeting with administrators very shortly after Mr Papas fled and that the Tesoriero Entities instituted the Statutory Demand Proceeding and made multiple challenges to the freezing orders against Mr Tesoriero and his related entities.
766 In any event, if I am wrong in my conclusion that Mr Tesoriero had actual knowledge, then I find that he falls squarely within the fourth Baden category under which refuge is denied to the morally obtuse, as recognised in Farah:
In this way, there is accommodated, through acceptance of the fourth category, the proposition that the morally obtuse cannot escape by failure to recognise an impropriety that would have been apparent to an ordinary person applying the standards of such persons.
767 The second string to Mr Tesoriero’s submission in relation to fourth category Baden knowledge, is to ask rhetorically why Mr Tesoriero would continue to risk the assets of his family and/or related entities assets in aid of property acquisitions with Mr Papas if he was aware of circumstances that would indicate the facts to an honest and reasonable person. The obvious retort to this submission is that he did so because he is morally obtuse.
768 Had a similar argument been mounted in relation to actual knowledge, then the explanation may have been framed by reference to the fact that until the game came unstuck in mid 2021, the rewards more than justified the risk as Mr Tesoriero perceived it. Further, as the evidence demonstrates Mr Tesoriero and Mr Papas were well and truly committed to the spree of acquisitions undertaken using funds siphoned off FGFS before the gravity of the Maia problem was fully appreciated. I do not accept that Mr Tesoriero can convert his role in that spending spree that followed the establishment of FGFS into a virtue when it comes to assessing his knowledge of the fraud. Similarly, I do not accept that Mr Tesoriero can convert his preparedness to sign the Maia Guarantee into a positive in his defence of the knowledge allegations made against him. The more likely inference, and the inference which I draw, is that Mr Tesoriero’s preparedness to execute the Maia Guarantee demonstrates the truth of the adage that desperate times require desperate measures.
I.19 Mr Bouchahine’s account of advance funding
769 I now turn to Mr Bouchahine’s evidence in relation to his understanding of the advance funding of contracts, which he says derived from a conversation he had with Mr Papas in 2019.
770 In paragraph 38 of his affidavit, Mr Bouchahine, recounted a conversation he alleges he had with Mr Papas:
38. I recall, I asked Bill Papas about the arrangements with Westpac and Société Générale. On one such occasion, Bill Papas and I had a conversation to the following effect:
I said: What is your arrangement with these lenders?
Bill Papas said: The lenders provide us with funding in advance of the machines being installed.
Bill Papas also said: What happens is that FGFS will simply foot the bill and pay the loan repayment until the equipment was installed. That means there will be a lag where FGFS is paying the loans, but we will simply recover the funds from the customer at the back-end of the agreement. The brokers know what they're doing.
771 In his oral evidence, he said this conversation occurred sometime in 2019 (although he expressed doubt about the timing later in his evidence), that no one else was present, that he made no note of it and that the first time that he wrote it down was when he made his affidavit in 2022. It was put to him, that Mr Papas never said that to him. He adhered to his evidence — “He did say that. That’s how the - the finding in advance program worked”.
772 Based on this alleged conversation, Mr Bouchahine says he understood from Mr Papas that FGFS would foot the bill and pay the loan repayments until the equipment was installed. In his oral evidence, Mr Bouchahine said that in the early period of the arrangements with the present financiers, that it was Forum Finance or Forum Enviro that was making the lease payments and then FGFS made the payments from 2019 onwards. He said that his understanding was that FGFS would recover the funds from the customer at the back-end of the equipment finance arrangements. I reject Mr Bouchahine’s evidence that he genuinely believed that the advance funding of contracts was a legitimate arrangement based on the conversation that he recounted with Mr Papas. For the reasons which follow I have concluded that Mr Bouchahine’s recount of the conversation he says he had with Mr Papas is not reliable. I do not accept that he genuinely held any such understanding.
773 In his cross-examination, Mr Bouchahine conceded that to his understanding, for the whole of the period that the impugned arrangements were on foot with Westpac, Westpac required payment schedules and certificates of acceptance which were signed by the customer before it would release any funds.
774 Mr Bouchahine also corrected his affidavit at the start of his oral evidence by clarifying that his earlier experience when employed by Upstream Print Solutions was that Societe Generale as part of the equipment leasing arrangements that it has in place with Upstream Print Solutions normally required a signed contract and proof of delivery of the equipment to the customer before funding would be released.
775 Mr Bouchahine acknowledged that in the context of the impugned Westpac arrangements, the payment schedule was the signed contract with the customer and the certificate of acceptance was proof of delivery to the customer. Further, that he understood that for the whole of the relevant period that it was only after Eqwe had lodged these documents that WBC would release the funds to Forum Finance.
776 Mr Bouchahine was unable to articulate any contractual arrangements that would enable FGFS to recoup the lease payments it had made in the form of cloaking payments from end customers at the back-end of the equipment finance arrangements. He agreed that it would be necessary for the customer to enter into a revised contract in order to enable FGFS to recoup what it outlaid in the so-called advance funding and that no revised contracts were ever entered into. He conceded he never asked Mr Papas about how FGFS would go about recouping what it had outlaid.
777 Notwithstanding his experience with and understanding of the centrality of proof of acceptance of the asset as a prerequisite to the release of financing in equipment leasing finance generally, and specifically with respect to the Westpac arrangements, Mr Bouchahine asserted in his oral evidence that he was:
under the impression having come from a finance background, I knew the stringent controls that banks have. They were not going to forward funds based on two pieces of paper. They have their own due diligence that they must also carry out.
778 The “pieces of paper” to which Mr Bouchahine referred were in effect the contract signed by the customer and the acceptance of delivery of the asset signed by the customer. Both of which were falsified in all of the Fraudulent Document Transactions. Mr Bouchahine appeared to be saying that because the financiers were participating in the equipment leasing arrangements, he took comfort from the fact that the “banks” must have had in place additional “stringent controls” and this caused him to be satisfied that the arrangements were legitimate. I reject Mr Bouchahine’s evidence on this issue. I do not accept that he relevantly relied in any way on the “stringent controls” he knew financiers generally observed in relation to arrangements such as the relevant equipment financing arrangements. To the contrary, I find that he knew that Westpac was relying on the contract executed by the customer and the proof of delivery.
779 There is an immediate tension between three critical parts of Mr Bouchahine’s evidence and defence.
780 First, he was aware from his finance background before joining Forum, including at Upstream Print Solutions, that generally financiers of equipment leasing arrangements would not actually release funding until they received proof of a signed contract with the end customer, and an acknowledgement of equipment delivery by that customer.
781 Secondly, he understood throughout the whole of the period in which Westpac was financing the equipment lease arrangements with Forum Finance and Iugis NZ that Westpac required a signed payment schedule (which was the equivalent of a signed contract with the end customer) and signed proof of delivery of the leased equipment by the end customer before Westpac would release funding.
782 Thirdly, he agreed that to his knowledge in the nearly three years in which Westpac provided funding, from September 2018 to June 2021, that “not one dollar” was repaid by a customer in respect of the funds that FGFS provided to be used as cloaking payments apparently paid on behalf of the end customers. Ultimately, Mr Bouchahine conceded that by causing FGFS to make repayments in respect of customer contracts, he was endeavouring to conceal from Westpac the fact that customers were not truly making repayments on their supposed funding agreements in respect of the ORCA equipment.
783 It is in this context that Mr Bouchahine’s submission as to what he did when his suspicions were aroused and why his suspicions were allayed falls to be assessed. Mr Bouchahine submits that when he became aware of circumstances that put him on inquiry, his concerns were allayed by Mr Papas telling him that the WBC equipment leasing arrangements with Forum Finance involved advance funding arrangements that were predicated on WBC advancing funds before equipment was delivered to the end customer. I reject his evidence that he had any such understanding. It is significant that Mr Bouchahine locates this conversation as occurring after his involvement in the Maia events. Knowing what Mr Bouchahine knew about Maia and the concerns Maia had raised, I do not accept that his evidence in relation to the advance funding model was anything other than an attempt to exculpate himself from what he knew about the arrangements.
784 Mr Bouchahine seeks to draw an analogy between his position and that of Westpac, submitting that they were both duped by Mr Papas. It is perhaps an understatement to describe that submission as ambitious — Mr Bouchahine as the CFO of the Consolidated Group and CFO of FGFS enjoyed a unique and expansive perspective from inside the web of Forum companies and FGFS, whereas Westpac was an external financier which was fed fraudulent documents, received cloaking payments and was not privy to the way in which the funds it advanced were cycled through the Consolidated Group and flowed into the control of FGFS and were used, amongst other things, to finance the personal projects of Mr Papas and Mr Tesoriero.
785 The evidence establishes that Mr Papas and Mr Tesoriero used tainted funds channelled through to FGFS and then to their other associated entities to purchase properties, as well as to purchase and/or lease cars, boats and other luxury items. Special purpose vehicles were incorporated to affect the acquisitions. A prime example being Mangusta, which did not carry on any business and whose purpose was to hold a yacht named “XOXO”. The XOXO was acquired by Intrashield as trustee for the Mangusta Trust for USD $900,000 on 1 June 2018 and subsequently transferred on 15 March 2019 to Mangusta for $1.00. Perhaps a more compelling illustration is the scale of the real property acquisitions in the period from 2018 until 18 December 2020. In that period, the Jointly Owned Entities and the Tesoriero Entities purchased properties with a cost price of in excess of $59 million.
786 Mr Bouchahine ultimately agreed that FGFS was used as the vehicle for the fraud, but he denied that FGFS was set up for that purpose. In the end, it matters not whether FGFS was set up for that purpose. From incorporation, FGFS did not undertake any legitimate business. From the inception of the Forum relationship with each of the present financiers, FGFS was used as a vehicle for the fraud. I find that each of Mr Bouchahine and Mr Tesoriero were aware that FGFS was used for that purpose from the time that the funding from each of the present financiers came online and began being passed through to FGFS. In reaching this finding I regard Mr Bouchahine’s and Mr Tesoriero’s respective involvement in the events concerning Maia to be significant.
787 Mr Bouchahine was closely involved in establishing FGFS. In an email to Ms Stamatoyianni, of Rothsay (the Forum Group auditors) which he copied to Mr Papas and Mr Tesoriero, Mr Bouchahine said of the new company that the “main function is to provide financial services to business”. Mr Bouchahine caused FGFS to open a bank account with NAB and he monitored the account. When FGFS was set up, Mr Bouchahine appreciated that unlike the companies in the Consolidated Group, FGFS’s accounts would not be consolidated with those of the Consolidated Group and would not be audited. Mr Bouchahine refused to concede that the very reason that FGFS was set up outside the Consolidated Group was so that its books would not be prepared by external accountants and audited by the Consolidated Group’s auditors. I do not accept that Mr Bouchahine did not appreciate that the establishment of FGFS as an entity outside the Consolidated Group was, amongst other things, designed to put its accounts beyond the purview of the external accountants and auditors of the Consolidated Group.
788 As mentioned in Section I.15, Mr Tesoriero said that he met with Mr Papas in August or September 2017 and Mr Papas raised establishing FGFS. He said that Mr Papas said that he would place seed capital into FGFS, and that it would act like a “treasury for the group” and fund in-house deals. Mr Tesoriero said that Mr Papas explained to him that FGFS would operate on the basis that funds which had been borrowed by Forum Finance would be diverted to it, and FGFS would “make a clip” (“like a brokering house”) on those funds and pass them back through the Consolidated Group. In doing so, FGFS would take a fee from the contract or customer. Mr Tesoriero suggested that such a clip would be returned to Mr Tesoriero and Mr Papas as shareholders of FGFS. Mr Tesoriero gave evidence that a “small portion” of funds received from Forum Finance would be disbursed by Mr Papas or Mr Tesoriero and used to fund the acquisition of assets, but that “the majority would go back through Forum Group”.
789 The explanation provided by Mr Tesoriero is predicated on the hollow assumption that FGFS was entitled to take a “clip” in the way a brokering house might and that it was in the best interests of the Primary Recipients to pass the tainted funds to FGFS for that purpose. Mr Tesoriero did not attempt in his evidence to make good the underlying premise. He did not suggest that FGFS had borrowed the funds, whether by way of secured or unsecured loan, and did not address how the funds advanced to FGFS were to be repaid.
790 On the outflow side of the ledger (funds paid away by FGFS), Mr Tesoriero denied any knowledge of arrangements between FGFS and any of the Tesoriero Entities pursuant to which the Tesoriero Entities were required to repay FGFS. Indeed in his oral evidence, Mr Tesoriero challenged the veracity of the deeds of loan in relation to these loans in the manner described in Section I.17. He suggested that his electronic signature had been applied without his approval or knowledge to the loans in evidence purportedly signed by him in relation to funds advanced to the Tesoriero Entities. Mr Tesoriero’s final resting position was that there was never a loan agreement between FGFS and the Tesoriero Entities, despite noting that Mr Papas may have “treated it as a loan on his side". Mr Tesoriero’s evidence directly contradicted his purported understanding at the relevant time that FGFS was deriving its income as a result of taking a “clip” in making intercompany loans.
791 Even if Mr Tesoriero’s explanation made sense, FGFS’s potential earnings from taking “clips” could not support it advancing with no obligation to repay the substantial amounts received by Mr Tesoriero and his related entities from FGFS.
792 As already addressed in Sections I.16 and I.17, Mr Tesoriero attempted to offer a legitimate explanation for the benefits that he and his related entities obtained as a result of the funds drained from the Consolidated Group into FGFS and then applied at or in accordance with his direction. For the reasons I have given, or to which I will come in relation to FGFS payments spreadsheets, I reject Mr Tesoriero’s evidence as his understanding that FGFS was undertaking a legitimate business.
793 The evidence demonstrates that the predominant purpose of FGFS was to siphon the funds raised within the Consolidated Group and by Iugis NZ and apply those funds to supporting the personal projects and lavish lifestyles of Mr Papas and Mr Tesoriero. FGFS was also used to channel some of the funds back into the Consolidated Group for the purpose of making cloaking payments to financiers to conceal and prolong the continuance of the fraud.
794 Mr Bouchahine was in substance the gatekeeper to this arrangement. He admitted to creating, or causing to be created, documents which he knew to contain materially false information which was directed to enhancing FGFS’s prospects of obtaining funding from financiers. He was responsible for the transfer of funds to FGFS and thereafter for the tainted funds being applied to Mr Papas and Mr Tesoriero’s “personal projects”. He was responsible for tracking and making the cloaking payments. Mr Bouchahine conceded that FGFS did not operate a legitimate business.
795 Mr Papas, and Mr Bouchahine were the only two people who could access the Consolidated Group’s bank accounts, and cause payments to be made by, and on behalf of, the entities in the Consolidated Group. Mr Bouchahine gave evidence that he was loyal to and trusting of Mr Papas. He perceived his role as being to do whatever he was directed to do by Mr Papas (at least regarding the causing of payments to be made from FGFS). Mr Bouchahine maintained under cross-examination that he never authorised payments to be made without the prior approval of Mr Papas. He maintained that even in relation to the numerous requests for payment made by Mr Tesoriero he only made payments requested by Mr Tesoriero that had been authorised by Mr Papas. Mr Bouchahine adhered to his evidence on this point.
796 When shown the evidence demonstrated that Mr Tesoriero regularly requested Mr Bouchahine or Mr Chin to make payments on his behalf that were not in connection with the business of the Consolidated Group, instead relating to the personal projects of Mr Tesoriero and/or Mr Papas. In an email chain dating from 9 October 2018, where Mr Bouchahine had responded promptly to a request for payment from Mr Tesoriero, noting that the payment would be made that same day, Mr Bouchahine said that, in the interim before responding to Mr Tesoriero’s email, he would have sought and obtained Mr Papas’ approval. On the whole the documentary evidence supports Mr Bouchahine’s evidence that Mr Papas authorised most, if not all, payments made by FGFS including those made for the benefit of Mr Tesoriero. From early after the establishment of FGFS, the evidence supports that Mr Tesoriero channelled his requests for funds to be advanced to Mr Papas. The following email exchange in March 2018 provides an example.
797 By at least March 2018, Mr Tesoriero was active in pursuing Mr Papas and Mr Bouchahine for the release of funds to meet an array of looming payments for various projects he was managing.
798 In an email to Mr Papas on 22 March 2018, Mr Tesoriero referred to his discussions with Mr Papas and told Mr Papas to “allow about 600k” for “Qld” (which is likely a reference to the impending settlement of the acquisition of 26 Edmondstone Road, Bowen Hills Qld 4006 by 26 Edmonstone Road, one of the Jointly Owned Entities), and “to allow about 1m” for “Rozelle” (which is likely a reference to the impending settlement of the acquisition of 23 Margaret Street, Rozelle NSW 2039 by 23 Margaret Street, one of the Tesoriero Entities).
799 On 23 March 2018, Mr Tesoriero sent a follow up email to Mr Papas with the subject “Re: upcoming payments again”, in which he:
(1) asked Mr Papas to confirm what Mr Tesoriero “can commit to deal wise for timing”;
(2) told Mr Papas that “total 2.125 required from forum” for “qld and rozelle” (being reference to the settlement of the 26 Edmondstone Road, Bowen Hills property and 23 Margaret Street, Rozelle property;
(3) informed Mr Papas of:
(a) “75k remaining payment on race car Mon/Tues”;
(b) “90k deposit on boat if they accept end of next week” (likely a reference to the XOXO yacht which was ultimately acquired and moored using the proceeds of the Westpac fraud by Mangusta);
(c) various other investment projects, some of which he described as “property secured”, including “3m for land subdivision property”, “2.7m for Lane cove zumbo deal”, “4m winery at Mudgee”, “Cannatrek 500k to 1 m”, “10-15m for Sam for us”; and
800 He closed this email by saying informed Mr Papas “[t]here’s more but I don’t want to give you a heart attack….” and asked Mr Papas to “[p]lease come back to me with something… I’m dancing here and the music has stopped”. He also asked Mr Papas to send him the “Orca info” when he could. He said in his evidence that he wanted an ORCA catalogue to show someone.
801 On 25 March 2018, Mr Tesoriero sent a further email to Mr Papas with same subject line — “Re: upcoming payments again” — to which I have already referred as an example of the deep affection Mr Tesoriero displayed towards Mr Papas. In that email, Mr Tesoriero outlined what he needed in terms of funds (“ideally”):
(1) “1.5 for late this week which takes out all the bits and pieces and gives us some revenue every week”;
(2) “On top of rozelle for this week or next week”
(a) “2.7m for Qld the week after (6th April)” (a reference to the acquisition of 26 Edmondstone Road, Bowen Hills property by 26 Edmonstone Road) which he said that he could “pay back the week after that or.... I can give you 1.65 towards Qld this week... but I think better to make use of the full 2 weeks....”;
(b) “3.2m Monday week securitised which will return us 80k a month and cover everything plus upfronts”;
(3) "Deposit on the boat" (a reference to the XOXO yacht).
802 He signs off his email with a joyful string of emojis referencing Miami, the Grand Prix and the XOXO.
803 It was put to Mr Tesoriero that by March 2018 he had started to cause significant funds to “come out of the Forum Group for these deals”. He denied that was so notwithstanding that it is clear on the documents which he himself wrote at the time that he was mixing funds received from Forum with finance secured against his family properties for the purpose of the personal projects he was pursuing at this time with Mr Papas and in some instances, through his own entities.
804 By December 2018, Mr Papas was demanding that some discipline be introduced into the processing of the payments from FGFS in support of the many personal projects in train. On 3 December 2018, Mr Papas sent an email to Mr Tesoriero:
I asked for projects and spreadsheets to manage each and the timing of payments. We approve once and then manage the cashflow
Forum is not a cash cow that has funds set aside as these being a priority
Once I have this in some sort of order and we agree then Bouch, you need to provide input to me as to timing of cashflow availability when you know everything that’s happening around us
This way you’re both killing me
805 Mr Tesoriero replied later that day:
Billy I’ve been doing my best to carry all these…. a lot I’ve been paying from my own pocket…
Tony and Brandon did up a spreadsheet… you didn’t see it..?
In terms of timing a lot of these invoices date back to even before June… so most if not all are overdue…
I’m not expecting Forum to be a cash cow… believe me I try to avoid paying what we can when we can but most of these people I’ve been holding for nearly 6 months… If we get permits on 2 in the new year and this is causing a strain to cash flow we can just flip them but thats a seperate conversation… we are not losing on these jobs, but unfortunately this is the nature of development… lumpy cash flow….
In any case let me know what we can do and I’ll go in to bat on the rest… but I thought that meeting that day this is what we said.. nothings been paid while you’ve been away hence why I got the short term loan of 67k for lodgement fees…
We’re the same team…
806 Mr Papas replied:
I know we’re the same team….. always
I’m probably just venting because I’m frustrated that I approve things or manage the cashflow then things don’t get done
I wasn’t aware he hadn’t paid anything and you went to get a loan L
807 Mr Bouchahine gave evidence that he provided assistance to Mr Papas and Mr Tesoriero in funding their personal projects through FGFS. He knew the projects funded, utilising funds held by FGFS, were not projects of or for the benefit of the Forum business. He understood the projects were purely for the benefit of Mr Papas and Mr Tesoriero. In fact, as mentioned, Mr Bouchahine understood that FGFS was itself a personal project of Mr Papas and Mr Tesoriero. He acknowledged that when he made, or caused to be made, payments out of FGFS account from time to time after September 2018, he acted on Mr Papas’ instructions and made any payment Mr Papas asked for without questioning Mr Papas about any of the payments.
808 Mr Bouchahine acknowledged that as an employee of FGOC (or one of its subsidiaries) he owed a duty to act in the best interests of FGOC and its subsidiaries. He did not consider the interest of FGOC or its subsidiaries when he made payments from FGFS’ account on Mr Papas’ instructions. He was aware at the time that both Mr Papas and Mr Tesoriero, as managing director and director respectively, owned duties to act in the best interests of FGOC and its subsidiaries, yet he never questioned whether Mr Papas and Mr Tesoriero were so acting. He saw his role as simply to do whatever Mr Papas told him in making payments from FGFS. Mr Bouchahine further agreed that he had caused the entire amount of funds paid by Westpac to Forum Finance to be paid to FGFS.
809 While Mr Bouchahine agreed that he provided assistance to Mr Papas and Mr Tesoriero in relation to funding their personal projects, including property development projects and the operation of service stations in Victoria, he maintained that he only provided administrative oversight of those under his supervision to ensure invoices were being issued and paid in relation to the personal projects, and simply oversaw payments made in accordance with Mr Papas’ direction, or requested from his personal assistants, and ensured business activity statements were prepared. Yet from the vantage point he had as the senior financial officer of the Consolidated Group and FGFS, Mr Bouchahine knew that the entirety of approximately $340 million that was paid by Westpac to Forum Finance over a period of about three years was paid out in its entirety to FGFS. Indeed, it was Mr Bouchahine who was responsible for causing the payments to be made. He knew when he did so that to make these payments was totally contrary to the inserts of shareholders in the individual companies in the Consolidated Group, other than perhaps Mr Papas and Mr Tesoriero who were the shareholders of FGFS. When he made the payments to FGFS he did not accurately record those payments in the books and records of Forum Finance. He accepted that causing the funds to be taken from Forum Finance and paid to FGFS was part of the broader scheme to conceal from Westpac that customers were not in fact making repayments and to enable Forum Finance to keep up the ruse in order to continue receiving funds from Westpac.
810 Mr Bouchahine claimed that, in addition to his salary as CFO, he was paid $50,000 per annum from FGFS for these services which was paid into a company controlled by him, KKP Bouch Pty Ltd, which was the trustee for Mr Bouchahine’s family trust.
811 I will next address the use of funds channelled into FGFS to support Mr Papas’ and Mr Tesoriero’s property portfolio and extravagant lifestyles.
I.21 Property and asset acquisitions from January 2018
812 From January 2018, Mr Tesoriero and Mr Papas, through their associated entities, embarked upon a multitude of property and asset projects that were funded, all or in part, by FGFS. Many of the acquisitions were committed to before the difficulties with Maia emerged, and certainly before it was appreciated that the difficulties would prove insurmountable. The evidence which I will come demonstrates that during the period from about March 2018 to October 2018 the Forum entities involved in the Maia relationship were under considerable financial pressure as they sought to make the payments due under the Standstill Agreement (as varied) and the Maia Deed of Assignment. As the correspondence addressed below between, in the main, Mr Papas, Mr Tesoriero and Mr Bouchahine demonstrates, that financial pressure appears to have been alleviated by the present financiers progressively coming on line. As will be seen the flow of tainted funds enabled Forum to not only move beyond the problems they were having with Maia but to resume expenditure on a grand scale in relation to the many and varied personal projects of Mr Papas and Mr Tesoriero, alone and in combination.
813 A summary prepared pursuant to s 50 of the Evidence Act in relation to the property purchases and ownership of various respondents to the Westpac Proceeding was tendered without objection. The summary was not contested. The majority of the real properties were purchased utilising SPVs, which were typically named after the address of the property that was bought by the entity.
814 The properties acquired by Mr Tesoriero’s associated entities represent the majority of the Australian assets held by the Respondents. Many of the respondents in the proceedings are SPVs set up by Mr Tesoriero for the sole purpose of holding and/or developing property.
815 Mr Tesoriero accepted that he was concerned about cashflow and had numerous discussions with Mr Papas from early 2018 to June 2021 about the cashflow position in relation to each of the property and asset acquisitions during this time. Mr Tesoriero’s concerns in relation to cash flow were not limited to his extensive real property acquisitions, but extended to extravagant personal property, race cars and yachts. By way of illustration, on 23 March 2018, Mr Tesoriero emailed Mr Papas an overview of the myriad of upcoming payments for Forum:
give me an idea if you can tonight or over the weekend at the latest, what you think I can commit to deal wise for timing
Ideally would see 2 below, qld and rozelle cleared by Wednesday… total 2.125 required from forum
75k remaining payment on race car Mon/Tues
90k deposit on boat if they accept end of next week
120k norlane property purchase property secured….24% return plus upfront early next week
3m for land subdivision property secured 30% return plus upfront late next week or early the week after
2.7m for Lane cove zumbo deal… 3 weeks from now
4m winery at Mudgee property secured….24% plus upfront
Cannatrek 500k to 1 m…. 1 to 2 weeks
775k as discussed previous deal… ideally sooner the better
10-15m for Sam for us… I can property secure this one
I told the boat guy we need 3 months mooring in Miami thrown in on the deal also….
There’s more but I don’t want to give you a heart attack….
816 Mr Tesoriero’s laundry list of investments and deals ranging from properties and wineries to race cars and boats totals in excess of $25 million and is indicative of Mr Tesoriero’s preparedness to agree to a deal and figure out the financing later. Mr Tesoriero concluded his email to Mr Papas with:
Please come back to me with something… I’m dancing here and the music has stopped….
Send me that Orca info when you can….
817 Later that day, Mr Papas replied to Mr Tesoriero: “Faaaaaaark!!!! Will let you know”. Mr Tesoriero replied a few minutes later: “Good problems to have…”.
818 Mr Tesoriero sent a similar email to Mr Papas on 25 March 2018 (which has already been partly extracted in Sections I.5 and I.20 above) summarising the upcoming payments on various property and asset acquisitions:
Ideally....
Try to allow me 1.5 for late this week which takes out all the bits and pieces and gives us some revenue every week...
On top of rozelle for this week or next week...
2.7m for Qld the week after (6th April)
which I can pay back the week after that or.... I can give you 1.65 towards Qld this week... but I think better to make use of the full 2 weeks....
3.2m Monday week securitised which will return us 80k a month and cover everything plus upfronts....
Deposit on the boat this week... the captain who is a moonee apparently said she will take us to the Bahamas for a week...
Gran prix week... Big night for me in case you can't tell by the email... I Love you brother.... there's a lot more BUT I need to tell you in person...
You happy for me to send the boat contract to Francis to review....?
Miami.... Malaka....
105ft.... Innnnnnnndaxiiiiiiii.....
819 Mr Tesoriero continued this pattern of identifying existing or potential acquisitions, then subsequently seeking funds from the FGFS cash flow administered by Mr Bouchahine and signed off on by Mr Papas. On 13 June 2018, Mr Tesoriero emailed Mr Papas and Mr Bouchahine:
Guys I just signed off on another 150k for tomorrow.
Tony the guys will deposit to forum group in the morning.
I’m working on hopefully extracting another 1.1 for next week…
Please if you get me info for David and financial commitments as requested in the morning it will help me to push.
On the 18th I need 300 to settle for Oakleigh then nothing for this till November. I will try to find this also but as a back up can you please try to allow.
820 I was not taken to evidence which enables me to conclusively determine for what purpose Mr Tesoriero appears to be working on raising funds to deposit “to forum group” and also extracting “another 1.1 [million] for next week”. I do note that this email is sent proximate to the time when Forum entities were under pressure to make instalment payments due under the Standstill Agreement. The standstill period was set to expire on 15 June 2018 or upon payment of the balance owing for the full and final satisfaction of the Standstill Agreement, which was due by 4.00 pm on 15 June 2018.
821 On 13 August 2018, Mr Tesoriero emailed Mr Papas and Mr Bouchahine a summary of upcoming payments:
Guys if you’re working thru stuff atm…
15k interest Jaf nominees today… 1.25m facility
15 or 16k architect today/tomorrow so that he does final piece for qld…
21k race team… this has been sitting from March and just really want to clear it if we can because the guy is going around….
around 20 odd k still sitting for q7…. again same deal as above… I just really don’t want people in those circles going around saying we don’t pay for 20 odd k a piece thats outstanding for both….
please come back to me with something guys….
when you guys get time… aside from the $….
email responses…
for Nick from the insurance….. so far he says he can take at least 40 k out of the present premiums….
for Andrew for the Aspro family fund guys…
for Allan for other funders…
for Robert Crossman.. same as above again…
822 By way of context, I note that by 22 October 2018, Forum appears to have resolved the drain on its resources occasioned by having to buy out the Maia Agreements for $58.85 million. It also had entered arrangements with the present financiers and the tainted funds had started by December 2018 when Mr Tesoriero sent his “wish list” to Mr Papas and Mr Bouchahine. On 3 December 2018, Mr Tesoriero emailed Mr Papas and Mr Bouchahine with the subject “wish list” describing outgoing payments for property developments and managing “extraction of equity”. This is an email which I will return to throughout these reasons. Relevantly, the first email in the chain is from Mr Tesoriero:
Tony as discussed….
Ideally.. 20k gets rid of all project consultants pretty much
68k back for 67k I borrowed to pay for qld application
20 odd K for Architect
10k back to me for Architect… I paid him 10k on card to keep him happy
50k for loans interest…currently overdrawn again from the 1st... I’m still behind with these and have been catching up where I can to cover.. would be amazing if we can do more in next couple of weeks again
600k for Oakleigh on Friday which can then be paid back the following Friday post settlement
Hoping to have 2 permits issued in the new year which will enable further extraction of equity on 2 of the land parcels
Please let me know what we can do guys…the consultants that are a few hundred dollars that make up that 20k would be great to get rid of if possible as my phone runs red hot with these few
823 On 28 August 2019, Mr Tesoriero emailed Mr Papas and Mr Bouchahine with the subject “upcoming cash flow”. Mr Tesoriero detailed updates on existing projects as well as new property acquisitions, such as petrol stations and a farm:
100k for petrol station deal due tomorrow
urbis 13k owed as per litigation awaiting on Francis to pay or not
Gadens lawyers 5k approx bill from last set of loans… waiting on confirmation
Contour planners 7k for completed permit on Oakleigh
2x overdrafts to pay out with CBA to put some old facilities to sleep 2x30k… whenever available… sooner the better
F3 overseas… 98k overdue by a month
500k for the farm and Bryson st development… probably a couple of weeks… maybe another 500k depending how finance tracks in another month after
824 On 18 September 2019, Mr Tesoriero emailed Mr Papas with the subject “cashflow projects”. Mr Tesoriero provided updates on existing properties and introduced new opportunities including supermarkets, warehouses and cryptocurrency:
7 x 500k farm paid back in between as per time line email sent… this job then overlaps with Bryson st development project
Gold mine 100k nex month then 1.5 m probably 3 months after then another 1.5 m at some point before listing
800k boys deal on hold
400k roughly to start Atherton to get it to a point of funding for the build in spec and marketing drawings and engineering to tender
600k deposit Natalia ave next week another 1.2 m when we settle in 9 months plus stamps of roughly 300k maybe another 400k in charges for bits and pieces to start build
Gosford Woolworths 750k deposit next 2 weeks then another 1.5m in 9 months to settle plus stamps 400k
1m USD crypto fund... 70k a week return
Petrol stations should only be 800k in stamps in about 140 days from now at settlement
100k for that warehouse I sent you yesterday in Clayton… I went and saw it this arvo… cheap… [thumbs up emoji]
80 oddK euro for marketing program with Dylan this was due from Jan… need to get in asap so they can prep.. its less than a few weeks away
Please pull the eyes out and let me know what you want to do so I can either push or pull
825 Mr Tesoriero gave evidence that not all of the acquisitions or “discussion points” raised in his emails to Mr Papas and Mr Bouchahine ultimately came to fruition. For example, he said that the farm and Bryston Street development did not go ahead.
826 The property acquisitions also generated income through rental payments. Rent was received by each of the properties owned by one of the Tesoriero Entities or a Jointly Owned Entities in generally the same manner. Mr Tesoriero submitted that rents would generally be collected by the individual entity which owned the property (which was often a SPV), which was then collected and managed by Forum’s accounts team under the direction of Mr Bouchahine. The accountants responsible for managing these payments were Mr Chin and Ms Fiona Yang. Mr Tesoriero referred to Mr Bouchahine, Mr Chin and Ms Yang as “our in-house accounting” team. The “in-house” team would then administer the interest payments on the property and any outgoings and expenses on those properties. Administering these payments was no small undertaking when understood in the context of the section 50 summary of “Additional property-related expenditure” which lists payments from FGFS, 26 Edmonstone Road and Canner accounts to entities relating to property development (for example, architects, design consultants, valuers, engineers and surveyors), property insurance (for example, Metrix and Metier3) and property maintenance (for example, utilities, water, council rates and land tax). The summary was not contested.
827 The projects started with the acquisition of 26 Edmondstone Road, Bowen Hills on 11 April 2018 for $2.9 million by 26 Edmonstone Road, one of their Jointly Owned Entities, acting as trustee for 26 Edmonstone Trust. This property is an office building in Queensland used by Forum. The deposit was provided by Mr Papas and the property was leveraged with ING Bank (Australia) Limited against existing properties owned by Mr Tesoriero. The property was sold on 31 January 2022 and the net proceeds of the sale are held by the receivers.
828 On 16 January 2020, 14 James Street, a Jointly Owned Entity, acquired 14 James Street, Clayton South for $672,000. The contract for sale records the purchaser as Mr Tesoriero and/or nominees and was executed by Mr Tesoriero. This property is a warehouse which was used by Forum. It was subject to a mortgage with the Witten Family Pty Ltd which was discharged and subsequently from 20 July 2020 a mortgage with NAB.
829 14 James Street acquired the neighbouring properties around six months later on 20 July 2020. The properties are 3 warehouses at 9 Parsons Street, Clayton South for $406,000 each; 10 James Street, Clayton South for $1.04 million; 12 James Street, Clayton South for $1.04 million; 16 James Street, Clayton South for $406,000; 18 James Street, Clayton South for $406,000; and 8 Olive Street, Clayton South for $524,000. Part of the purchase price for each of the neighbouring properties was borrowed from NAB. These properties were also warehouses and were rented through a leasing agent. Rent was paid to Forum into a nominated account for 14 James Street held with the NAB. All of the properties purchased by 14 James Street are now sold.
830 On 11 June 2020, 1160 Glen Huntly Road, a Tesoriero Entity, acquired 1160 Glen Huntly Road, Glen Huntly for $1.672 million. The contract for sale recorded Mr Tesoriero and/or nominees as the purchaser and was executed by Mr Tesoriero. Mr Tesoriero gave evidence that the funds used to purchase this property included approximately $1.2 million borrowed from a private lender, Devnull Investments Pty Ltd, and the balance from Mr Tesoriero. The property is now sold and the net proceeds of the sale were paid into the Supreme Court of Victoria.
831 On 20 August 2021, Oakleigh Industrial Pty Ltd, an entity related to Mr Tesoriero, acquired 8-12 Natalia Avenue, Oakleigh for $6.45 million. This property is an office and warehouse space. The contract of sale recorded Mr Tesoriero and/or nominees as the purchaser and was executed by Mr Tesoriero. The property purchase was completed pursuant to a nomination deed executed by Mr Tesoriero on 20 August 2012 which nominated Oakleigh Industrial as purchaser. Under the nomination deed, Oakleigh Industrial reimbursed Mr Tesoriero for the initial deposit paid on the property. These funds are held on trust pending confirmation as to Mr Tesoriero’s stamp duty liability. Part of the purchase price was borrowed from Lasky Finance Co Pty Ltd.
832 On 30 April 2018, 23 Margaret Street, a Tesoriero Entity, acquired 23 Margaret Street, Rozelle for $4.1 million. The registered proprietor was 23 Margaret Street acting as trustee for 23 Margaret Street Trust. On 1 May 2018, TIG borrowed the sum of $1.033 million, secured against family properties, to apply in settlement of the property at 23 Margaret Street. This property, although owned by a Tesoriero Entity, became Mr Papas’ residence. The property was sold on 25 February 2022 and the net proceeds of the sale were paid into a controlled monies account.
833 On 18 September 2018, Canner, a Tesoriero Entity, acquired 12 Hartington Street, Elsternwick for $1.7 million. The registered proprietor was Mr Assaf Ben-David as nominee for Canner. Mr Tesoriero gave evidence that the funds used to purchase this property included approximately $1.02 million borrowed from CBA leveraged against the property itself, approximately $150,000 from Mr Tesoriero and the balance from Mr Papas. This property was a development opportunity and as at the close of the evidence the mortgagee was in possession.
834 On 13 December 2018, FGFS, a Jointly Owned Entity, acquired 2-4 Atherton Road, Oakleigh for $4.21 million. The contract for sale dated 18 May 2018 recorded Mr Tesoriero and/or a nominee as the purchaser and was executed by Mr Tesoriero. Mr Tesoriero gave evidence as to multiple sources of funding for the acquisition of 2-4 Atherton Road, Oakleigh:
[f]rom memory, I put down 100,000 holding deposit on the day, and then the gentleman at – the real estate agent gave me another couple of weeks or three weeks to come up with the balance for the 10 per cent. The building was bought for around 40 4 million, so I came up with the additional 300,000. Then, 70 per cent was taken from Thinktank, and then there was a second additional borrowing of another 10 per cent taken as – as a second mortgage over the property for the balance, so, I think, in the end, I think, FGFS might have funded 10 or 15 per cent of the building purchase.
835 Mr Tesoriero confirmed that the funds contributed by Mr Papas for the purchase of 2-4 Atherton Road, Oakleigh were funds provided by FGFS:
[D]o you know who exactly purchased that property?
The property was purchased by Forum Group Financial Services and was owned by Forum Group Financial Services.
Okay. And can you tell us – so as far as you understand, where did the money come from for that purchase?
Bill got that money from Forum Group Financial Services, I understood, hence why it went in that entity.
Okay. So you said you “understood.” Can you just describe the basis for your understanding?
As I said, every time I buy something or – and this was no different– there would be a discussion with Mr Papas about the metrics and numbers and whether he wanted to be part of it or whether it was, you know, something that he could contribute or whether I would have to contribute, and, this particular one, we worked out a number to go to at the auction, and – and then, you know, having spoken to banks prior to the auction – it was some three or four weeks, I think, that had transpired during the campaign – I had a fair idea of what the number would be that the banks would provide and – and the balance that would need to come from Bill or from FGFS, in this particular case.
And so you discussed that the money would come from FGFS?
Yes.
836 The property at 2-4 Atherton Road, Oakleigh has now been sold and the net proceeds of the sale have been paid into a trust account.
837 On 28 May 2019, Mr Tesoriero acquired two units, 305/48 and 306/48 Blenheim Street, Balaclava for $2.15 million. The registered proprietor is 308 Carlisle Street Holding Pty Ltd, which is not a respondent in these proceedings. The contracts of sale record Mr Tesoriero as the purchaser and were executed by Mr Tesoriero. These properties are unsold and understood to be leased.
838 On 23 November 2020, 64-66 Berkeley Street, a Jointly Owned Entity, acquired 64-66 Berkeley Street, Hawthorn for $7.95 million. The contract of sale records Mr Tesoriero as the purchaser and was executed by Mr Tesoriero. This property was a residential property which was purchased for Mr Tesoriero to live in and later develop. Mr Tesoriero gave evidence that around 90 percent of the funds used to purchase this property were borrowed from Judo Bank Pty Ltd and the balance was borrowed from Mr Papas.
839 On 28 June 2019, 5 Bulkara Street, a Jointly Owned Entity, acquired 5 Bulkara Street, Wagstaffe for $5.8 million. The deposit was provided by Mr Papas and the property was leveraged with CBA, with the balance provided by Tesoriero Entities. This property was mainly used as a holiday rental rather than a residence for Mr Papas or Mr Tesoriero and had a local agent who would manage any requests to hire or rent the property.
840 On 18 December 2020, 6 Bulkara Street, a Jointly Owned Entity, acquired 6 Bulkara Street, Wagstaffe for $9.5 million. This property is a holiday rental located next door to 5 Bulkara Street, another property acquired by a Jointly Owned Entity. Mr Papas had negotiated a private sale with the previous owner. Around 70-80% of the funds used to purchase this property were borrowed from the NAB. Similar to the 5 Bulkara Street property, rent for this property was collected through an agent specialising in holiday rental collection and then passed on to Forum’s in-house accounting team. Both properties are now sold.
841 Several regional petrol stations were acquired by Tesoriero Entities. Each petrol station property was acquired by its own SPV. The petrol stations were newly built at the time and were operational. The operators were Viva Energy and Dib Group. These were purchased through a combination of borrowed funds from ANZ and Judo Bank and vendor finance with a caveat across all of the properties such that the properties were settled progressively. The borrowed funds were arranged by a broker. Each of the petrol station properties was secured with a first mortgage with either ANZ or Judo Bank and a second caveat for the vendor, Aksara Holdings Pty Ltd. Rental payments received for each of the petrol stations were paid to the corresponding SPV’s individual bank account. The petrol station properties are as follows:
842 On 1 May 2020, there were various property transactions:
(1) 123 Hight Street, a Tesoriero Entity, acquired two properties at 124 High Street, Taradale for $562,500;
(2) 4 Cowslip Street, a Tesoriero Entity, acquired 2 Cowslip Street, Violet Town for $3.5 million;
(3) 9 Main Street, a Tesoriero Entity, acquired one folio at 9 Main Street, Derrinallum, three folios at 9-13 Main Street, Derrinallum and two folios at 15 Main Street, Derrinallum; and
(4) 275 High Street, a Tesoriero Entity, acquired 9/269-275 High Street, Golden Square for $3.4 million;
843 Part of the purchase price of each property transaction was borrowed from Judo Bank. The contract for sale of each of the properties recorded Mr Tesoriero and/or nominees as the purchaser and was executed by Mr Tesoriero. On 13 July 2020, 89 Betka Road, a Tesoriero Entity, acquired 89 Betka Road, Mallacoota for $1.14 million. Part of the purchase price was borrowed from Judo Bank. The contract for sale recorded Mr Tesoriero and/or nominees as the purchaser and was executed by Mr Tesoriero.
844 On 15 July 2020, there were a further four property transactions.
(1) 14 Kirwin Road, a Tesoriero Entity, acquired 14 Kirwin Road, Morwell for $1.33 million;
(2) 160 Murray Valley, a Tesoriero Entity, acquired two folios at 160 Murray Valley Highway, Lake Boga for $1.78 million;
(3) 31 Ellerman Street, a Tesoriero Entity, acquired 31 Ellerman Street, Dimboola for $1.05 million; and
(4) 55 Nolan Street, a Tesoriero Entity, acquired 55 Nolan Street, Maryborough for $1.2 million.
Part of the purchase price of each property transaction was borrowed from ANZ. The contracts for sale recorded Mr Tesoriero and/or nominees as the purchaser and were executed by Mr Tesoriero.
845 On 18 December 2020, there was one further property transaction. 9 Gregory Street, a Tesoriero Entity, acquired 9 Gregory Street, Ouyen for $900,000. Part of the purchase price was borrowed from ANZ. The contract of sale records Mr Tesoriero and/or nominees as the purchaser and was executed by Mr Tesoriero. Payments recorded in the section 50 summary “Payments to other properties” are described in bank statements as “Aksara Petrol T3” in relation to 9 Gregory Street, Ouyen. These funds were not traced to any of the financiers in these proceedings. It is understood to correspond to the vendor.
I.21.5 Sources of funding for property acquisitions
846 From May 2017 onwards, there were no further investments in TIG in the form of share subscription or capital contribution. From that point forward, Mr Tesoriero says that his “investments” were made in the form of contributing to property purchases made by the Jointly Owned Entities.
847 Mr Tesoriero submitted that the properties purchased by the Tesoriero Entities and Jointly Owned Entities (identified in Sections I.21.1 to I.21.4 above) were financed through third party finance on a specific loan to value ratio. In the event of any shortfall, Mr Tesoriero would contribute funds by drawing on loans against the Tesoriero family properties or Mr Papas would contribute funds, or a combination of both. Mr Tesoriero gave evidence that he and Mr Papas would often “have money going backwards and forwards between ourselves” without any formal documentation or ledger to record when Mr Tesoriero lent money to Mr Papas or vice versa. It became clear during the course of cross-examination that Mr Tesoriero’s references to funds contributed by Mr Papas or Mr Tesoriero were typically derived from the companies which they controlled or the properties owned by such companies. Alternate sources of fundings for the property and asset acquisitions were: Mr Tesoriero’s family and their properties, Mr Papas’ and Mr Tesoriero’s existing investments, and third party financing. Before turning to each of these sources of funding, the table below sets out each of the properties purchased by the Tesoriero Entities and Jointly Owned Entities.
Date | Amount | Cumulative Amount | Address purchased | Purchased by | Category of company |
11.04.2018 | $2,900,000 | $2,900,000 | 26 Edmondstone Road, Bowens Hill QLD 4006 | 26 Edmonstone Road | Jointly Owned Entity |
30.04.2018 | $4,100,000 | $7,000,000 | 23 Margaret Street, Rozelle NSW 2039 | 23 Margaret Street | Tesoriero Entity |
18.09.2018 | $1,700,000 | $8,700,000 | 12 Hartington Street, Elsternwick VIC 3185 | Canner | Tesoriero Entity |
13.12.2018 | $4,210,000 | $12,910,000 | Lots 1 and 2 on Title Plan 092625B – Atherton Road, Oakleigh VIC 3166 | FGFS | Jointly Owned Entity |
28.06.2019 | $5,800,000 | $18,710,000 | 5 Bulkara Street, Wagstaffe NSW 2257 | 5 Bulkara St | Jointly Owned Entity |
16.01.2020 | $672,000 | $19,382,000 | 14 James Street, Clayton South VIC 3169 | 14 James Street | Jointly Owned Entity |
01.05.2020 | $562,000 | $19,944,500 | 124 High Street, Taradale VIC 3447 | 123 High Street | Tesoriero Entity |
01.05.2020 | $3,485,814.29 | $23,430,314.29 | 2 Cowslip Street, Violet Town VIC 3447 | 4 Cowslip Street | Tesoriero Entity |
01.05.2020 | $1,250,000 | $24,680,314.29 | 9-13 and 15 Main Street, Derrinallum VIC 3325 | 9 Main Street | Tesoriero Entity |
01.05.2020 | $3,428,571.43 | $28,108,885.72 | Unit 9, 269-275 High Street, Golden Square VIC 3555 | 275 High Street | Tesoriero Entity |
11.06.2020 | $1,672,000 | $29,780,885.72 | 1160 Glen Huntly Road, Glen Huntly VIC 3163 | 1160 Glen Huntly Road | Tesoriero Entity |
13.07.2020 | $1,136,685.71 | $30,917,571.43 | 89 Betka Road, Mallacoota VIC 3892 | 89 Betka Road | Tesoriero Entity |
15.07.2020 | $1,324,285.71 | $32,241,857.14 | 14 Kirwin Road, Morwell VIC 3840 | 14 Kirwin Road | Tesoriero Entity |
15.07.2020 | $1,781,250 | $34,023,107.14 | 160 Murray Valley Highway, Lake Boga VIC 3584 | 160 Murray Valley | Tesoriero Entity |
15.07.2020 | $1,050,000 | $35,073,107.14 | 31 Ellerman Street, Dimboola VIC 3414 | 31 Ellerman Street | Tesoriero Entity |
15.07.2020 | $1,200,000 | $36,273,107.14 | 55 Nolan Street, Maryborough VIC 3465 | 55 Nolan Street | Tesoriero Entity |
20.07.2020 | $406,000 | $36,679,107.14 | Warehouse 1, 9 Parsons Street, Clayton South VIC 3169 | 14 James Street | Jointly Owned Entity |
20.07.2020 | $406,000 | $37,085,107.14 | Warehouse 2, 9 Parsons Street, Clayton South VIC 3169 | 14 James Street | Jointly Owned Entity |
20.07.2020 | $406,000 | $37,491,107.14 | Warehouse 3, 9 Parsons Street, Clayton South VIC 3169 | 14 James Street | Jointly Owned Entity |
20.07.2020 | $1,035,300 | $38,526,407.14 | 10 James Street, Clayton South VIC 3169 | 14 James Street | Jointly Owned Entity |
20.07.2020 | $1,043,420 | $39,569,827.14 | 12 James Street, Clayton South VIC 3169 | 14 James Street | Jointly Owned Entity |
20.07.2020 | $406,000 | $39,975,827.14 | 16 James Street, Clayton South VIC 3169 | 14 James Street | Jointly Owned Entity |
20.07.2020 | $406,000 | $40,381,827.14 | 18 James Street, Clayton South VIC 3169 | 14 James Street | Jointly Owned Entity |
20.07.2020 | $523,740 | $40,905,567.14 | 8 Olive Street, Clayton South VIC 3169 | 14 James Street | Jointly Owned Entity |
23.11.2020 | $7,950,000 | $48,855,567.14 | 64-66 Berkeley Street, Hawthorn VIC 3122 | 64-66 Berkeley Street | Jointly Owned Entity |
18.12.2020 | $900,000 | $49,755,567.14 | 9 Gregory Street, Ouyen VIC 3490 | 9 Gregory Street | Tesoriero Entity |
18.12.2020 | $9,500,000 | $59,255,567.14 | 6 Bulkara Street, Wagstaffe NSW 2257 | 6 Bulkara Street | Jointly Owned Entity |
Total property investment | $59,255,567.14 | ||||
I.21.6 Mr Tesoriero’s family and their properties
848 Mr Tesoriero’s property investments were also facilitated through reliance on his family and their properties as security. Mr Tesoriero gave evidence that he has experience in property development since around 2002. On 7 April 2020, Mr Tesoriero forwarded an email to Mr Harry Tsouskas, a broker at Lending Association, referring to an earlier email from Blackridge Finance dated 20 March 2020, concerning discussions with Mr Tesoriero and Mr Tesoriero Snr about the property acquired by 1160 Glen Huntly Road. The email noted that Mr Tesoriero Snr would be prepared to become a director and shareholder of 1160 Glen Huntly Road and to guarantee the loan in order to “get the deal across the line”. Mr Tesoriero Snr was described as owning a number of properties “most of them with commercial funding through [TIG]”. Further, on 15 February 2021, Mr Tsouskas sent an email to Mr Tesoriero seeking confirmation of the ownership of several properties by Mr Tesoriero’s family and Tesoriero Entities in order to start “the valuation process”.
849 As discussed, Mr Tesoriero submitted that he had not received any return on his investments in Forum as his investments were used to fund further property acquisitions and developments. For example, on 19 November 2019, FGOC approved a return of capital to shareholders in the sum of approximately $5 million. At this time, TIG held approximately 15.06% and Intrashield held approximately 22.94% of shares in FGOC. As a result, entities associated with Mr Tesoriero were due to receive approximately $1.3 million. Mr Tesoriero gave evidence that his shares were not paid out, unlike the other shareholders. Mr Papas told him that each of their entitlements, totalling around $4 million, was “rolled into the properties”.
850 The correspondence between Mr Papas, Mr Tesoriero and Lending Association, as described below, highlights the process of refinancing properties owned by the Tesoriero Entities or Jointly Owned Entities in order to extract equity to fund the purchase of other properties. During this process, Mr Papas and Mr Tesoriero often involved Mr Stefanetti to provide financial accounts and related information. The third party financing was facilitated by advisors at Lending Association, Mr Tsouskas and Mr Bill Constantinidis.
851 NAB was the targeted lender for 1160 Glen Huntly Road, Glen Huntly; 23 Margaret Street, Rozelle; 64-66 Berkeley Street, Hawthorn; 6 Bulkara Street, Wagstaffe; and 5 Bulkara Street, Wagstaffe. NuLend was the targeted lender for 26 Edmondstone Road, Bowen Hills; 2-4 Atherton Road, Oakleigh; 8-12 Natalia Avenue, Oakleigh South and 12 Hartington Street, Elsternwick.
852 On 7 July 2020, Mr Tsouskas sent an email to Mr Tesoriero and Mr Papas concerning proposed borrowings in connection with the “the next tranche of transactions”. For each of the properties, Mr Tsouskas provided details of the owner of the property, the status of funding, any valuations and any “action items” for Mr Papas and Mr Tesoriero to complete such as answering questions about the status of development application approvals. On 31 July 2021, Mr Tsouskas sent an updated list of properties and their funding status to Mr Papas and Mr Tesoriero. In this email, Mr Tsoukas requested that amendments be made by Mr Stefanetti to the Tesoriero Investment Trust, 1160 Glen Huntly Road and 6 Bulkara Street “as discussed in meeting”. Mr Tsouskas also requested copies of the management accounts for the 2020 financial year for the Tesoriero Entities, Forum Group, Iugis, 26 Edmonstone Road, Palante, Spartan and FGFS. These requests were described as “being nabs requirements”. The evidence indicates that there were substantial delays between the requests and Mr Tsoukas being provided the management accounts by Mr Papas, Mr Tesoriero or the companies’ accountants. On 4 August 2020, Mr Papas sent an email to Mr Tsouskas (and others) stating that he would provide a response for “the smaller entities” by the following week and indicated that it would take “at least 3 weeks” to complete the process for FGOC, FGFS and Iugis. On 7 September 2020, Mr Tsouskas sent an email to Mr Papas and Mr Tesoriero requesting “[a]ny updates on the financials requested”. Mr Tsouskas sent further follow up emails on 9 September 2020 and 15 September 2020. In the latter email, Mr Tsouskas expressed his concern in relation to timing “given Hawthorn needs to settle next month with Wagstaffe shortly after and we are yet to receive income and finalise structure in order to place lodgements to the banks.”
853 Mr Tsouskas sent a further email on 15 September 2020 to Mr Papas and Mr Tesoriero, summarising the outcome of a meeting held earlier that day regarding each of the properties. Mr Tsouskas identified “Hawthorn” (referring to 64-66 Berkeley Street, Hawthorn) as a priority purchase whereas the Wagstaffe purchases (referring to 5 Bulkara Street, Wagstaffe and 6 Bulkara Street, Wagstaffe) could “be settled at a later date when / as requested by Bill P”. Mr Tsouskas also identified 26 Edmondstone Road as a priority transaction “in order to extract equity to fund other sites”. In relation to the outstanding requests for financial accounts, Mr Tsouskas stated “Management Accounts to be received this week on several entities (FGOC, Iugis) with remainder to be completed shortly after”.
854 On 29 September 2020, Mr Tsouskas sent an email to Mr Papas and Mr Tesoriero acknowledging that Mr Papas had provided the management accounts “for the larger entities” and was still waiting to receive “income requirements and amendments”. Mr Bill Constantinidis sent a further email to Mr Papas and Mr Tesoriero confirming that “NAB won’t take our submission till we have this so please do your best to get for me”. On 30 September 2020, Mr Tesoriero replied to Mr Tsouskas saying “Lou is finalising financials as discussed”. This appears to be the end of the relevant email chain. The evidence suggests that Mr Papas and Mr Tesoriero were slow to provide supporting material and financial documents relating to Forum, even when it was ostensibly in their interests to do so and was a precondition imposed by the NAB to accessing third party financing. On 8 April 2020, Mr Bill Constantinidis sent an email to Mr Tesoriero regarding outstanding information in relation to properties within the Forum “portfolio”:
You promised me I would have this yesterday and I don’t. We are going around in circles. Many points from yesterday.
If you’re at the point of losing deposits this doesn’t make sense why you don’t sit down and send it to me/us.
The Priority items in particular was not replied to. Why?
My me sending you the approval letter for the purchase you won’t have funds to complete and therefore I DO need everything from you.
855 The discussions relating to third party financing continued into 2021. On 15 February 2021, Mr Tsouskas sent an email to Mr Tesoriero confirming the ownership and associated securities of properties owned by Mr Tesoriero’s parents and Tesoriero Entities. CBA was recorded as the lender for 286 Carlisle Street, Balaclava; 12 Hartington Street, Elsternwick and several properties owned by Mr Tesoriero Snr (in his own name or jointly with his wife) and 308 Carlisle Street Holdings Pty Ltd.
856 On 24 February 2021, Mr Tsouskas sent an email to Mr Papas, Mr Tesoriero and others, attaching “the NuLend application for the refinance of Hawthorn” to be signed by Mr Papas, Mr Tesoriero and Mr Tesoriero’s parents. Mr Tsouskas also noted the reliance on Mr Tesoriero’s family properties:
Next steps on 6 Bulkara and Hawthorn will be emailed across by tomorrow with indicative equity release mentioned which is heavily reliant on the Tesoriero family properties valuations. The goal is to reduce monthly repayments and release funds.
Essentially;
• 6 Bulkara St refi to NAB
• Hawthorn refi to NuLend
• Tesoriero family properties to remain at CBA and extract equity
857 On 27 February 2021, Mr Tesoriero and his parents signed the NuLend letter of offer for $3 million in the name of TIG in its corporate capacity and as trustee for the Tesoriero Investment Trust, secured by properties owned by the Tesoriero family. The loan agreement and mortgages for the Tesoriero family properties pursuant to the NuLend loan were signed on 2 March 2021. Mr Papas, Mr Tesoriero, Mr Tesoriero’s parents and 286 Carlisle Street were listed as guarantors. The cash general ledger for FGFS records the proceeds of the NuLend loan as being applied in aid of the acquisition of Autonomous Energy by Iugis Investments, via a loan from FGFS on 5 March 2021 . Mr Tesoriero described his understanding of the funding provided by NuLend as being for the purpose of the acquisition of Autonomous Energy:
How was it funded?
Yes. I leveraged on some assets, family assets, that I had.
Okay. And did you have a conversation with Mr Papas about that?
Yes. I did. Yes.
And what was that about?
He said, “Would you be able to help to make this acquisition?” Then we spoke to a broker and we looked at properties and the broker suggested maybe we could do this to get it over the line to be able to settle it.
Okay. And you said you leveraged some properties. What did you do?
Well, I went to meet with the lender, the Nu Lend lender, and leveraged the properties.
858 Mr Tesoriero gave evidence of his understanding of the repayment of NuLend:
And so do you know what happened to the proceeds of that loan?
Yes. I assume – I know that the business was purchased and I know that it was for 3 million. So I didn’t handle, really, that transaction other than to, you know, orchestrate the loan but then -
Yes?
The process of the transaction, the funds and all that, I didn’t oversee it.
Yes. Okay. And do you know if the loan was repaid?
Yes. I believe it was.
And can you tell us about that?
I’m not too across how or when or -
How do you know it was repaid?
I just – the broker told me that it was repaid.
Okay?
It was a short-term facility for a few months.
859 The NuLend loan, which was set to expire on 5 May 2021, was repaid by FGFS on 6 April 2021 and 20 May 2021.
I.21.9 Luxury assets and expenses
860 A further s 50 summary was tendered in relation to payments made by Consolidated Group Entities to acquire and/or service luxury assets during the period of the fraud based on the Consolidated Group bank statements. The s 50 summary was not challenged. In total, $8,033,796 was spent luxury items, excluding the $86,600 spent on jewellery purchased with funds from Mr Papas’ account (which was not traced to funds derived from financiers). Of that total, $6,081,154 was traced to Westpac, SMBC and Societe Generale.
861 The vast majority of expenses were paid from the account of FGFS, although Intrashield, Spartan and Palante also paid some expenses. The items purchased can be broadly grouped as follows.
862 Between 4 June 2019 and 26 May 2021, $1,310,000 was transferred to Macrovue Pty Ltd, a broker used by Mr Papas for making investments through his private investment account in the name of Palante. As discussed, Palante was wholly owned by Mr Papas. From 4 June 2019, the payments to Macrovue were drawn from the Palante account. From April 2021, the transfers to Macrovue were drawn from the Spartan account and were not recorded in the FGFS Xero Loan Statement. As discussed, Palante and Spartan were wholly owned and operated by Mr Papas until each company entered into liquidation.
863 A total of $253,196 was spent on the XOXO yacht for transporting and mooring costs by Forum, FGFS, and Intrashield between 15 October 2018 and 15 January 2021. XOXO was purchased prior to the first advance of funds from the financiers.
864 In addition to expenses relating to XOXO, a total of $669,719 was spent by FGFS on storage and maintenance of a speedboat called the Grady White Freedom. A total of $203,090 was spent in connection with various other boat-related expenses by FGFS, Palante and Intrashield.
865 Through FGFS, Mr Papas and Mr Tesoriero acquired and financed a series of luxury cars during the period of the fraud:
(1) $200,000 was spent on the purchase of a 1967 Ford Mustang Shelby GT500;
(2) $265,801 was spent on the purchase of a Audi R8;
(3) $9,673 was spent in connection with the mortgage of a Audi RSQ8;
(4) $239,197 was spent on the purchase of a 1967 Ford Mustang Big Boss;
(5) $126,860 was spent on the purchase of a Chevrolet Bel Air;
(6) $15,744 was spent in connection with a financial arrangement with Nissan Financial Services in relation to a Porsche Cayenne;
(7) $140,618 was spent on leasing charges for a leased Porsche Cayman;
(8) $351,263 was spent in connection with the mortgage of a Porsche GT2 RS, which appears to have ultimately been purchased;
(9) $22,626 was spent in connection with the mortgage of a Porsche GT4;
(10) $28,379 was spent on further Porsche-related expenses;
(11) $315,372 was spent on the purchase of a 2018 Lamborghini Huracan Spyder;
(12) $142,087 was spent on the purchase of a Range Rover.
866 In his cross-examination, Mr Tesoriero explained that the luxury cars were financed using his own funds. By way of example, Mr Tsouskas assisted Mr Tesoriero with the financing and transfer of ownership of a 2018 Lamborghini Huracan Spyder. The vehicle was insured in the name of FGFS with Mr Tesoriero as the disclosed driver and Mr Tesoriero’s parent’s house in Caulfield North as the designated address at which the car was garaged. The vehicle was purchased with the assistance of Regent Finance in July 2018 and paid out on 14 July 2020. This vehicle was smashed in around 2019 by an associate of Mr Papas and subsequently subject to a dispute with an insurer as to repairing the vehicle. Neither the liquidator nor Mr Tesoriero have been able to locate the Lamborghini. Mr Tesoriero accepted that he “lost it”. I do not accept his evidence on this point, Rather, it is another incredible assertion by Mr Tesoriero that simply cannot be believed. I pause to note that his evidence was also deliberately vague as to the eventual resting places of other luxury motor vehicles purchased with tainted funds. I do not accept that his evidence was truthful. It may be that in truth he knows what became of the car but is not prepared, even under oath, to disclose it. Alternatively, it is another manifestation of his “comme ci, comme ça” attitude as to the acquisition of valuable assets, in this case, a trophy motor vehicle, which provides further support my findings that Mr Tesoriero knew that the flow of funds from FGFS was simply too good to be true.
I.21.9.4 Other vehicles and vehicle-related expenses
867 In addition to the luxury cars, several other vehicles were purchased:
(1) $42,750 was spent by Palante on the purchase of a Toyota Hilux;
(2) $54,469 was spent by Palante on the purchase of a XI GT Camper Trailer;
(3) $35,000 was spent by FGFS on the purchase of a Volkswagen GTI;
(4) $18,000 was spent by FGFS on the purchase of a Seadoo Jetski.
868 A further $62,657 was spent on other unspecified car expenses by entities within the Consolidated Group between 24 August 2018 and 19 May 2021.
869 There were also expenses relating to motor vehicle racing paid by FGFS and occasionally Palante. A total of $149,745 was spent in connection with cars at a “Melbourne Performance Centre” between 19 February 2021 and 9 June 2021. A total of $189,422 was spent on various racing car-related expenses, including track days, car transport for track days and tyres, and $600,855 was spent on unspecified other race car expenses between November 2019 and May 2021.
I.21.9.6 Horse racing expenses
870 A total of $162,3178 was spent by FGFS and Instrashield on stabling and training a racehorse named Bartender Blues between 26 September 2019 and 23 November 2020.
871 A total of $2,169,269 was spent by FGFS on projects and products in Greece between 18 April 2019 and 19 November 2019.
I.21.9.8 Miscellaneous expenses
872 A total of $197,464 was spent by FGFS on other miscellaneous luxury expenses, including professional helicopter services, between 3 May 2019 and 12 February 2021.
873 Between at least August 2018 and February 2021, Mr Bouchahine and Mr Chin, a subordinate of Mr Bouchahine’s, sent excel workbooks to Mr Tesoriero and or Mr Papas. These workbooks variously contained one or more spreadsheets recording outstanding payments, recurring payments and/or cash flow summaries for FGFS and various other entities, including entities in the Consolidated Group and entities that held property related to Mr Papas and Mr Tesoriero’s personal projects.
874 Westpac relied on these documents against Mr Tesoriero for two purposes. First, as mentioned in Section I.4.2, as one on the many bases on which they challenged Mr Tesoriero’s credit. Secondly, and more significantly, Westpac relied on the excel workbooks, and the cash flow spreadsheets in particular, as another basis on which the Court should find that Mr Tesoriero, had actual knowledge, being knowledge within the first three Baden categories, of the fraudulent scheme.
875 Westpac relied on these documents against Mr Bouchahine as one of the related means by which to establish that Mr Bouchahine had actual knowledge of the fraudulent scheme. Westpac submitted that Mr Bouchahine’s role in creating or supervising the creation of the worksheets demonstrated that he had actual knowledge of the key integers of the fraudulent scheme.
876 Before moving to the submissions made by Westpac, Mr Tesoriero and Mr Bouchahine in relation to these documents, I will first make some observations about the surrounding evidence, including the relevant contemporaneous documents. Although there are limited iterations of the workbooks in evidence, I make the following inferences from those that have been tendered together with the covering emails by which they were circulated.
877 Mr Bouchahine with the assistance of his subordinates, principally Mr Chin, was responsible for the preparation of excel workbooks which featured in the evidence and which I describe below. The workbooks were a management tool used in the finance department. They appear to have been in use for some time before late 2018, from which time the excel workbook was circulated by Mr Bouchahine and or Mr Chin to Papas and or Mr Tesoriero. There are versions of the workbooks that were sent to Mr Tesoriero in evidence that date from 7 August 2018 through to 24 February 2021. The form of the circulated version of the workbook and the spreadsheets within it changed over time. From the workbooks that are in evidence I infer that the circulated version was initially limited to a single spreadsheet which contained information in relation to outstanding payments on Mr Papas and Mr Tesoriero’s personal projects. Mr Bouchahine confirmed that the purpose of the workbooks was to record expenses incurred by Mr Papas and or Mr Tesoriero in relation to their personal investments, businesses or assets. A second spreadsheet was subsequently included in the circulation version which contained information in relation to recurrent payments. Finally, a third spreadsheet was included which contained information in relation the FGFS’s cash flow. In the cash flow spreadsheets information is included in relation to FGFS making cloaking payments to Westpac’s agent in very substantial amounts. Conversely, the cash flow spreadsheets do not record substantial payments being made to the manufacturers of the assets that were ostensibly the subject of the equipment lease finance arrangements.
878 The workbooks appear to have been a means introducing a measure of control over the outflow of funds from Forum, and by extension, FGFS, at a time when Mr Papas was concerned that Mr Tesoriero was using “Forum” as a “cash cow”. The workbooks had been used for some time before Mr Papas expressed this concern about Forum being used as a cash cow but were modified in around December 2018 after Mr Papas indicated that he wanted “projects and spreadsheets to manage each and the timing of payments” to introduce a process whereby “We”, but really, he, would approve payments “once” and then Mr Bouchahine would “manage the cashflow”. Mr Papas also said that he required Mr Bouchahine to provide input as to “timing of cashflow availability”.
879 The “cash cow” email is dated 3 December 2018 and has the subject line of “wish list”. The email chain is between Mr Tesoriero, Mr Papas and Mr Bouchahine. It is extracted in Section I.20.
880 I infer that Mr Papas’ email prompted the change to the “outstanding payments” spreadsheet. The change is evident in the “Outstanding Payments for BP VT – 05 Dec 18” workbook sent by Mr Bouchahine to Mr Papas and Mr Tesoriero on 5 December 2019. The 5 December 2018 iteration of the payments spreadsheet included further columns headed “w/e DD/MM/YY” where “DD/MM/YY” is a date. The first iteration of this new format includes columns for the next seven weeks and only has data included for the first week, that is the week ending 7 December 2018. I infer that it an attempt at instituting a better means of “managing the cashflow” by including projections for payments going forward.
881 The evidence demonstrates that after FGFS was set up in November 2017, Mr Tesoriero and Mr Papas had commenced on somewhat exuberant expenditure spree. My findings in relation to the acquisitions in the period from January 2018 are in Section I.21.
882 By March 2018, the contemporaneous documents reflect that cash flow difficulties were emerging as the commitments that had been incurred were falling due, or indeed, were past due. At around this same time, in late February 2018, problems started to emerge in the relationship between Maia and Forum that resulted in the demand for Forum to pay out the approximately $58.85 million that Maia had advanced under existing equipment lease financing arrangements with Forum in Australia.
883 The timeframe for Forum to buy out Maia by making substantial instalments payments was repeatedly extended. It is not an overstatement to describe Forum as experiencing a cash flow crisis in the period between about March 2018 and about October 2022. As mentioned, it was on 22 October 2018, that the Maia Deed of Assignment was finally executed, and Maia was paid out. The cash flow crisis that Forum was experiencing was alleviated, amongst other things, by the Primary Recipients entering into new financing arrangements with WBC and SMBC in the latter half of 2018. As mentioned in Section I.18.1, funds from the new financiers were progressively made available to the Primary Recipients from 31 August 2018.
884 The workbooks in evidence do not appear to be an exhaustive selection of the workbooks which were prepared in the relevant period, and which were sent to Mr Tesoriero and or Mr Papas. Even so, based on the selection of workbooks in evidence and the evidence given by the relevant witnesses, I make the following findings.
885 First, Mr Bouchahine and/or Mr Chin sent the workbooks to Mr Tesoriero and/or Mr Papas, on a fairly frequent, if not weekly, basis, with additional versions being provided from time to time when requested by Mr Tesoriero.
886 Secondly, and unsurprisingly, the spreadsheets within the circulated workbooks underwent several evolutions throughout the period, both in terms of format and content:
(1) from at least 7 August 2018 to 20 February 2019, Mr Bouchahine or Mr Chin sent Mr Tesoriero and/or Mr Papas workbooks titled “Outstanding Payments for BP VT”.
(2) These workbooks consisted of a single spreadsheet which set out the outstanding payments owed to creditor categories against various of Mr Papas and/or Mr Tesoriero’s related entities. These spreadsheets also recorded the relevant invoice number, the invoice date and the date on which the payment is due.
(3) As indicated by the title of the workbook, most, if not all, of the payments recorded in the spreadsheet were outstanding as at the date the workbook was prepared.
(4) During the period 7 August 2018 to 29 November 2018, separate spreadsheets were prepared in relation to FGFS’s cash flow. An example of a cash flow spreadsheet is the spreadsheet entitled “Cashflow for Bill and Vince 19 Oct” which Mr Bouchahine emailed Mr Papas and Mr Tesoriero on 19 October 2018.
(5) As referred to above, on 3 December 2018, Mr Papas’s “cash cow” email prompted the change to the format of the payments spreadsheet.
(6) The next change to the workbooks was introduced from at least 7 April 2020. From this time, the workbooks sent by Mr Chin or Mr Bouchahine to Mr Tesoriero and/or Mr Papas were entitled “Outstanding and Recurring Payments for BP & VT”. From this time a second spreadsheet was included in the excel workbook that was circulated. The second spreadsheet set out recurring payments.
(7) From at latest 30 July 2020, the form of the workbooks titled “Outstanding and Recurring Payments for BP and VT” changed again. From this time, the workbook included an additional spreadsheet entitled “Summary cash flow Forum Group Financial Services”. Mr Chin sent these workbooks to Mr Tesoriero.
887 Thirdly, I infer that:
(1) Mr Tesoriero was actively involved in the process of causing the workbook to be revised and/or updated. It appears that the process by which an invoice could be added to the spreadsheet would be for Mr Tesoriero to send the relevant email or invoice to Mr Chin who would in turn update the workbook and send an updated copy of the workbook back to Mr Tesoriero. There are multiple examples of Mr Tesoriero engaging with Mr Bouchahine or Mr Chin to secure revisions or updates to the outstanding payments spreadsheet. In order for Mr Tesoriero to do this, he was obviously reviewing the spreadsheets at about the time the spreadsheets were provided to him. There are contemporaneous notations in which Mr Chin has recorded that he spoke to Mr Tesoriero about particular entries in the outstanding payments spreadsheets. Mr Tesoriero acknowledged in cross-examination that in all likelihood such notations meant that he had checked the spreadsheet, called back Mr Chin and communicated information which resulted in the spreadsheet being updated. I find that Mr Tesoriero was directly and consistently involved in providing information to be included in the workbooks and reviewing those workbooks proximate to the time he received them.
(2) Mr Tesoriero was involved in the decision making as to whether funds would flow from FGFS to cover outstanding invoices. He was included in correspondence concerning the management of FGFS's cash flow. In cross-examination, Mr Tesoriero expressly acknowledged that he and Mr Papas and Mr Bouchahine had "numerous discussions" regarding cash flow throughout 2018 through to June 2021. I accept, however, that it was Mr Papas who ultimately had to approve payments. Mr Bouchahine's evidence was that he only applied FGFS funds to payments after Mr Papas had approved such payments being made. He was firm in his evidence that he required Mr Papas's approval before making payments that related to Mr Tesoriero's personal projects.
(3) The contemporaneous documents demonstrate that Mr Tesoriero was principally but not exclusively interested in getting funds out of FGFS to meet the expenses he was chasing on the personal projects with which he was concerned.
888 On this topic, Mr Tesoriero submitted that his active engagement in the excel workbooks was limited to the information about impending payments in relation to the personal projects in which he was interested, whether individually or with Mr Papas, and this meant that he only read the payments spreadsheets, and not the cash flow spreadsheets. In effect, Mr Tesoriero submitted that his knowledge should be assessed, not by reference to the whole of the information that was provided to him, but only by reference to discrete parts of that information in which he now says he was interested. He relied on his purported inability to recall whether he saw and/or read the information.
889 Mr Tesoriero insisted when cross-examined said that he only looked at the outstanding payments spreadsheets and not the cash flow spreadsheets, even when he was sent iterations of the workbook which included the cash flow spreadsheet. Mr Tesoriero also denied that he regularly received cash flow spreadsheets.
890 I do not accept Mr Tesoriero’s evidence on this issue. The infer from the documentary evidence, and particularly the emails to Mr Tesoriero which attached the workbooks, including by reference to discussions that had occurred with him, that Mr Tesoriero received workbooks in different forms over the period I have identified. I do not accept that Mr Tesoriero ignored or closed his eyes to the cash flow information with which he was provided in the workbooks. The information in the cash flow spreadsheets was, after all, of utmost importance to him in understanding how and when his primary needs in relation to the payment of expenses on the personal projects would be met.
891 The contemporaneous documents reflect that Mr Tesoriero was very much engaged in working out how he could meet payments on the personal projects. That was important to him. I am not persuaded by Mr Tesoriero’s attempts to segregate his knowledge on the basis of which of the spreadsheets the information he was given was included in — he was given the whole of the workbook. The very purpose for accurately updating and maintaining the “outstanding” and “recurring” payment spreadsheets was to facilitate reliable cash flow projection and management to avoid a recurrence of Mr Tesoriero having to “pay from his own pocket”, a fact he had bemoaned in an email exchange with Mr Papas in the “cash cow” email exchange in December 2018.
892 Mr Tesoriero received a number of “Outstanding Payments” spreadsheets. He recalled receiving them. He agreed that it was his practice to check through them as he received them. Mr Tesoriero agreed he was keeping a close eye on outstanding invoices and wanted to be across the detail of all expenditure. Indeed, some of the spreadsheets were sent in response to him requesting them. Mr Tesoriero acknowledged that it “wasn’t uncommon” for him to make such requests.
893 The workbooks were prepared and circulated regularly in accordance with Mr Papas’s instruction. They were used as a management tool in relation to many personal projects in which Mr Papas and Mr Tesoriero were involved. They were important to Mr Tesoriero in this regard. For example, he accepted that to the extent that the rental income derived from 26 Edmonstone Road, Bowen Hills or from “second mortgages” was insufficient to meet the expenses incurred by 26 Edmonstone Road, FGFS or entities in the Consolidated Group would make payments into the account in the name of 26 Edmonstone Road in order to facilitate it meeting expenses that it had incurred. Another example dates from 19 October 2018 when Mr Bouchahine emailed Mr Papas and Mr Tesoriero and attached an excel workbook named “Cashflow for Bill and Vince 19 Oct” stating “Please see attached cashflow for Entities. You will need to [sic] through and allocate payments to the correct month. It will update to the consolidated spreadsheet.” The attached excel workbook contained multiple spreadsheets named “Intrashield”, “26 Edmonstone”, “23 Margaret”, “Canner Investments”, “FGFS” and “Consolidated”. Mr Tesoriero accepted that the purpose of this workbook was to assist Mr Papas, Mr Bouchahine and himself to manage FGFS and entities in the Consolidated Group’s cash flow for the purposes of meeting the various expenses that he and Mr Papas were incurring. Later that same day, Mr Bouchahine sent Mr Papas and Mr Tesoriero another workbook with the same name, stating in the covering email “Please use this spreadsheet for cash flow as it includes Atherton Rd.”. One difference between the earlier and later workbooks is that the later workbook also appears to include entries in respect of various entities which are described as “Estimate Outstanding” which Mr Tesoriero eventually accepted reflected estimates which had been obtained and the “amount of cash required”, but in respect of which no invoices had been issued at that time.
894 Mr Tesoriero was asked whether he kept a very close eye on expenses and cash flow. Mr Tesoriero stated that he did not in respect of cash flow but did make sure that the invoices coincided with the quotes that had been received. Mr Tesoriero sent an email to Mr Papas and Mr Bouchahine dated 28 August 2019 with the subject line “upcoming cash flow”. He set out in the body of his email various expenses which were either overdue or upcoming. When shown this email and challenged in cross-examination, Mr Tesoriero conceded that he was in fact concerned about cash flow and that he and Mr Papas had numerous discussions around cash flow, not just in 2019, but from 2018 through to June 2021. Mr Tesoriero said he had such discussions “more with Mr Papas”, but also had such discussions with Mr Bouchahine.
895 I find that despite his protestations to the contrary, Mr Tesoriero did review, and suggested amendments to, cash flow spreadsheets which were sent to him by Mr Bouchahine and/or Mr Chin. For example, on 3 October 2019, Mr Bouchahine sent an email to Mr Papas which attached a workbook named “Cashflow FGFS Other Companies 01 October 2019” and stated “After talking to Vince, I have made a few changes to the cash flow report. Please see attached”.
896 Another example is an email dated 17 April 2020 from Mr Bouchahine to Mr Papas and Mr Tesoriero with the subject “FGFS Cash Flow” in which Mr Bouchahine said “I have updated the information Vince sent through this morning and would like confirmation of timing before I update the master spreadsheet…”. Attached to that email was a workbook containing a spreadsheet which appears to set out a “Summary Cash Flow” for FGFS broken down into weekly forecasts of expenses from the week ending in 17 April 2020 until the week ending 12 June 2020.
897 I do not accept Mr Tesoriero’s explanation that he had no recollection of the discussion with Mr Bouchahine and that he had “no input at all into that cash flow report”. That said, I do accept, as I have said, that Mr Tesoriero was primarily concerned with the payments spreadsheet. The cash flow spreadsheets were principally the domain of Mr Papas and Mr Bouchahine, but Mr Tesoriero did receive them and I infer that he read them given the obvious relationship between the cash flow and payments spreadsheets and Mr Tesoriero’s avid interest in the payment of expenses incurred on his and Mr Papas’ personal projects. As 2020 wore on, Mr Tesoriero received more information in relation to cashflow.
898 From at latest 30 July 2020 until at least 24 February 2021, Mr Tesoriero received from Mr Chin workbooks titled “Outstanding and Recurring Payment for BP & VT” which included a spreadsheet entitled “cash flow”.
899 The format of these cash flow spreadsheets is very similar to the corresponding spreadsheet in the workbook titled “Cashflow FGFS Other Companies 01 Oct 2019” which Mr Bouchahine sent to Mr Papas. In the workbook titled “Outstanding and Recurring Payment for BP & VT” Mr Chin sent to Mr Tesoriero on 30 July 2020, the “cash flow” spreadsheet included therein, includes green highlighted comments which are specifically flagged for Mr Tesoriero’s attention. The first says “LaTrobe paid out loan – VT details TBC”. The second says “LaTrobe paid out loan ??? – VT Details tbc”.
900 I infer from the inclusion of these comments that Mr Chin expects that Mr Tesoriero will read and respond to the comments which he has highlighted for his attention in the body of the cash flow spreadsheet itself. By this time, Mr Tesoriero and Mr Chin have been collaborating for some time in relation to the preparation and revision of the workbooks. That Mr Chin does not draw Mr Tesoriero’s attention to the enquiry in relation to LaTrobe in his covering email is a further indication of Mr Chin’s expectation, based on his previous communications with Mr Tesoriero, that Mr Tesoriero would review the workbook, including the cash flow spreadsheet, and having done so, would revert to him in relation to the queries he had raised therein. In this regard, I note the contrast in approach adopted by Mr Chin of confirming that “Unity” has been paid in the covering email on 10 July 2020, this being a matter that is not referred to in the attached workbook and is thus included in the covering email. I infer that, despite his reluctance to admit that he did so, Mr Tesoriero did review the workbooks, proximate to the time he received them, including the cash flow spreadsheet section of the workbooks. This cash flow spreadsheet also included the line expense, to which Westpac draw attention, that refers to “BHO – New Funder”, which appears to record as an expense over a 10 week period the sum of $15,491,000 and is by far the largest expense recorded in the cash flow spreadsheet. The first reference to “BHO – New Funder” in the cash flow spreadsheets was as early as 3 October 2019.
901 It is significant that a number of the workbooks which Mr Tesoriero received included cash flow spreadsheets which in turn included a line item indicating projected payments from FGFS to “BHO new funder”. Mr Tesoriero first denied that he knew this was a reference to Westpac, before later conceding that it was a reference to either Westpac or some other funder. A review of these workbooks would have disclosed the true nature of the arrangement between FGFS and Forum Finance, the Primary Recipient in the Westpac arrangements – namely, that FGFS sourced funds from Forum Finance and ultimately from Westpac (referred to as “BHO new funder”), that payments were being made by Forum entities in very large amounts to Westpac; that very little or no payments were being made to manufacturers of the equipment which was ostensibly being financed; and that Forum was not being reimbursed by Westpac’s purported customers for its payments on account of those customers’ Westpac loans.
902 Mr Tesoriero’s explanations given during his cross-examination on these matters were unconvincing. For example, Mr Tesoriero was asked about a cash flow spreadsheet showing that $3.615m was forecast to be paid over three weeks commencing in the week ending 11 October 2019 to “BHO new funder”. Mr Tesoriero refused to concede that the forecast payment was a payment being made to Westpac because Forum was itself repaying by way of cloaking payment the false equipment loans. Mr Tesoriero first said the entry could be explained on the basis that it could be a brokering fee, but when pressed on how that could be so, he then stated he had no idea what the forecasted payment was for.
903 A further example is provided by Mr Tesoriero’s evidence when he was cross-examined on the workbook that he was emailed on 30 July 2020, which reflected that approximately $15.491m had been paid to “BHO funder” in the period July to October 2020, but that virtually nothing had been paid to the supposed manufacturers of the ORCA equipment. Mr Tesoriero did not concede that it was clear something was seriously wrong at that point.
904 From August 2018 until February 2021, Mr Tesoriero and Mr Papas received financial spreadsheets from Mr Bouchahine, and or Mr Chin, which recorded third party payments and finance repayments to be made in relation to properties and assets purchased with funds obtained through the scheme. From at least July 2020, these spreadsheets disclosed the sources of, and application of, FGFS’s cash flow. The spreadsheets referred to recurring payments to funders, such as BHO (Eqwe), SMBC and “Flexi” (Flexirent), with such payments being made from FGFS.
905 I am satisfied that the evidence relating to the excel workbooks provides a further basis upon which to infer that Mr Tesoriero had actual knowledge of the fraud. Had I not been satisfied that Mr Tesoriero had actual knowledge on the basis of the Maia events which occurred earlier in time, I would readily draw that inference on the basis that he received, reviewed and understood the significance of the cash flow spreadsheets in revealing the true position. For completeness, I note that I do not accept that Mr Tesoriero understood at the time he received and reviewed the cash flow spreadsheets that the arrangements with Westpac were “future funded” contracts. My findings in relation to Mr Tesoriero’s evidence that he held such an understanding are at Section I.
906 I now turn to consider the position in relation to Mr Bouchahine’s knowledge assessed by reference to the workbooks
907 As I followed the evidence, and interpolating to add context by reference to the findings that I have already made in relation to Mr Bouchahine, the issue of whether Mr Bouchahine had actual knowledge falls to be determined by reference to the following propositions:
(1) Mr Bouchahine knew from his receipt of the early contractual documents in September 2018 that Westpac required the delivery of equipment before providing funding;
(2) Mr Bouchahine's experience in relation to equipment leasing finance, both before and after joining Forum, was that in normal practice proof of delivery of the asset and execution of a contract with the end customer were prerequisites to finance being drawn;
(3) Mr Bouchahine understood as a matter common sense that proof of delivery and execution of a contract with the customer were essential - in particular, delivery was critical to the underlying raison d'etre for equipment leasing finance arrangements;
(4) Mr Bouchahine knew throughout the whole of the period of the fraud against Westpac that Forum had not paid the ostensible manufacturer of the equipment that ostensibly underpinned the fraudulent leasing arrangements;
(5) Mr Bouchahine knew that Mr Papas' and Mr Tesoriero's personal projects were being paid, in the main, directly or indirectly, by FGFS, including expenses that were recurrent in nature. I note that Mr Bouchahine readily admitted that was so, as he had to given he was responsible for making the payments once he had obtained Mr Papas's approval;
(6) Mr Bouchahine agreed that the reference to "BHO New Funder" in the cash flow spreadsheets was Westpac. Accordingly, Mr Bouchahine knew that payments were being made by Forum to Westpac, rather than by customers. He caused these payments to be made and did not record in Forum Finance's books and records the involvement of FGFS.
908 In light of the above, the conclusion that Mr Bouchahine has actual knowledge of the fraud is inescapable. Mr Bouchahine’s only means of resisting that conclusion is by reference to his purported belief in the future funded or advanced funded arrangement. For the reasons given in Section I.19, I do not accept Mr Bouchahine’s account of the advance funding arrangements. I am fortified in my conclusion by the evidence in relation to Mr Bouchahine’s involvement in, and knowledge gained as a result of, the information recorded in the excel workbooks. Mr Bouchahine’s explanation of the future funded or advanced funded arrangement allegedly told to him by Mr Papas was not credible. That is further demonstrated by his evidence in relation the workbooks.
909 The Westpac fraud spanned the period from September 2018 to June 2021. Mr Bouchahine agreed that in that two and a half year period, not one dollar was repaid by a customer in respect of funds FGFS had apparently paid out on a customer’s behalf.
910 On Mr Bouchahine’s explanation of the advanced funding arrangements, once the equipment was installed, the customer contract would be transferred back to a Consolidated Group Entity that would then commence billing the customer. Mr Bouchahine acknowledged that this would require the customer to enter into a revised contract, which, to Mr Bouchahine’s knowledge, never occurred. Mr Bouchahine never raised this topic with Mr Papas.
911 As mentioned, Mr Bouchahine admitted in hindsight that:
(1) the effect of the arrangement reflected in the workbooks in reality was to transfer money from Forum Finance to FGFS in order to deceive funders;
(2) if he had thought about it at the time, he would have realised that; and
(3) by causing FGFS to make repayments to Westpac under the customer contracts, he was endeavouring to conceal that fact from Westpac.
912 For these reasons, I am fortified in my conclusion that Mr Bouchahine had actual knowledge of the fraud from early in the period of the Westpac fraud and certainly at latest by the time he was called on the facilitate the making of the first of the cloaking payments.
I.23 Conclusion regarding FGFS
913 I am satisfied that FGFS did not conduct any legitimate business. No explanation consistent with legitimate business objectives was provided by Mr Tesoriero or Mr Bouchahine as to why FGFS was established outside the Consolidated Group and yet received and disbursed large sums from the Primary Recipients, three of whom were within the Consolidated Group. The expenditure on the personal projects for Mr Tesoriero and Mr Papas, unconnected with any legitimate business of the Consolidated Group is striking. Indeed, Mr Tesoriero’s utilisation of the funds on assets prone to fast depreciation, and assets that were generally illiquid, such as luxury vehicles and boats, was inconsistent with the notion that under an advance funding arrangement FGFS was intended to service receivables for an unspecified period of delay.
914 The following conclusions in relation to knowledge are in summary form and should be read with the discrete findings made in relation to each of the individual respondents in the earlier parts of this section.
915 Mr Papas had actual knowledge of the fraud scheme perpetrated on each of the financiers. The fraud was premeditated by Mr Papas. Mr Papas conceived and executed the fraud. He was assisted by Ms Agostino, Mr Tesoriero and Mr Bouchahine, who all played a part, but it was Mr Papas that called the shots.
916 The mud map he made in 2018 is an admission, in the broader sense. While it was made in April 2018, some six months before the first advance by any of the present financiers was made, the essential integers of the fraud that he went on to perpetrate against each of the present financiers were all there. The fraud was centred on equipment lease financing underpinned by the twin pillars of “false contracts” and “advance finding of contracts” and supported by “company structures” with Mr Tesoriero and himself as directors. To protect himself he planned to have “money here & overseas” and if the fraud was discovered he would embark on his “overseas escape”. I am not sure if it would be correct to describe the note as prescient, it more readily represents careful forwarding planning against which Mr Papas was able to execute over a period of almost three years.
917 Westpac has established that Ms Agostino had actual knowledge of, and knowingly assisted Mr Papas in executing, the fraud. I find that she had actual knowledge of the fraud from at least late 2018. Ms Agostino held a senior role within the equipment leasing finance part of Forum business and had a degree of knowledge, familiarity and involvement with this part of the Forum business. Her involvement in the Maia events, her subsequent involvement in creating fraudulent transaction documents and insurance certificates at Mr Papas’s direction, her close personal and working relationship with Mr Papas and her flight from the jurisdiction when the fraud was discovered taken in combination support the inference that she had actual knowledge of the fraudulent scheme. If I am wrong in finding that Ms Agostino had actual knowledge of the fraud, then I am satisfied that she had constructive knowledge (fourth category Baden) from at least late 2018.
918 Mr Tesoriero had actual knowledge of the fraud from the inception of the arrangements with Westpac and SMBC. It follows that he had actual knowledge of the fraud at the later time when Societe Generale entered into financing arrangements with Forum Finance.
919 Mr Tesoriero was an unimpressive witness. His evidence was unreliable, and in material respects, dishonest. Mr Tesoriero was prepared to reinvent his version of events and to not be completely candid unless confronted with contemporaneous documents which contradicted him, and even then, he dissembled. His loose approach to telling the truth in giving evidence was reminiscent of his approach to his business dealings with financiers and brokers.
920 I do not accept that Mr Tesoriero believed, during the period of the fraud, that Forum was operating as a legitimate business which supported the significant sums extracted from FGFS by Mr Papas and Mr Tesoriero to fund their personal projects. Mr Tesoriero's inconstancy in his evidence was manifest in his evidence relevant to his Loan Defence. His evidence in relation to his involvement in and understanding gleaned from the events with Maia in 2018 was jarring when compared to the contemporaneous documents and the fact he signed the Maia Guarantee. His inability to provide a coherent explanation of what he understood by future funded contracts confirmed that he held no relevant understanding to that effect at the relevant time. To the contrary, he understood that the concept was used as a fig leaf for the fraud. His attempts to distance himself from the cash flow spreadsheets which revealed the true position were not credible.
921 While I accept that Mr Papas was the architect of the fraud, Westpac has not proved that Mr Tesoriero was a joint architect of the fraud. Given that I have found that Mr Tesoriero had actual knowledge of the fraud, it matters not that he was not an architect of it.
922 If I am wrong in my conclusion on actual knowledge, I would have been satisfied that Mr Tesoriero had constructive knowledge of the fraud (fourth category Baden) for the reasons I have given in the earlier part of this section.
923 Mr Bouchahine had actual knowledge of the fraud since at least the early stages of the Westpac fraud, and at least by the time he commenced making the cloaking payments.
924 While Mr Bouchahine made many appropriate concessions in his evidence, he maintained that he believed that the equipment leasing finance arrangements were legitimate, essentially on the basis of what he said Mr Papas told him about future funding contracts. I do not accept Mr Bouchahine held any contemporaneous belief that the future funded contracts were other than a euphemism for the fraud. That much would have been plain to him, given his role in cycling the funds from Forum Finance to FGFS and thence wherever he was told to move them by Mr Tesoriero and Mr Papas, provided Mr Papas authorised it. He was involved in the creation of false documents for the purpose of assisting Mr Tesoriero obtaining finance, he knew the invoice addressed to customers were being “edited”, he tracked and made cloaking payments to the financiers. He also had clear sight of the fact that payments to equipment manufacturers did not correlate to the volume of equipment leasing finance that was flowing into the Primary Recipients and washing around the Consolidated Group and into Mr Papas’ and Mr Tesoriero’s personal projects.
925 If I am wrong in finding that Mr Bouchahine had actual knowledge, then I would have been satisfied Westpac had comprehensively established that Mr Bouchahine had constructive knowledge (fourth category Baden).
926 Before leaving the topic of knowledge, I should expressly address the submissions made on behalf of Mr Tesoriero and Mr Bouchahine relying on the decision of Hammerschlag J in Moriah War Memorial College Association v Augustine Nosti [2020] NSWSC 942.
927 Mr Tesoriero and Mr Bouchahine sought to resist Westpac’s submissions on their knowledge based on the “free money” thesis on the basis that an “unexplained source of funds does not bring with it a necessary inference or implication” that money has been stolen, relying on Moriah.
928 In Moriah, the plaintiff, Moriah College, a private school in Sydney, brought proceedings against the defendant, Mr Nosti, its former financial controller and manager, in relation to large sums of money which he stole from them between 2004 and 2019. In concurrent proceedings, Moriah also brought a claim for knowing receipt against Mr Nosti’s wife, Melynda Nosti, on the basis that she had knowingly received some of the stolen funds. The thrust of Moriah’s case was that over a period of many years, Mr and Mrs Nosti had significantly increased their expenditure on international travel and other items such as cars, boats and caravans, and that this expenditure was so beyond their obvious means that it would have indicated to an honest and reasonable person in Mrs Nosti’s position that there was an unexplained source of income. Moriah alleged that Mrs Nosti’s knowledge of the fact of this “unexplained source of income” was sufficient to establish liability for knowing receipt under the fourth category in Baden.
929 At trial, Mrs Nosti defended the claim on the ground that she did not have knowledge of Mr Nosti’s breach of trust. She gave evidence that she had a very limited role in and knowledge of the couple’s financial affairs, that she believed their lifestyle to have been funded by a combination of Mr Nosti’s salary, loans and gambling winnings, and that on the few occasions that she had discussed financial matters with Mr Nosti such as their mortgage, she had ultimately accepted his explanations of their financial situation. In particular, her evidence revealed that:
(1) Mr Nosti had full control of and responsibility for his wife’s financial statements, accounts and tax obligations. Although she had at some stage accessed an internet banking account which he had set up for her to pay some of her utility bills, she stopped accessing that account not too long after it was established.
(2) Mr Nosti had responsibility for all of their household bills. Mrs Nosti did not recall ever accessing or reviewing bank statements for their home loan.
(3) From the time that they met, Mr Nosti had assisted Mrs Nosti with the management of her finances. When she first met Mr Nosti, Mrs Nosti had told him that she had opened a business and needed an accountant, and he had replied that he would “love to help”.
930 Against this background, the Court concluded that Mrs Nosti did not have the knowledge required to be liable for knowing receipt.
931 Even if I were to accept that Moriah is authority for the proposition that an unexplained source of income is insufficient to establish liability for knowing receipt, this proposition must be understood in context. The findings in Moriah were made in circumstances where the defendant had very limited involvement in and knowledge of her financial affairs. The fact of some “unexplained source of income” was also the only fact which the plaintiff sought to rely upon to establish knowledge for the purposes of its knowing receipt claim.
932 Those circumstances are a far cry from the facts of the present case. Unlike Mr Tesoriero and Mr Bouchahine, Mrs Nosti had little to almost no involvement in or responsibility for, her and Mr Nosti’s financial affairs. The nature of Mr and Mrs Nosti’s relationship was also starkly different from the relationship that Mr Tesoriero and Mr Bouchahine had with Mr Papas. Mr and Mrs Nosti’s relationship was a marital relationship – one of implicit trust and co-dependency. It was from the outset founded upon an expectation that Mr Nosti was an accountant that could assist his wife with financial matters. As Hammerschlag J put it, Mrs Nosti “was vulnerable to him and he dominated her with respect to financial matters in a bullying way” (at [119]).
933 The nature of Mr Tesoriero and Mr Bouchahine’s relationship with Mr Papas, and the extent of their financial involvement with Forum, is plainly not analogous, for obvious reasons. For starters, Mr Tesoriero and Mr Bouchahine were involved with Mr Papas in a professional capacity. In Mr Tesoriero’s case, he was Mr Papas’ business partner. In Mr Bouchahine’s case, he was employed as his CFO. Money and the exchange of financial information about the Forum business were therefore at the very heart of their relationship with one another. Indeed, this was the sole basis upon which they were known to each other. Further, the evidence reveals that financial information about the Forum entities was readily exchanged between the three of them. Both Mr Tesoriero and Mr Bouchahine had a high level of access to information about Forum’s cash flow and its accounts. In Mr Bouchahine’s case, he had actual access to and control over those funds. It was with him that responsibility for the authorisation and tracking of payments by Forum lay. I thus have real difficulty with the submission put by Counsel for Mr Bouchahine that his relationship with Mr Papas was analogous to the relationship of Mr and Mrs Nosti and that the reasoning of the Court in Moriah in relation to Mrs Nosti should apply mutatis mutandis in the present circumstances.
934 In any event, I do not understand Westpac to put their case as narrowly as, or in a manner which is comparable to, the way in which the plaintiff’s case was framed in Moriah. In Moriah, the plaintiff’s case turned upon an allegation that the existence of an unexplained source of income was sufficient to establish knowledge of a kind within the fourth category of Baden. Specifically, Moriah submitted that it was an “unexplained source of income” which was the “fact” which would have been indicated to an honest and reasonable person in the position of Mrs Nosti. It then alleged that knowledge of this “fact” was sufficient to found liability for knowing receipt. Hammerschlag J rejected this submission at [97]. His Honour found that “knowledge, actual or constructive, of an unexplained source of income, simpliciter, is insufficient” to establish liability under the second limb of Barnes v Addy.
935 By way of contradistinction, Westpac relies upon unexplained income as just one of many indicia of Mr Papas’ fraud. Thus, even if I were to accept that unexplained income is alone a fact which is insufficient to establish that an honest and reasonable person in the position of Mr Tesoriero or Mr Bouchahine would have had knowledge of the fraud, this conclusion would be of little consequence. Moriah does not, and cannot reasonably be interpreted to, go so far as to suggest that unexplained income is, when considered alongside other relevant circumstances, incapable of indicating fraud to an honest and reasonable person.
936 Accordingly, I reject the submissions made by Mr Tesoriero and Mr Bouchahine in reliance on Moriah.
I.25 The tracing analysis evidence
937 The liquidator’s accounting evidence relied on at the final hearing was supplied by:
(1) Jason Preston; and
(2) Jason Ireland; and
938 Mr Preston and Mr Ireland are both partners in the restructuring practice of McGrathNicol, Chartered Accountants (admitted as members of the Chartered Accountants Australia and New Zealand) and are registered liquidators. Both Mr Preston and Mr Ireland have over 20 years’ experience undertaking complex restructuring and turnaround assignments, capital reorganisations and formal insolvency administrations.
939 By way of recap, as outlined in Section D, they are liquidators of the following corporate entities that are, or were, respondents in one or more of the three proceedings:
(1) 5 Bulkara Street;
(2) 6 Bulkara Street;
(3) 14 James Street;
(4) 26 Edmonstone Road;
(5) FG;
(6) FGFS;
(7) FGOC;
(8) Forum Enviro;
(9) Forum Enviro (Aust);
(10) Forum Finance;
(11) Forum Fleet;
(12) Imagetec FS;
(13) Imagetec Solutions;
(14) Intrashield;
(15) Iugis;
(16) Iugis Waste;
(17) Palante; and
(18) Spartan
I.25.1 Affidavits of Mr Preston
940 Mr Preston affirmed two affidavits dated 7 February 2022 and 10 June 2022, concerning the extensive tracing processes undertaken by him and members of the McGrathNicol forensic team, to analyse the transactions of the Forum related companies and FGFS collectively referred to as the Traced Forum Entities) between 21 June 2018 to 9 June 2021 (the Relevant Tracing Period).
941 The purpose of the tracing process was to ascertain:
(1) the main sources of the funds that were received by the Traced Forum Entities;
(2) the movement of funds between accounts held by the Traced Forum Entities; and
(3) the payment of funds from the Traced Forum Entities to external entities or persons.
942 The following factual conclusions are based on the liquidators’ investigations, including their tracing analysis. The liquidators’ evidence on this issue was not challenged. The liquidators’ evidence is supported by detailed s 50 summaries, which were adduced without objection, save for one discrete challenge by counsel for Mr Tesoriero.
943 The objection concerned an amended s 50 payment summary with respect to Mr Tesoriero, specifically what was classified as “Payments to, or on behalf of, Mr Tesoriero”. The basis for this objection was in order to create this summary there were inferences drawn from certain documents, that were not identified nor tendered, that Mr Tesoriero directed payments to various third-party entities (not listed as respondents in the proceedings). Counsel suggested that this be headed “Payments Concerning Vince Tesoriero”, with supplementary material tendered demonstrating the rationale behind attributing Mr Tesoriero’s direction behind these payments. As a result of this objection, the heading was altered and an additional 10 documents were tendered in support of these inferences.
944 The main sources of the funds received into a number of the Traced Forum Entities’ accounts were the financiers (whether directly or via Eqwe or Flexirent).
945 The funding provided by the financiers to Traced Forum Entities was in the following periods:
(1) WBC – 13 September 2018 to 9 June 2021;
(2) WNZL – 22 February 2019 to 9 June 2021;
(3) SMBC (or Flexirent) – 21 June 2018 to 26 May 2021; and
(4) Societe Generale – 9 March 2021 to 24 May 2021.
946 Funding from the financiers was received into one or more of the following Source Accounts:
(1) account held with National Australia Bank Limited (NAB) in the name of Forum Enviro with account number ending 0595 (Forum Enviro Account);
(2) account held with NAB in the name of FORUM ENVIRO AUST PL with account number ending 1722 (Forum Enviro (Aust) Account);
(3) account held with NAB in the name of Forum Finance Pty Ltd with account number ending 3695 (Forum Finance Account); and
(4) account held with ANZ in the name of Orca Enviro Solutions NZ Ltd with account number ending 1400 (Iugis NZ Account).
947 Funds from SMBC (whether directly, or via Flexirent) were deposited into the Forum Enviro Account and the Forum Enviro (Aust) Account;
948 Funds from Westpac or Eqwe acting in its capacity as an agent for Westpac were deposited into the Forum Finance Account;
949 Funds from WNZL and Eqwe in its capacity as agent for WNZL were deposited into the Iugis NZ Account; and
950 Funds from Societe Generale, or Eqwe acting in its capacity as agent for Societe Generale to the Forum Finance Account.
951 Taking the three financiers together, the Relevant Tracing Period, inclusive of the earliest date that funding was provided by a Financier to the last date that funding was provided by a Financier, being 21 June 2018 (SMBC) to 9 June 2021 (Westpac).
I.25.2 Flow of funds within Traced Forum Entities
952 The majority of the funds derived from the financiers and deposited in the Source Accounts were then transferred to another account held with NAB in the name of FORUM GRP FS with account number ending 8642 (FGFS Account). These funds were then “mixed” with the funds otherwise in the FGFS Account, typically being monies received from other Forum Entities.
953 Payments were then made out of the FGFS Account to:
(1) the Source Accounts;
(2) accounts other than the Source Accounts held by the Forum Group; or
(3) to parties external to the Forum group of companies.
954 Tracing analysis was conducted over a five stage process.
955 First, relevant bank statements were obtained by the liquidators through the issuance of statutory notices and subpoenas (either by themselves or others). This was supplemented by accounting records held with the accounting system Xero, the books and records of the Traced Forum Entities and tracing that had been conducted by NAB, obtained by the liquidators under subpoena.
956 Secondly, the bank statements were converted into portable document format (PDF) format and Excel workbooks. These converted bank statements described for each transaction the account name, account number, account type, branch reference, date of the transaction, description of the transaction, debit, credit and the account balance.
957 Thirdly, all transactions in these converted bank statements were assigned two categories, used to describe the nature of the debit or credit, a “Higher Level Category” (summarising or group a set of transactions of a similar name) and a “Sub Level Category” (that gave a more detailed description of a transaction where applicable). An example of this two-tiered categorisation is a transaction that was a credit received by a financier: the Higher Level Category would deem this a “Financier” transaction and the Sub Level Category would specify which financier was responsible for the credit eg “Westpac”.
958 Categorisation was also used for the description of transfers between bank accounts. For example, some were classified as “Relevant Entity Transfers”, “Relevant Individual Transfers” or “Property Transfers”, if these companies and individuals had an association with the Forum group of companies (for example, entities where the directors and/or shareholders were Mr Papas and/or Mr Tesoriero) and the liquidators had bank statements in respect of these. Further analysis was undertaken, as was demonstrated in the second affidavit, in attributing “Vehicle and Property Transactions” that had not previously been attributed to a specific respondent.
959 Another categorisation was whether a transaction was related to a “Person of Interest”, being a person who was defined as having a relationship with a Traced Forum Entity. A transfer could be identified as relating to a Person of Interest by matching corresponding account names, account numbers of descriptions to the relevant debit or credit.
960 Fourth, the funds provided by the Financiers (Financier Funding) were traced by the liquidators using the following method:
(1) identifying Financier Funding within the Source Accounts by filtering relevant bank statements by their Higher Level Category;;
(2) collating these transactions into a separate Excel worksheet described as the Financier Funding Worksheet;
(3) allocating Tracing Categories depending on which financier was the source of those funds. There is another Tracing Category called “Other” where the source of the funds was not one of the four financiers above;
(4) a trace was performed from the time when funds were transferred by or on behalf of the relevant financier, resulting in a credit being made into the relevant Source Account to its “endpoint” (tracing from the point at which credit was made into the relevant Source Account to the point at which it was transferred to a bank account other than one of the Relevant Trace Accounts, as defined below in subparagraph (6));
(5) approximately 80% of the Financier Funding was transferred from the Source Accounts to the FGFS Account;
(6) Financier Funding was also transferred and expended into these other Traced Forum Entity accounts:
(a) Forum Enviro (Aust) Account;
(b) Forum Enviro Account;
(c) Forum Finance Account;
(d) account held with NAB in the name of FG with account number ending 2934 (FG Account);
(e) account held with NAB in the name of Forum Finance with account number ending 9670;
(f) account held with NAB in the name of FGOC with account number ending 4529;
(g) account held with NAB in the name of Iugis with account number ending 6968 (Iugis Account);
(h) account held with NAB in the name of 26 Edmonstone Road with account number ending 9902;
(i) account held with NAB in the name of 286 Carlisle Street with account number ending 1512;
(j) account held with NAB in the name of Canner with account number 9119;
(k) account held with NAB in the name of Intrashield with account number ending 7556;
(l) account held with NAB in the name of Palante with account number ending 2583;
(m) account held with NAB in the name of Spartan with account number ending 6572;
(n) account held with Westpac in the name of Spartan with account number ending 1467;
These, along with the FGFS Account are referred to collectively as “the Relevant Trace Accounts”;
(7) recording all transactions that transferred funds to the FGFS Account. Transactions involving the other Relevant Trace Accounts were only traced on an exception basis and where the transactions were sourced from Financier Funding. Whilst the nature of the exception basis was not elaborated upon in the first affidavit, an example of the exception basis was described in the second affidavit, whereby transactions that exceeded $50,000 were traced if they related to vehicles or real property. This was for the purpose of attributing whether any of these transactions could be attributed to a specific respondent;
(8) crediting the balance of funds attributed to the relevant Tracing Category when a Financier transferred funds (for example, if Westpac made a payment, the balance of the Westpac category would increase);
(9) debiting the balance of funds attributed to the relevant Tracing Category when a corresponding debit (i.e. a debit with the same date and amount) was made from that relevant account (i.e. if a corresponding debit was found to the Westpac credit in subparagraph (7) then the balance of the Westpac category would decrease):
(10) when funds were transferred to the FGFS Account (or other Relevant Trace Account), a percentage was allocated to the relevant Tracing Category based on the source of funds from that transfer;
(11) based upon the above steps, the liquidators then took two alternative approaches to their tracing analysis that gave rise to the First Tracing Model (referred to by the liquidators as the Revised Tracing Model) and the Second Tracing Model (referred to by the liquidators as the Alternative Tracing Model);
(12) the First Tracing Model, analysed debits from the Relevant Trace Accounts, by expending funds in the “Other” category first, prior to any payments being allocated from WBC, WNZL, SMBC or Societe Generale. Once the Tracing Category “Other” was depleted, Financier Funding was drawn down on a pro-rata basis from the Tracing Categories according to the proportion of funds each of the Financiers had contributed to their specific Tracing Category; and
(13) the Second Tracing Model, adopted the inverse approach when analysing debits from the Relevant Trace Accounts, by expending Financier Funding first on a pro-rata basis according to the proportion of funds each of the Financiers had contributed to their specific Tracing Category, prior to any payments being allocated to the category “Other”. Once the balance of the Financier Funding was depleted, the Category “Other” was drawn down.
961 Fifth, the liquidators created a series of tables, demonstrating how they allocated Financier Funding by reference to Higher Level Categories and Sub Level Categories, as described above. A list of all of the categories is in evidence. In this way the liquidators have demonstrated the use of Financier Funding to make payments for and on behalf of each of the respondents.
962 The liquidators were able to identify and trace 100% of the funding provided by the Financiers through to an “endpoint”. The total amount identified and traced was $518,705,430.
963 Tables which demonstrate the end-points of the Financier Funding based on the primary tracing methodology applied by the liquidators are in evidence.
964 Mr Preston was cross-examined on his evidence by counsel for Mr Tesoriero.
965 Although in written opening submissions, counsel for Mr Tesoriero submitted that there was “nothing in the financial statements [comprised of the FGFS accounts] to show the receipt of funds from Westpac or from customer contracts involving Westpac funding”, the challenge to Mr Preston in cross-examination was limited to putting to Mr Preston that certain movements of funds were recorded as loans in the FGFS accounts. Mr Preston accepted by reference to the limited examples put to him that the FGFS accounts did indeed record certain outflows from FGFS as repayments or payments against a loan to a TIG. The cross-examination of Mr Preston on this topic did not undermine the basis upon which the liquidators concluded that the vast majority of the financier funding made its way to FGFS and was from that point traced to the end points identified by the liquidators.
I.26.1 The Eqwe/Forum Programme Agreements
966 I now turn to address the specific arrangements in relation to the fraud perpetrated against Westpac.
967 The fraudulent transactions the subject of the Westpac Proceeding arise out of a funding structure pursuant to principal and agency agreements and sale of receivable agreements, referred to internally by WBC as the Eqwe/Forum Programme (which was also referred to as the “BHO/Forum Programme” as Eqwe previously traded under the name BHO Finance).
968 The agreements that comprised the Eqwe/Forum Programme during the Relevant Period were as follows.
969 First, a set of principal and agency agreements facilitating sale of receivables programs with Forum Finance were entered into by WBC with Eqwe as follows:
(1) the First Eqwe Agreement between WBC and BHD Leasing Pty Ltd ACN 154 478 707 (trading as BHO Finance) dated 8 May 2017. The First Eqwe Agreement was entered into following an email, dated 4 May 2017, sent by Mr Daniel of Westpac internally to relevantly, Mr Anderson of Westpac attaching a draft briefing note regarding the sale of receivables program between Westpac and BHD Leasing, which stated that BHD Leasing held an existing strong relationship with WBC, and that BHO had identified a market gap for financing software;
(2) the Second Eqwe Agreement between WBC and Eqwe dated 15 July 2019. The Second Eqwe Agreement was entered into when Eqwe was known as BHO Funding Pty Ltd. It occurred at the request of Eqwe, as explained at the time by Eqwe because Eqwe wished to put in place a different Eqwe entity for the arrangements with WBC to the arrangements with other financiers. The First Eqwe Agreement came to an end when the Second Eqwe Agreement came into effect; and
(3) a document titled “Business Terms Letter BHO Funding Pty Ltd – Disclosed Principal and Agency program” dated 15 July 2019.
970 Secondly, agreements for the sale of receivables and goods entered into between BHD Leasing, Eqwe and Forum Finance, as follows:
(1) the First Forum Agreement, a Master Sale of Receivables and Goods Agreement between BHO Finance and Forum Finance dated 31 August 2018, which was precipitated by correspondence between Mr Price, director of BHO Finance, and Mr Anderson in which Mr Anderson provided Mr Price with indicative pricing for proposed arrangements with potential customers;
(2) the Second Forum Agreement, a Master Sale of Receivables and Goods Agreement between Eqwe and Forum Finance dated 12 July 2019. The Second Forum Agreement replaced the First Forum Agreement;
971 Thirdly, the following agreements entered into in New Zealand variously between WNZL and Eqwe, and Eqwe and Iugis NZ, which mirrored the Australian financing arrangements:
(1) the NZ Eqwe Agreement, a principal and agency agreement between WNZL and Eqwe dated on about 17 December 2018; and
(2) the NZ Forum Agreement, a master sale of goods and receivables agreement between Eqwe and Iugis NZ dated 19 December 2018.
972 Under the principal and agency agreements, WBC or WNZL appointed Eqwe as non-exclusive agent to purchase equipment and enter into leasing agreements (finance leases) with customers approved by WBC or WNZL throughout Australia and New Zealand.
973 Under the First and Second Forum Agreements:
(1) Forum Finance could offer to sell to Eqwe (as agent for WBC) customer receivables on finance being advanced and Forum Finance, if the offer was accepted, would assign to Eqwe (as agent for WBC) the right and title to the receivables and security in exchange for the advance of finance to be provided by WBC; and
(2) Iugis NZ could offer to sell to Eqwe (as agent for WNZL) customer receivables on advancing finance and Iugis NZ, if the offer was accepted, would assign to Eqwe (as agent for WNZL) the right and title to the receivables and security in exchange for the advance of finance to be provided by WNZL.
974 The Eqwe/Forum Programme funding structure was intended to operate as follows:
(1) Forum Finance, subject to credit approval by WBC, would enter into equipment purchase arrangements with its customers pursuant to which it would acquire assets required by its customers, using funding provided by WBC through Eqwe. Forum Finance would then provide those assets to the customers on conventional equipment finance terms which provided for monthly payments to be made by the customer (which would be assigned to WBC). At the end of the term, the equipment which had been used by the customer was to be assigned to the customer.
(2) Receipt of the relevant documents from Eqwe (including documents which it received from Forum Finance under the First and Second Forum Agreements) was a condition precedent to the advance of funds by WBC under the agency agreement. On receipt of those documents and credit approval, WBC advanced funds to Forum Finance, which WBC understood Forum Finance used to acquire the equipment by the customer, the subject of the relevant approval by WBC. Once WBC received an email from Eqwe providing the relevant documents and the funding request (initially provided by Forum Finance to Eqwe purportedly on behalf of the customer), it then paid the approved amount of the required funding to Forum Finance's bank account at NAB, for the purpose of being used to purchase the financed equipment.
(3) Simultaneously with receipt of the funds, a sale notice (in accordance with the First and Second Forum Agreements) (a copy of which would be sent to WBC as part of a funding request received via Eqwe) was then issued by Forum Finance to Eqwe. By that sale notice, Forum Finance sold the relevant receivable to Eqwe (as agent for WBC).
(4) A Notice of Assignment was to be issued to the customer by Forum Finance under the First or Second Forum Agreement, to give notice to the relevant customer that Forum Finance had assigned its rights to Eqwe, acting as agent for WBC.
(5) Eqwe was required to disclose to the end customer (in respect of the relevant equipment or receivables financing) that it acted as agent for a disclosed principal, WBC. On being notified of the assignment of the receivable, the customer was also directed to make its monthly payments to an Eqwe account held with WBC.
(6) Eqwe then paid the monthly scheduled payments in respect of the lease payments due to WBC.
975 Under the First Eqwe Agreement, Eqwe (then known as BHO Funding Pty Ltd) was paid an arranger fee, calculated as a percentage of the contract price for the service it provided in sourcing asset financing customers. Under the Second Eqwe Agreement, Eqwe was paid a trailing commission in relation to the introduced contracts.
976 Payments made by WBC to Forum Finance in respect of transactions introduced by Eqwe were paid to an account in the name of Forum Finance, held at NAB with BSB 082 080 and account number ending 3695 (FF Account).
I.26.2 Iugis dealings with WNZL
977 The Eqwe/Forum Programme was intended to operate in the same way in New Zealand, with the key differences being that Iugis NZ (instead of Forum Finance), subject to credit approval, entered into equipment purchase arrangements with Veolia NZ pursuant to which it acquired assets required by Veolia NZ, using funding provided by WNZL through Iugis NZ. Iugis NZ then provided those assets to Veolia NZ on conventional equipment leasing or financing terms. The receivables agreements for Iugis NZ were introduced to WNZL by Eqwe. The payments of the amount financed were made by WNZL to an Iugis NZ account.
978 Payments made by WNZL to Iugis NZ in respect of transactions introduced by Eqwe were paid to an account in the name of Iugis NZ, held at the ANZ with account number ending14-00 (Iugis NZ Account). Eqwe was paid a brokerage fee in relation to the NZ transactions.
I.27 Transactions between Forum Finance and WBC
979 A summary of the fraudulent transactions and documents was prepared by WBC pursuant to s 50 of the Evidence Act. That summary was uncontested and admitted into evidence. It sets out in condensed form the transactions alleged to be fraudulent, the funding date and funding amount, the purported customer name, the name of the relevant Eqwe entity, particulars of the documents forming the transaction, and bank account details to which payment was made. The transaction summary ascribes transaction numbers to each transaction, which I have adopted for the purposes of the examples which follow which are drawn from the comprehensive s 50 summary. I have used these examples to illustrate the nature of the fraud, and the manner in which it was implemented by Mr Papas through Forum Finance. The following recital of facts relating to the fraudulent transactions represents my findings of fact on this issue, unless stated otherwise. I find that WBC has established the balance of transactions identified in the s 50 summary being transactions numbered T1 to T100. The evidence in relation to each of those transactions is consistent with the exposition of the evidence in relation to each of the examples I address in detail below. In saying that the evidence in relation to the balance of the WBC Transactions is consistent with the evidence in relation to the WBC Transactions which I have worked through in detail below, I mean to allow for the fact that the evidence necessarily varies in the details which are bespoke to each transaction, for example, the dates, amounts, identity of the alleged customer representative, but is nonetheless relevantly to same effect in establishing the operation of the fraudulent scheme.
980 The financing transactions occurred in a context where Forum was not necessarily able to meet purchase requests from customers, such as Veolia. For example, as mentioned, Westpac fast-tracked settlements with Forum Finance following correspondence from Mr Sheeran of BHO Finance in September 2018 in which he said that Forum Finance was “screaming for cash to fulfil purchases”.
981 I now turn to illustrate the WBC fraud by reference to four transactions (Transaction 1A and 1B, Transaction 2 and Transaction 4).
982 Transaction 1A involved a customer payment schedule dated 24 August 2018 from Forum Finance for the sale of 14 ORCA OG25 and 23 ORCA OG50 Organic Waste Digesters from Forum Finance to Veolia. The payment schedule was purportedly signed by Ms Brar as CFO of Veolia. Ms Brar’s signature was purportedly witnessed by Mr Papas. The evidence revealed that the signature of Ms Brar on the payment schedule was not in fact hers. However, this was unknown to Mr Price at the time he sent the email of 4 September 2018 (described below) and the officers of Westpac who received the email. Indeed, prior to the discovery of the fraud in mid 2021, the fraudulent nature of the signatures was not apparent to the officers of BHO Leasing and Westpac for any of the fraudulent transactions. Mr Papas signed the payment schedule with the title of Managing Director of Forum Finance, whilst Ms Brar was described as the CFO. There is no suggestion that Mr Papas did not sign the document. As mentioned, he has not filed any defence or evidence in these proceedings to deny that the signature is his on the documents relevant to this transaction, and indeed all the Fraudulent Transaction Documents.
983 The starting point for a consideration of this transaction is an email dated 4 September 2018 from Mr Price of Eqwe (then known as BHO Finance) to Mr Daniel and Mr Anderson of Westpac, copied to Mr Sheeran and Ms Katrina Constable of BHO Finance. In that email, Mr Price attached the package for the purchase of receivables payable by Veolia in respect of ORCA units installed in various premises. The email from Mr Price had six attachments, being a payment schedule, a sale notice, a signed transfer of rights letter, an Excel spreadsheet with calculations of receivables, BHO Finance’s invoice and a company extract. Mr Price referred to the payment schedule in his email, and noted that that it was signed by Ms Brar. Mr Price attached the LinkedIn details of Ms Brar. The effect of Mr Price’s email was that Veolia was purchasing ORCA machines and that funds were required for the purchase of these machines.
984 The payment schedule attached to Mr Price’s email, which is in substantively the same form as the payment schedules utilised for the other transactions, purported to be a schedule, a tax invoice, and an agreement between Forum Finance and the customer (in this case, Veolia). The payment schedules represented that Veolia was the customer and Forum Finance was the owner of the ORCA units which were to be purchased by Veolia. Relevantly, the payment schedule represented that upon delivery of the products by Forum Finance to the customer, Veolia committed to paying the product price referred to in the payment schedule. Annexure A to the payment schedule listed serial numbers, relevantly for 14 ORCA OG25 and 23 ORCA OG50 Organic Waste Digesters, with locations in South Australia, Queensland, and New South Wales. Annexure A was purportedly signed by Ms Brar on 24 August 2018. Further annexed is a certificate of acceptance of delivery which purportedly certified that delivery was accepted on 28 August 2018 through the signature of Ms Brar, and witnessed by Mr Papas.
985 Pursuant to the sale notice, dated 31 August 2018, Forum purported to give notice to BHO Finance that it was offering to sell the relevant receivables and goods for payment of $2,059,170. The sale notice was signed by Mr Papas. Further, with respect to the notification of assignment to Veolia, the transfer of rights letter dated 5 September 2018 purported to give Ms Brar notice of the assignment by stating that “we have unconditionally and absolutely transferred full legal and beneficial title to and right and interest in the Payment Schedule…to BHD Leasing Pty Limited … (who is acting as agent for Westpac Institutional Bank)”. The wording of the notice of assignment was in standard form used in all the fraudulent transactions. The Excel spreadsheet provided detail as to the receivables that Veolia intended to purchase, the brokerage tax invoice to Westpac related to the fee charged for introducing the business, and the company extract provided further information about Veolia including by identifying Ms Brar as a director of Veolia.
986 The payment schedule, certificate of delivery, sale notice, and transfer of rights letter were submitted by Forum Finance to BHO Finance by email dated 29 August 2018 sent from Mr Papas to Mr Sheeran, and an email dated 31 August 2018 sent from Mr Papas to Mr Sheeran attaching the sale notice and transfer of rights letter.
987 Transaction 1B involved a customer payment schedule in similar terms to that pertaining to Transaction 1A. It was dated 7 September 2018 from Forum Finance for the sale of 23 ORCA OG100 and 23 ORCA OG50 Organic Waste Digesters from Forum Finance to Veolia. The payment schedule was purportedly signed by Ms Brar as CFO, and her signature was purportedly witnessed by Mr Peter Lamb.
988 Mr Papas provided the payment schedule in addition to a certificate of delivery (in similar terms to the documents provided as part of Transaction 1A, but for different amounts and different days) to Mr Sheeran of BHO Finance by email dated 9 September 2018.
989 Again, Ms Brar’s purported signature was on the payment schedule, and Mr Papas signed the payment schedule with the title of Managing Director of Forum Finance. Annexure A to the payment schedule listed a range of serial numbers with locations in South Australia, Queensland, and New South Wales. Annexure A to the payment schedule was purportedly signed by Ms Brar on 7 September 2018. The certificate of acceptance of delivery, also annexed, purportedly certified that delivery was accepted on 28 August 2018 through the signature of Ms Brar, and witnessed in this instance by an individual other than Mr Papas, being Mr Lamb bearing the title “GM Ops NSW”. In this respect, I note that the s 50 summary which identifies that Mr Papas is the witness of Ms Brar’s signature is incorrect. The sale notice dated 9 September 2018 from Forum Finance to BHO Finance, seeking payment in the amount of $4,591,914, was signed by Mr Papas. Further, the transfer of rights letter from Forum Finance to Veolia dated 12 September 2018 was again addressed to Ms Brar.
990 The Transaction 1A and 1B Documents were submitted by BHO Finance to Westpac by email dated 4 September 2018 sent from Mr Price to Mr Daniel and Mr Anderson. I will refer to Transaction 1A and 1B together as Transaction 1.
I.27.2.1 Westpac’s internal processes
991 The fraudulent transactions were the subject of Westpac “deal packs” prepared for the purposes of being submitted internally within Westpac for funding approval. The deal pack for Transaction 1 included an internal request from the Asset Finance Team to Mr Anderson by email on 13 September 2018 seeking confirmation of the authorised signatory for the funding for the transaction. Mr Anderson confirmed by reply email that Ms Brar was the CFO of Veolia, and was an authorised signatory.
992 The affidavit of Mr Anderson dated 14 October 2021 explained that, with respect to transaction approval, “[o]nce an underlying customer has credit approval, transactions could be processed for amounts under the credit limit.” Mr Anderson deposed that, in order to begin a transaction, Eqwe would contact Westpac requesting an interest rate and then inform Westpac of the amount of transactions in advance. If Eqwe was content with the rate offered by Westpac, it would send a package for the purchase of receivables containing a payment schedule between Forum Finance and the underlying customer, a sale notice from Forum to Eqwe, notification of assignment signed by Forum Finance, purchase of receivables Excel spreadsheet, and an Eqwe tax invoice. Mr Anderson deposed that a member of the Asset Finance team would review the package, and would also prepare a pricing sheet. The Asset Finance team would also seek to verify the signatures of underlying customers. The member of the Asset Finance team who reviewed the package for the purchase of receivables would then sign the pricing sheet, and provide the deal pack to Mr Anderson or Mr Daniel.
993 Each deal pack included the Westpac pricing sheet and the following documents provided by Eqwe:
(1) payment schedule between Forum and the underlying customer;
(2) sale notice from Forum to Eqwe;
(3) notification of assignment signed by Forum; and
(4) Eqwe tax invoice.
994 When the deal pack was checked, the person who checked it would sign the pricing sheet. This was typically Mr Anderson. A member of the Asset Finance team would then forward the deal pack, the signed PDF pricing sheet and the pricing sheet in native Excel format together with other documents relevant to the specific transaction to the Asset Finance Operations team. When processing transactions, the Asset Finance Operations team performed additional checks including reviewing the signatory against lists of signatories that they held. Once the drawdown occurred, Westpac would provide settlement confirmation and remittance advice to Eqwe. Eqwe was also to provide to Westpac the PPSR verification for the security interests over the assets underlying the transaction, as required under the Eqwe principal and agency agreements.
995 Ms Brar deposed that, having been provided with the payment schedules for Transaction 1A and Transaction 1B by Westpac’s solicitors, she did not sign the payment schedules or certificates of acceptance of delivery, nor did she authorise anyone to sign the payment schedules or certificates of acceptance of delivery on her behalf or affix her electronic signature to them. Ms Brar also confirmed that none of the handwriting on the payment schedules or certificates of acceptance of delivery was hers.
996 Further, Ms Brar deposed that the first time she saw the transfer of rights letters was when they were provided to her by solicitors for the financiers in the Westpac Proceeding.
997 I accept Ms Brar’s evidence.
998 Transaction 2 facilitated funding of $1,085,079 on 14 September 2018, and comprised of a customer payment schedule dated 28 August 2018 from Forum Finance for the sale of 12 ORCA Organic Waste Digesters from Forum Finance to ALH. The schedule was purportedly signed by Mr Smith as Chief Operating Officer of ALH. Mr Smith's signature was purportedly to be witnessed by Mr Tas Papas. As the uncontested evidence shows, Mr Smith did not hold that office, nor was the signature his.
999 By email dated 4 September 2018, Mr Price sent to Mr Daniel and Mr Anderson an email attaching the standard package for purchase of receivables, being the payment schedule between Forum Finance and ALH, the sale notice from Forum Finance to BHO Finance, the transfer of rights letter by Forum Finance, an Excel folder with calculations, and the BHO Finance invoice. Mr Price noted that the payment schedule was signed by Mr Smith, who was the national manager for “Food, Operations, Sales, Procurement” at ALH.
1000 The certificate of delivery, which was undated and annexed to the payment schedule, noted delivery of the relevant equipment to ALH on 28 August 2018. The certificate was purportedly signed by Mr Smith as Chief Operating Officer. Mr Smith's signature was purportedly witnessed by Mr Tas Papas. The sale notice, dated 31 August 2018 from Forum Finance to BHO Finance seeking payment in the amount of $1,029,585, is signed by Mr Papas. The transfer of rights letter dated 5 September 2018 from Forum Finance to ALH is addressed to Mr Smith, and provided the standard notice of unconditional and absolute transfer of title to and right and interest in the payment schedule to BHO Finance.
1001 The basis for Mr Smith’s purported authority to sign was contained in a purported email from Mr Smith to Mr Tas Papas of 28 September 2017 forwarding a scanned document. In an email from Mr Papas to Mr Price, copied to Mr Sheeran, dated 13 September 2018, with the attachment entitled “Authority to sign”, Mr Papas stated: “I found this that we’ve used in the past.” That attachment is a letter purportedly written by Mr Bruce Mathieson, a director of ALH, dated 28 September 2017 which noted that “Trevor Smith is an authorised signatory for the purposes of executing Forum Enviro Agreements for the ORCA products on behalf of ALH”. Mr Price subsequently provided that letter to Mr Anderson on 13 September 2018 by email, in which he noted “[t]his is what Forum have on file from Bruce Mathieson”.
1002 The relevant documents were submitted by Forum Finance to BHO Finance by:
(1) email dated 29 August 2018 sent from Mr Papas to Mr Sheeran attaching the customer payment schedule and the certificate of delivery;
(2) email dated 31 August 2018 sent from Mr Papas to Mr Sheeran attaching the sale notice and transfer of rights letter; and
(3) email dated 13 September sent from Mr Papas to Mr Price of BHO Finance attaching a certificate of currency for Industrial Special risks Insurance from Aon for the period 30 June 2018 to 30 June 2019 with policy number 01R0266074 that expressly notes FG as an interested party (ALH Insurance Certificate).
1003 In turn, as noted the relevant documents were submitted by BHO Finance to Westpac by email dated 4 September 2018 sent from Mr Price to Mr Daniel and Mr Anderson, and an email dated 8 September 2018 sent from Mr Sheeran to Mr Anderson attaching the ALH Insurance Certificate.
1004 Mr Smith deposed that at the relevant times he was the National Food Manager of ALH, and has been in that role since January 2012. Mr Smith deposed that, in 2014 or 2015, he was approached by Mr Tas Papas, and he agreed to enter a three-month trial for the installation of one ORCA machine, and then, after that, he extended the trial with six more ORCA machines, at various venues throughout Australia (Trial Program). Mr Smith deposed that there was no formal written agreement for the Trial Program. A service agreement was entered into by ALH and Iugis on 1 March 2021 with respect to the machines installed at the seven venues in the Trial Program (Service Agreement). Mr Smith signed the Service Agreement for and on behalf of ALH. In around August 2019, Mr Tas Papas requested a copy of ALH's Certificate of Currency of Insurance, and Mr Smith gained access to a copy of that document and forwarded it to Mr Tas Papas.
1005 On 23 June 2021, Mr Anderson sent an email to Mr Smith seeking his confirmation as to whether a number of payment schedules that were attached to an email matched ALH’s records. On the same day, Mr Anderson sent a further email attaching further documents. Mr Anderson’s emails also contained certificates of delivery. On 26 June 2021, Mr Smith sent an email to Mr Bruce Mathieson Jr (CEO of ALH) and Mr Shane Gannon (CFO of Endeavour Group, the parent company of ALH), in which he expressed concern that he had not seen the documents before Mr Anderson provided them to him, and noted that it was not his signature on the documents. Mr Smith sent a further email to Mr Mathieson Jr and Mr Gannon later that day again stating that the signature on the documents was not his. Mr Smith deposed that, before sending this email, he opened all of the documents that were attached from Mr Anderson, that none of the signatures in the payment schedules and/or the delivery certificates were his, and that the payment schedules and delivery certificates incorrectly identified his title as Chief Operating Officer, a role which he had never held.
1006 Mr Smith also stated that, in respect of other transactions, certain of the premises at which it was said that ORCAs were installed for ALH were not operated by ALH, or did not have an operational need for a waste digester.
1007 With respect to the document entitled “Authority to Sign” which Forum had relied upon as the basis for Mr Smith’s purported authority, Mr Smith deposed that he did not send an email to Mr Tas Papas attaching that document on 28 September 2017, and until the time of preparing his affidavit he had not previously seen the document. Mr Smith also searched the “sent” folder of his email account and was unable to locate a copy of an email sent to Mr Tas Papas on 28 September 2017 or the purported attachment.
1008 Mr Smith deposed that he also searched the books and records of ALH to which he had access, including documents concerning the day-to-day food operations of ALH, but not legal or insurance documents, and did not locate any arrangements with respect to the goods referred to by serial number in the payment schedule, and did not locate a copy of the relevant payment schedules, letters from Forum Finance in relation to the payment schedules, and the relevant certificates of delivery.
1009 I accept Mr Smith’s evidence.
1010 Transaction 4 occurred on 20 September 2018 for the amount of $3,047,535 and involved a customer payment schedule dated 6 September 2018 from Forum Finance for the sale of 43 ORCA Organic Waste Digesters from Forum Finance to Coles. The payment schedule was purportedly signed by Mr Parikh as Category Manager, Stores, Procurement Services/General Manager Procurement. Mr Parikh’s signature purports to be witnessed by Mr Tas Papas. An undated certificate of delivery noting delivery of the equipment to Coles on 7 September 2018 purports to be signed by Mr Parikh. Mr Parikh’s signature was purportedly witnessed by Mr de Silva, Senior Category Manager of Stores and Sustainability for Coles.
1011 On 10 September 2018, Mr Price sent an email to Mr Daniel and Mr Anderson of Westpac attaching the standard package for the purchase of receivables payable by Coles in respect of ORCA units installed in various premises, being the payment schedule between Forum Finance and Coles, the sale notice from Forum Finance to BHO Finance, a transfer of rights letter, an Excel folder with calculations, and a BHO Finance invoice. Mr Price noted that the payment schedule was signed by Mr Parikh, and that “[w]e are getting confirmation that Vinay has authority to sign for purchases under $10m”.
1012 The sale notice dated 9 September 2018 from Forum Finance to BHO Finance seeking payment in the amount of $2,890,533 was signed by Mr Papas. Further, the transfer of rights letter dated 14 September 2018 from Forum Finance to Coles was addressed to Mr Parikh. Pursuant to the payment schedule, Forum Finance, as owner, entered into the agreement with Coles, which was purportedly dated 6 September 2018. The ORCAs were listed in Annexure A to the payment schedule as being located in various states and territories throughout Australia. Mr Parikh’s signature of 6 September 2018 was purportedly endorsed below the equipment list.
1013 In an email purportedly sent on 10 September 2018 from Mr Parikh to Mr Tas Papas, Mr Parikh stated “I confirm to you and relevant persons that the ORCA contract falls within my delegation which is for store capital costs and contracts to the value of $10 million. Beyond that value requires Board approval”. Mr Tas Papas forwarded that email to Mr Papas on 10 September 2018. In turn, Mr Papas forwarded the email chain to Mr Price of BHO Finance, copying Mr Sheeran.
1014 On 19 September 2018, in response to what I infer was a request for further information regarding Mr Parikh’s authority, Ms Leah Weckert (CFO of Coles) purportedly sent an email to Mr Parikh confirming that “[f]or the purposes of giving comfort to your supplier ... pass this email on as confirmation that you are the appropriate authorised representative for Coles to execute the agreement for the supply of ORCA systems dated 6th September 2018”. The phone number and sign-off purportedly used in that email did not match the actual details used by Ms Weckert. Again, on 19 September 2018, Mr Parikh purportedly forwarded Ms Weckert’s email to Mr Tas Papas and noted that “[a]s discussed, please see below authority from Leah Weckert our CFO”. Mr Tas Papas purportedly forwarded the email chain to Mr Papas. Mr Papas forwarded the email chain to Mr Sheeran, with Mr Price copied, with the notation “FYI”.
1015 The relevant transaction documents were submitted by Forum Finance to BHO Finance, including by email dated 9 September 2018 sent from Mr Papas to Mr Sheeran attaching the customer payment schedule and the certificate of delivery, and an email dated 11 September 2018 sent from Mr Papas to Mr Price forwarding an email purporting to be sent from Mr Parikh to the effect that the contracts for the supply of ORCA products was within Mr Parikh's delegation of $10 million. The documents were in turn then submitted by BHO Finance to Westpac by email dated 10 September 2018 sent from Mr Price to Mr Daniel and Mr Anderson.
1016 Mr Parikh deposed that on 23 June 2021 he was contacted by Mr Anderson in relation to four contracts with Forum Finance. Mr Parikh looked at each of the customer payment schedules and delivery certificates, and deposed that the signatures on those documents which purported to be his were not in fact his. Mr Parikh gave evidence that he did not sign those documents and did not give anyone authority to sign them or to affix his electronic signature on his behalf, and was prior to the email from Mr Anderson unaware of Forum Finance. Mr Parikh did not have authority to execute contracts on behalf of Coles.
1017 Mr de Silva deposed that the signatures purporting to be his on the certificates of delivery were not his, he did not sign those documents, and he did not witness Mr Parikh sign those documents.
1018 Mr Parikh also gave evidence that the email purporting to be sent by him on 10 September 2018 to Mr Tas Papas in relation to his delegation was not sent by him and that he did not have delegation to sign contracts up to $10 million for and on behalf of Coles. Further, Mr Parikh deposed that the emails purporting to be sent by him, including an email from Ms Weckert to him on 19 September 2018, authorising him to execute the agreement for the supply of ORCAs was not a genuine email. Searches conducted across Coles’ systems could not locate the email purporting to be sent by Mr Parikh or Ms Weckert on 19 September 2018. Mr Parikh also deposed that the transfer of rights letter from Forum Finance addressed to Coles and marked to Mr Parikh’s attention had not been seen by Mr Parikh until it was provided to him by Mr Anderson in June 2021.
1019 On receipt of the documents from Westpac, Mr Parikh emailed Mr Tas Papas and Mr Papas. On 24 June 2021, Mr Parikh was forwarded an email chain by Mr Tas Papas that included an email in which Mr Tas Papas said in relation to the customer payment schedules purporting to be signed by Mr Parikh “I have never seen these documents before and don’t know what they are”.
1020 Mr Parikh deposed that he could not locate the customer payment schedule and certificates of delivery in Coles’ books and records. He also did not locate any record of the equipment referred to in those documents being leased or purchased by Coles. This was consistent with Mr de Silva’s evidence that he did not recall Coles purchasing ORCA machines from Forum Finance.
1021 I accept Mr Parikh’s evidence.
I.28 Transactions between Iugis NZ and WNZL
1022 Transaction NZ1 facilitated funding of NZD $3,110,986 on 21 December 2018. This transaction involved a customer payment schedule dated 18 December 2018 from Iugis NZ for the sale of 2 ORCA OG15, 10 ORCA OG25 and 6 ORCA OG50 Organic Waste Digesters from Iugis NZ to Veolia NZ. The schedule was purportedly signed by Ms Brar (CFO of Veolia NZ), and purportedly witnessed by Mr Papas.
1023 An undated certificate of delivery noting delivery of the equipment (referred to in the payment schedule) to Veolia NZ on 18 December 2018 was purportedly signed by Ms Brar, which and purportedly witnessed by Mr Papas. The sale notice dated 19 December 2018 from Iugis NZ to BHO Funding seeking payment in the amount of NZD $2,975,231 (incl. GST) was signed by Mr Papas. Further, the transfer of rights letter dated 21 December 2018 from Iugis NZ to Veolia NZ was addressed to Ms Brar and purportedly gave Ms Brar notice of the unconditional and absolute transfer to “BHO Funding Pty Limited … (who is acting as agent for Westpac New Zealand Limited)”.
1024 The documents were submitted by Iugis NZ to BHO Finance by email dated 19 December 2018 sent from Mr Papas to Mr Price of BHO Finance attaching the customer payment schedule and the certificate of delivery, and email dated 19 December 2018 sent from Ms Suzi Phillips to Mr Price of BHO Finance and Mr Papas attaching the sale notice and transfer of rights letter.
1025 By email dated 20 December 2018 from Mr Price to Mr Moreton, the relevant transaction documents were submitted by BHO Finance to Westpac, including the Excel model calculating purchase price (whilst noting that the tax invoice would be provided later that morning). In that email, Mr Price noted that the payment schedule and certificate of delivery had been signed by Ms Brar.
1026 Mr Papas purportedly signed the payment schedule as Managing Director of ORCA Enviro Solutions NZ Limited. Annexure A to the payment schedule lists a number of serial numbers with the same location in New Zealand. Annexure A was purportedly signed by Ms Brar on 18 December 2018. The certificate of acceptance of delivery also annexed, purportedly certified, that delivery was accepted on 18 December 2018 through the signature of Ms Brar, which was witnessed by Mr Papas. The sale notice dated 19 December 2018 is signed by Mr Papas.
1027 Ms Brar deposed that she did not sign the payment schedule and certificate of delivery, and that she did not authorise anyone to affix her electronic signature to those documents. She deposed that the signature did not look like hers and to the extent that there is handwriting on the documents, the handwriting was not hers.
1028 Ms Brar also gave evidence that she did not receive the transfer of rights letter from Iugis NZ addressed to Veolia NZ and marked to her attention.
1029 I accept Ms Brar’s evidence.
1030 The starting point for the drawdowns in 2018 under the invoice financing arrangements between Flexirent and SMBC is the 2018 MRASA. Under the 2018 MRASA, Flexirent was able to offer to sell to SMBC customer receivables which arose from leasing contracts between Forum Enviro (Aust), as Flexirent’s agent, and Forum Enviro (Aust)’s customers, in exchange for finance being advanced. Where SMBC accepted an offer, it was granted an equitable interest over the receivables and underlying assets.
1031 In addition to the overarching 2018 MRASA, the following agreements formed part of the financing arrangements:
(1) a Supplemental Deed between SMBC and Flexirent dated 2 August 2018 under which the parties agreed certain additional terms that would apply to any receivables owing by the customer, Veolia;
(2) a principal and agency agreement between Flexirent and Forum Enviro (Aust) dated 13 June 2018 through which Forum Enviro (Aust) acted as Flexirent’s agent in relation to certain rental and lease agreements; and
(3) an agent side letter between SMBC, Flexirent and Forum Enviro (Aust) dated 2 August 2018 by which Forum Enviro (Aust) was authorised to act as SMBC’s collection agent in relation to the monthly receivables which arose from the various underlying leasing arrangements. The effect of this arrangement was that Forum Enviro (Aust) would remit all payments it received from Veolia under purported Technology Licence Agreements (TLAs) to SMBC directly, rather than via Flexirent, as was contemplated by the 2018 MRASA.
1032 Accordingly, pursuant to the 2018 MRASA, SMBC intended that Forum Enviro (Aust) would enter into TLAs with the customer (being Veolia) by which Forum Enviro (Aust) would lease waste management and disinfectant systems to Veolia, and Veolia was required to make monthly payments in the form of usage charges to Forum Enviro (Aust). Flexirent would provide SMBC with offer letters which proposed the sale of receivables and related assets under an executed TLA in exchange for financing and SMBC would advance a settlement sum to Flexirent and in return be granted an equitable interest over the receivables and related assets. Forum Enviro (Aust) would remit the monthly usage charges to SMBC.
1033 Under the 2018 MRASA, four offer letters were sent by Flexirent and accepted by SMBC between 6 August 2018 and 19 December 2018. The receivables purportedly sold to SMBC were rental payments that were owed by Veolia pursuant to TLAs it had purportedly entered into with Forum Enviro (Aust). The total amount paid by SMBC to Flexirent pursuant to these four offer letters was $29,709,714.
1034 Like WBC, SMBC also prepared a summary of fraudulent transactions and documents pursuant to s 50 of the Evidence Act, which was also uncontested and admitted into evidence. It sets out in condensed form the fraudulent transactions and the associated Fraudulent Transaction Documents.
1035 I will adopt the same approach I have taken with Westpac Fraudulent Transactions. I will illustrate by example the way in which the fraudulent scheme was put into effect under the 2018 MRASA. Unless I indicate otherwise the examples I have set out represent my findings. Having regard to the balance of the s 50 fraudulent transaction summary I am satisfied that SMBC has established that the remaining transactions under the 2018 MRASA involved fraudulent dealings to like effect as those detailed in the following examples. Accordingly, I find that the transactions effected in connection with the 2018 MRASA were fraudulent. The following examples of drawdowns effected under the 2018 arrangements explain why I have reached the conclusions I have in relation to the fraud being established.
I.29.2 First Drawdown under the 2018 Arrangement
1036 The first drawdown under the 2018 MRASA involved an offer letter dated 6 August 2018 (First 2018 Offer Letter), pursuant to which SMBC paid $14,411,503 to Flexirent in connection with two TLAs, dated 26 July 2018. The first TLA had a commencement date of 5 July 2018 (TLA 1 2018), and the second had a commencement date of 5 August 2018 (TLA 2 2018). Both TLAs were between Forum Enviro (Aust) and Veolia (as lessee), and were in respect of waste management equipment and involved monthly usage charges of $127,200 and $147,000 respectively.
1037 TLA 1 2018 provided for the lease of ORCA OG15, OG25, OG50 and OG100 for a term of 60 months to Veolia. The ORCA units were noted to be located in Queensland, New South Wales and South Australia. TLA 1 2018 was purportedly signed by Ms Brar, CFO of Veolia, and Mr Julian Gaillard, the Company Secretary of Veolia. Both signatures were purportedly witnessed by Mr Papas. The acceptance of TLA 1 2018 was also signed by Mr Papas. The equipment schedule which set outs the ORCA units was purportedly signed by Ms Brar.
1038 Similarly, TLA 2 2018 provided for the lease for a term of 60 months to Veolia of ORCA OG50 and OG100 located in South Australia, New South Wales, Queensland and Western Australia. TLA 2 2018 was also purportedly signed by Ms Brar and Mr Gaillard. Mr Papas again purportedly witnessed both signatures and signed the acceptance. The equipment schedule was purportedly signed by Ms Brar.
I.29.3 Second Drawdown under the 2018 Arrangement
1039 The second drawdown under the 2018 MRASA involved an offer letter dated 28 September 2018 (Second 2018 Offer Letter), pursuant to which SMBC paid $3,829,312 to Flexirent in connection with a TLA dated 3 September 2018 (TLA 3 2018). TLA 3 2018 had a commencement date of 1 September 2018, was between Forum Enviro (Aust) and Veolia (as lessee) in respect of waste management equipment, and involved a monthly usage charge of $73,500.
1040 TLA 3 2018 stipulated a licence term of 60 months to Veolia of ORCA OG50 and OG100 located in New South Wales, Queensland and South Australia. TLA 3 2018 was again purportedly signed by Ms Brar and Mr Gaillard, and purportedly witnessed by Mr Papas, who also signed the acceptance. The equipment schedule was purportedly signed by Ms Brar.
1041 The uncontested evidence detailed below demonstrates that, the first and second drawdowns were facilitated by the inclusion of fraudulent signatures for each of Veolia representatives. The supposed transactions which SMBC understood that it was financing were fabricated.
1042 Before moving to the evidence of the Veolia witnesses in relation to the first and second 2018 drawdowns, I will briefly outline the change to the MRASA arrangements that occurred in 2020.
1043 The drawdowns effected from 2020 were facilitated under the Master Receivables and Acquisition Servicing Agreement between Forum Enviro (Aust) and SMBC dated 17 July 2020 (2020 MRASA), and a Supplemental Deed between Forum Enviro (Aust) and SMBC dated 17 July 2020 pursuant to which Forum Enviro (Aust) could offer to sell to SMBC customer receivables which arose from various leasing contracts between Forum Enviro (Aust) personally and its customers, in exchange for advancing finance. If the offer was accepted, Forum Enviro (Aust) would assign to SMBC the right and title to the receivables in exchange for the finance provided.
1044 As in respect of the 2018 MRASA, under the 2020 MRASA, it was intended by SMBC that Forum Enviro (Aust) would enter into TLAs with Veolia for the leasing of waste management and disinfectant systems following Forum Enviro (Aust) providing SMBC with an offer letter proposing the sale of receivables in exchange for financing. SMBC would then advance the settlement sum to Forum Enviro (Aust) in exchange for the grant of a legal interest in the receivables.
1045 On 27 July 2020, Forum Enviro (Aust) provided to SMBC a Waste Management MTLA and a Health Management MTLA purportedly between Forum Enviro (Aust) and Veolia which provided for multiple equipment leases to be arranged under a single master TLA by submitting TLA Schedules. This feature of the 2020 arrangements was different to the 2018 arrangements where specific TLAs were issued. In total under the 2020 arrangements, 15 offer letters were sent by Forum Enviro (Aust) and accepted by SMBC between 27 July 2020 and 21 May 2021, pursuant to which SMBC paid $83,993,909. SMBC made some single payments comprising multiple settlement amounts under multiple Offer Letters. Thus, SMBC made nine payments to Forum Enviro (Aust) in relation to the 15 offer letters.
1046 The Waste Management MTLA and Health Management MTLA were purportedly executed by Ms Brar and Mr Conlon, both as directors of Veolia. Mr Papas signed the agreements on behalf of Forum Enviro (Aust). The signature of Mr Kozlovic, the former Chief Strategic Development and Innovation Officer of Veolia, was applied as an authorised signatory of Veolia on both agreements. The unchallenged customer evidence from Veolia established that each purported signature on behalf of Veolia on the relevant documents was fraudulent. Before turning to the evidence of the Veolia witnesses, I will illustrate, again by way of example, the way in which drawdowns under the 2020 arrangements were effected. Having regard to the balance of the s 50 summary, I am satisfied that drawdowns under the 2020 arrangements were effected in substantially the same way as the 2018 arrangements and affected by the use of falsified documents emblazoned with fraudulent signatures.
I.29.5 First Drawdown under the 2020 Arrangement
1047 The first drawdown under the 2020 MRASA involved two offer letters dated 27 July 2020 pursuant to which SMBC paid $1,550,450 (First 2020 Offer Letter) and $8,444,416 (Second 2020 Offer Letter) to Forum Enviro (Aust).
1048 The First 2020 Offer Letter provided notice in connection with a TLA Schedule dated 23 July 2020 issued by Veolia under the Health Management MTLA, and was signed by Mr Papas. The TLA Schedule provided for a monthly usage charge of $28,000 over a term of 60 months commencing 1 August 2020, and was purportedly signed by Mr Kozlovic. The TLA Schedule provided for the lease of five Surfacide Helios products located in New South Wales, Queensland and Victoria. Again, Mr Papas purportedly witnessed Mr Kozlovic’s signature, and signed the acceptance of the TLA Schedule on behalf of Forum Enviro (Aust). This particular arrangement is ostensibly supported by a certificate of acceptance of delivery which was purportedly signed by Mr Kozlovic, and witnessed by Mr Papas, on 23 July 2020.
1049 The Second 2020 Offer Letter was made in connection with a TLA Schedule also dated 23 July 2020 issued by Veolia under the Waste Management MTLA, and was signed by Mr Papas. The relevant TLA Schedule provided for a term of 60 months, over the course of which $152,500 would be charged per month. Mr Kozlovic purportedly signed the TLA Schedule, with Mr Papas as his witness. A number of OG100, IG150, IG250 and IG500 located in New South Wales, Queensland, Victoria, Western Australia and Tasmania were purportedly leased. On the relevant certificate of acceptance of delivery, Mr Kozlovic’s signature was purportedly applied, and again witnessed by Mr Papas, on 23 July 2020.
1050 On 30 July 2020, Mr Papas purportedly sent Mr Kozlovic an email attaching notices of assignment relating to the TLA Schedules which were fraudulently signed on 23 July 2020 under the Health Management MTLA and Waste Management TLA, and asking that Mr Kozlovic confirm receipt of the email. That same day, an email was sent from an email account bearing the name of Mr Kozlovic to Mr Papas confirming receipt. Mr Papas subsequently forwarded that email chain to Mr Timpany, a director of SMBC, as confirmation of receipt of the notices of assignment from Veolia.
I.29.6 Evidence regarding 2018 Drawdowns
1051 The signatures of Ms Brar and Mr Gaillard on the TLAs in relation to the 2018 drawdowns were fraudulent. No evidence has been led to suggest that Mr Papas did not witness and sign the TLAs. As mentioned, he did not file any defence or evidence to deny that he signed the documents. He fled the jurisdiction at about the time the fraud was discovered.
1052 Ms Brar deposed that Veolia had “previously leased some waste digesters for use by its clients from companies within the Forum group of companies”, including Forum Enviro (Aust). However, in respect of the TLAs purportedly executed by her in support of the 2018 drawdowns, Ms Brar deposed that she received those documents from SMBC’s lawyers for the first time on 8 July 2021. She did not sign any of the TLAs which were provided to her at this time, and that her signature had been forged.
1053 I accept Ms Brar’s evidence.
1054 Mr Gaillard deposed that on 13 September 2021, lawyers for SMBC provided him with copies of five TLAs. He says that prior to receiving the five TLAs at this time he had never seen those documents before. Mr Gaillard deposed that the TLAs were not signed by him, his purported signature was forged, and that he has never had any commercial or other dealings with Forum Enviro (Aust), Mr Papas or other representative of Forum Enviro (Aust) in relation to the five TLAs he was given by SMBC.
1055 I accept Mr Gaillard’s evidence.
I.29.7 Evidence regarding 2020 Drawdowns
1056 The 2020 drawdowns were underpinned by the Waste Management MTLA and Health Management MTLA. Mr Conlon of Veolia deposed that, prior to receiving the MTLAs from SMBC’s lawyers, he had never seen the documents. He says that the documents were not signed by him, and that his signature had been forged.
1057 I accept Mr Conlon’s evidence.
1058 Mr Kozlovic deposed that prior to receiving copies of the TLA Schedules from SMBC’s lawyers, and the associated certificates of acceptance of delivery, he had never seen those documents before. Mr Kozlovic deposed that those documents were not signed by him, and incorrectly identified his position as “COO” of Veolia, a position which he has never held at the company. In respect of the Waste Management MTLA and Health Management MTLA, Mr Kozlovic deposed that he did not sign those agreements which identified him as an authorised signatory. Further, in respect of the email chain in July 2020 between Mr Papas and Mr Kozlovic, he deposed that he did not send those emails or authorise for the emails to be sent on his behalf.
1059 I accept Mr Kozlovic’s evidence.
I.30 Liquidator’s analysis of fictitious leases underpinning SMBC arrangements
1060 As mentioned, Mr Ireland, in his affidavit sworn 9 June 2022, deposed to the arrangements made with various Forum entities purportedly to obtain funding to acquire waste digesters and surface disinfectant machines (the Machines), how those machines were used in the business of various Forum entities, and the investigations undertaken by the liquidators in relation to the legitimacy of purported equipment leases between Veolia and Forum Enviro (Aust) funded by SMBC or Flexirent in the period between 21 June 2018 and 26 May 2021.
1061 Mr Ireland prepared a Schedule in which he identified purported equipment leases as being legitimate or fraudulent based on whether there were records to substantiate the existence of the purported equipment or records of invoices issued to or payments being received by a Forum entity from the purported customer. As a result of this analysis, Mr Ireland concluded that all of the purported equipment leases that he reviewed were fraudulent.
1062 The ostensible arrangements in respect of these leases were as follows:
(1) Forum Enviro (Aust), Forum Enviro, OES and Iugis (each, an Iugis AU Entity, collectively Iugis AU) leased and serviced Machines;
(2) these Machines were generally purchased by either FGFS or Iugis AU;
(3) the Machines were delivered to Iugis AU or into storage facilities for which Iugis AU was liable; and
(4) Iugis AU leased the Machines:
(a) directly to customers on a case-by-case basis or pursuant to a master leasing agreement; or
(b) had distribution agreements in place whereby the lessee (Iugis AU) would sub-lease Machines to other third parties. For example, OES had a distribution agreement with Veolia, whereby Veolia was appointed the exclusive distributor in Australia and New Zealand to promote, market and sell or lease the Machines to third parties.
1063 The funds for these purchases were provided in the following way:
(1) FGFS received funds from Forum Enviro (Aust), which in turn was provided by parties such as SMBC (SMBC and Flexirent); and
(2) Iugis AU obtained funds from a number of sources, the primary source being monies loaned to it by FGFS.
1064 In the course of the liquidations, Mr Ireland noticed that in many of these leases, whilst there may have been a written lease agreement, which appeared on its face to have been signed by both Iugis AU and a customer, Iugis AU had not leased the Machine(s) that was the subject of that written lease agreement to that customer. Mr Ireland sought to ascertain the legitimacy of specific equipment leases between Veolia and Forum Enviro (Aust), funded by SMBC or Flexirent between 21 June 2018 and 26 May 2021 (Equipment Leases), these leases being distinct from other legitimate leases for Machines.
1065 Mr Ireland employed a four-step process to analyse the legitimacy of leases, namely identifying the Equipment Leases, reviewing each Equipment Lease, reviewing the records of the relevant Forum Entity and supervising the preparation of an Equipment Lease Spreadsheet in the form of an excel workbook, a copy of which is in evidence.
1066 Equipment Leases were identified by reviewing the books and records of the Forum Entities, and supplemented by targeted email searches on the Forum Server and the various affidavits of the Westpac, SMBC and Societe Generale proceedings, including the affidavits of:
(1) Michael Timpany sworn 13 July 2021 and 4 February 2022; and
(2) Gurpreet Brar, sworn 1 July 2021.
1067 The affidavits of Mr Timpany and Ms Brar are relevant, given that Mr Timpany notified Veolia of 23 contractual documents and nine purported confirmation emails in July 2021, for the assignment of receivables to SMBC. In all instances, Ms Brar, who was at the relevant time the CFO of Veolia, claimed she did not sign any of the documents, did not approve for her use of electronic signature and that she had not seen any of the documents before being notified by Mr Timpany.
1068 The data was collated and the following information was recorded regarding each Equipment Lease:
(1) the Forum Entity which was listed on the equipment lease, noted as the lessor;
(2) the purported customer in the Equipment Lease;
(3) the product’s description;
(4) the serial number of the relevant purported equipment;
(5) the date on which the Equipment Lease was purportedly witnessed
(6) the individual who purportedly witnessed the lessee’s signature; and
(7) the monthly payment (exclusive of GST) payable by the purported customer to the lessor.
1069 Once this data was collated, the serial numbers were checked to see if any occurred in more than one Equipment Lease concurrently. There were 56 instances of duplicated serial numbers from 319 leases. However, Mr Ireland opined that he did not regard duplication of a serial number of itself as sufficient to conclude that a lease was fraudulent.
1070 To further verify whether the leases were fraudulent Mr Ireland:
(1) noted the unique identification number (UIN) assigned to each Equipment Lease (only two Equipment Leases did not have an UIN assigned and for the purpose of this exercise Mr Ireland attributed each with their own UIN) (SMB.500.001.0001 [28]);
(2) identified invoices that related to the Equipment Leases. When reviewing the books and records of the Forum Entities, there were numerous invoices in these systems which were rendered in respect of the purported customers (Veolia Invoices). However, when reconciling these he noted that none of the Veolia Invoices related to the equipment leases. He did not identify any invoices that were issued to the purported customers in respect of the equipment leases;
(3) identified any payments made by the purported customers associated with the Equipment Lease. Whilst the books and records of the Forum Entities contained payments made by customers associated with legitimate equipment leases, there were no payments that were received by a Forum Entity from a purported customer in respect of an Equipment Lease;
(4) identified any payments made by Forum Entities in respect of the Equipment Leases. When reviewing the FGFS balance sheet (reviewing payments described by the UINs of the Equipment Leases), FGFS was making the monthly payments for that lease, rather than the purported customer;
(5) identified all Machines located in warehouses operated by GPI (General) Pty Ltd, trading as PFM Corp, engaged by Iugis, and on customer’s premises, listing all serial numbers. When matching the serial numbers, it was noted that none of the serial numbers of the purported equipment of an Equipment Lease appeared on these lists; and
(6) cross-checked the serial numbers against the affidavit of Ms Brar. In her affidavit she compiled a list of all Iugis goods supplied to Veolia with their serial numbers. None of those serial numbers matched any of those relevant to the purported equipment in an Equipment Lease.
1071 Given this, it was apparent that the purported equipment, relevant to the Equipment Leases did not exist.
1072 Mr Ireland therefore concluded that equipment leases were fraudulent where:
(1) there was no record of invoices being issued to the purported customer in respect of the equipment leases, or any payments being recorded as having been received by a Forum Entity from the purported customer in respect of that particular lease; and
(2) there was no record which substantiated the existence of the purported equipment the subject of the particular lease.
1073 Mr Ireland concluded that there were 20 fraudulent Equipment Leases because in each instance he was not able to identify any evidence that:
(1) any of the purported equipment existed or was ever in the possession of Iugis AU;
(2) any invoices were issued to the purported customers for payments to be made in respect of these leases; and
(3) any payments were received by a Forum Entity from any purported customer in respect of the leases.
1074 Despite there being no recorded payment received by a Forum Entity from a purported customer for an Equipment Lease, FGFS was still recording a monthly payment referable to an Equipment Lease in their balance sheet as a liability. This meant that they were making the monthly payment, rather than the purported customer.
1075 The evidence of Mr Ireland correlates to the s 50 summary that was prepared titled “Summary of fraudulent documents”.
1076 In this document for example, there are details of 19 “offers” made pursuant to the Master Receivables and Acquisition Servicing Agreements (MRASAs) made in 2018 and 2020. The 2018 MRASA was between Flexirent and SMBC and the 2020 was between Forum Enviro (Aust) and SMBC.
1077 These offers involved forged signatures of members of Veolia and therefore, the subsequent agreements created from these offers did not exist.
1078 There are 20 corresponding “advances” made by SMBC that correspond to each of the 19 “offers”. These “advances” can be found at lines 2, 3, 5, 7, 9, 14, 16, 21, 23, 27, 32, 34, 40, 42, 46, 51, 53, 58, 60 and 64 of the relevant s 50 summary. These are the 20 offers referred to in Exhibit JI-1 of Mr Ireland’s affidavit, in the worksheet marked “Contracts”.
1079 Mr Ireland was not cross-examined. There was no objection to anything in his affidavit. None of the active parties sought to contradict Mr Ireland’s evidence.
1080 I am satisfied that the Equipment Leases were fraudulent and that the equipment referred to in them did not exist. It follows that the offers made on the basis of the Equipment Leases and communicated by Mr Papas were also fraudulent.
I.31 Forum dealings with Societe Generale
1081 The equipment financing arrangements between Societe Generale and Forum Finance were brokered by Eqwe. An agreement between Eqwe, Societe Generale and Forum Finance formed the basis of the arrangements. The agreement was contained in a Master Agreement (Receivables Acquisition and Servicing Agreement) dated 6 November 2020 between Forum Finance, Eqwe and Societe Generale, and the Eqwe Specific Servicing Guidelines (ESSG) between Societe Generale and Eqwe signed on 2 November 2020.
1082 Pursuant to the Master Agreement, Forum Finance was able to offer to sell receivables to Societe Generale by delivering an offer notice to Societe Generale. After receipt of an offer notice, Societe Generale could accept the offer contained by payment to Forum Finance of a discounted amount, being a figure less than the full price owing by the customer (Veolia) (in the form of the receivables), for goods purportedly being supplied to Veolia (namely, the waste digesters). If Societe Generale accepted the offer it was required to pay the discounted amount less the receivable retention amount, which was broadly the net present value of the aggregate of the last three payments that were to be made by Veolia. The right of Forum Finance to give an offer notice was subject to Forum Finance also providing an executed payment schedule, an executed notice of assignment, and a PPSR verification statement.
1083 Societe Generale has a number of divisions, relevantly including:
(1) a treasury division that, among other things, finances activities for business divisions within Societe Generale;
(2) a “global markets” division that, among other things, undertakes financial market activities, including the provision of swaps for business divisions within Societe Generale;
(3) a Global Corporate Coverage (GCC) division; and
(4) a SSL group.
1084 The GCC and SSL were the relevant business divisions and units that were relevantly involved in the management and administration of the arrangements under the Master Agreement.
1085 The GCC division was responsible for dealings and communications between Societe Generale, Forum Finance and Eqwe, including negotiating the terms of the Master Agreement and the ESSG.
1086 The SSL group advanced financing to fund commercial activities (relevantly, the payments to Forum Finance). In order to do so, SSL was required to obtain a loan from the treasury division. Loans made by the treasury division to SSL accrued interest, which SSL was required to pay to the treasury division upon obtaining a benefit from the commercial activities it had financed.
1087 In the present case, SSL took out loans for each of the three payments which it caused to be made to Forum Finance over the course of the financing arrangements, each of which had a variable interest rate, being the AUD Bank Bill Swap Rate 1 month interest rate, and, relevantly, a further percentage of 0.68% for the first of the payments which was made in March 2021 within Societe Generale or the purpose of hedging against interest rate exposure, three separate swaps were entered into with the global markets division by which each variable interest rate component was swapped with a fixed interest rate. Societe Generale subsequently formed the view that it was unlikely to receive any further payments from Forum Finance and there was no longer any ongoing interest rate exposure to hedge against, accordingly, Societe Generale terminated the three swaps. By doing so, Societe Generale incurred break fees, comprising an interest rate differential break cost and funding break cost. The loss incurred from the swaps loss, if pressed, will be dealt with separately in the relief hearing.
1088 Each payment schedule submitted to Societe Generale was purportedly executed by Veolia (through Ms Brar, Veolia’s then CFO) in two parts, and included an annexure containing a list of the purported goods being supplied, including a serial number and location for each of those goods.
1089 The three transactions can conveniently be described collectively because they involved the same steps, with only one minor discrepancy, which I will come to. In each instance, Societe Generale received the offer notices, payment schedules, certificates of acceptance and notices of assignment after Mr Papas, or his executive assistant, Ms Eloise Orlandini, sent them to representatives of Eqwe, who then sent those documents to representatives of Societe Generale. The certificate of acceptance for the third transaction was not passed on by Eqwe to Societe Generale for reasons I will come back to. The documents were purportedly signed by Ms Brar and signed or witnessed by Mr Papas.
1090 In contrast to WBC and SMBC, Societe Generale did not prepare or rely upon evidence summaries pursuant to s 50 of the Evidence Act. Instead the primary documents in relation to the three advances by Societe Generale were relied upon. The following example is accordingly drawn from the primary documentary evidence relied upon by Societe Generale. It illustrates the way in which the fraud was effected against Societe Generale and is substantially similar (save for bespoke details) to the primary documentation in relation to the second and third advances made by Societe Generale.
1091 The first transaction under the Master Agreement occurred in March 2021 (March 2021 transaction). On 2 March 2021, Ms Orlandini provided to Ms Constable of Eqwe by email (copying Mr Price of Eqwe and Mr Papas) a copy of a payment schedule and certificate of acceptance of delivery. The payment schedule, dated 1 March 2021, provided for 60 monthly instalments of $92,400 to be paid by Veolia, with a total product price of $5,544,000. The payment schedule was purportedly signed by Ms Brar, and witnessed by Mr Papas. Annexure A to the payment schedule set out the products which were the subject of the lease, being organic waste digesters variously labelled Iugis Sagano 150, Iugis Tongass 250, Iugis Congo 500, and Iugis Amazon 1000, said to be located in New South Wales, Victoria, Queensland, Tasmania and Western Australia. The annexure to the payment schedule was purportedly signed by Ms Brar.
1092 The certificate of acceptance of delivery was dated 1 March 2021, and was purportedly signed by Ms Brar and witnessed by Mr Papas. The offer notice, dated 2 March 2021, was signed by Mr Papas, referred to the Master Agreement and offered to sell and assign the legal and beneficial interest in the receivables to Veolia.
1093 On 3 March 2021, Mr Price emailed Mr Papas and Ms Orlandini with details regarding the first drawdown under the Societe Generale facility, and noted that a notice of assignment would be sent for execution upon funding being provided. Ms Orlandini subsequently emailed the executed offer notice to Mr Price and Ms Constable. On the same day, Ms Constable provided by email to Mr Thong, Head of Corporate Coverage – Australia & New Zealand, Societe Generale, copies of the executed offer notice, an excel model, the payment schedule and certificates of acceptance.
1094 On 8 March 2021, Forum Finance created the notice of assignment, which is purportedly signed by Ms Brar and Mr Papas. However, without being sent the notice of assignment, or a PPSR verification statement, on 9 March 2021 at around 2:20pm Societe Generale made the requisite payment of $4,128,757 to Forum Finance. This figure represented $4,313,510, being the discounted amount of the offered receivables under the offer notice, less the sum of $184,753, being the receivable retention amount that Societe Generale was entitled to retain.
1095 On 9 March 2021 at 2:45pm, Ms Constable provided to Mr Thong by email a copy of a PPSR verification statement regarding the registration of the security interest by Forum Finance against Veolia in favour of Forum Finance. That same day at 2:52pm, Mr Thong forwarded the email from Ms Constable to Mr Dumont (the then Front Office Originator — SSL at Societe Generale), attaching the PPSR verification statement.
1096 On 11 March 2021, Mr Papas provided a copy of the executed notice of assignment by email to Ms Constable, copying Mr Price. On 12 March 2021, Ms Constable provided Mr Thong a copy by email of the executed notice of assignment. That same day, Mr Thong forwarded Ms Constable’s email to, among others, Mr Dumont, with the notice of assignment attached (which further attached the payment schedule).
1097 The evidence in relation to the second and third advances from Societe Generale is substantially to the same effect.
1098 On 3 May 2021, Societe Generale received from Eqwe a second offer notice in relation to Veolia. The payment schedule, dated 28 April 2021, provided for 60 monthly instalments of $46,800 to be paid by Veolia starting with an initial payment on 5 May 2021, with a total product price of $3,088,800. Annexure A to the payment schedule set out the products which were the subject of the lease, being Iugis Amazon 1000 and Iugis Congo 500 products said to be located in NSW, Victoria and WA. A few days later on 6 May 2021, Societe Generale received the verification statement from Eqwe in relation to the second transaction. On 7 May 2021, Societe Generale paid $2,299,539 to Forum Finance.
1099 On 18 May 2021, Societe Generale received from Eqwe a third offer notice in relation to Veolia. The payment schedule, dated 28 April 2021, provided for 60 monthly instalments of $52,200 to be paid by Veolia starting with an initial payment on 1 July 2021, with a total product price of $3,088,800. As with the second transaction, Annexure A to the payment schedule set out the relevant products, being Iugis Amazon 1000 and Iugis Congo 500 products said to be located in NSW, Victoria and WA. The certificate of acceptance for the third transaction was sent from Forum to Eqwe on 17 May 2021, but never onforwarded by Eqwe to Societe Generale. It was inadvertently missed by Eqwe in their review of the transaction documents for the third transaction. Societe Generale submits that nothing turns on that matter given the various claims and representations relied on by Societe Generale which formed the basis for Societe Generale’s, belief that in any event the third transaction products had been delivered to Veolia. On 24 May 2021, Societe Generale paid $2,558,902 to Forum Finance.
I.31.3.1 Execution of the transaction documents
1100 Ms Brar deposed that she did not sign the notices of assignments, payment schedules and certificates of acceptances. Ms Brar further stated that the handwritten name which purported to be hers on the notice of assignment dated 8 March 2021 was not her handwriting.
1101 Ms Brar also deposed that the payment schedule attached to the notice of assignment which set out a list of waste digesters said to have been supplied to Veolia, with a serial number listed for each item, were never delivered to Veolia. Her evidence based on an internal review of Veolia’s books and records, and extended to enquiries made of the Chief Operating Officer – Waste. Her evidence is that Veolia has not entered into any contracts for the purchase/lease of the goods itemised in the payment schedule. Ms Brar deposed that the goods itemised in the payment schedule, do not match the serial numbers of any of the like goods which have actually been supplied to Veolia.
1102 I accept Ms Brar’s evidence.
I.31.3.2 Payment to Forum Finance
1103 Mr Thong deposed that, in respect of Societe Generale’s acceptance of the offer notice on 9 March 2021 and subsequent payment of $4,128,757 to Forum Finance, at no time prior to the discovery of the fraud did anyone from Eqwe or Forum Finance inform Societe Generale that the relevant amount was not being sought by Forum Finance to be paid. Mr Thong further deposed that if there were anything on the face of the documents that had caused him concern, or if Eqwe had raised any concerns with him, then he would have not forwarded the documents to Mr Dumont or if Mr Dumont had already received the document, then he would have told him to pause his review and would have gone back to Eqwe and as necessary, Forum Finance, to have his concerns addressed. Mr Thong stated he would not have allowed the matter to be progressed further within Societe Generale and, if his concern was serious enough, he would have taken steps to escalate the matters internally so that Societe Generale could consider its legal options.
1104 In respect of the notice of assignment and the PPSR verification statement which were not received in the first tranche of materials for the March 2021 transaction, Mr Thong gave evidence that following internal discussion as to whether to wait for the documents or rely on the assurance that they would be forthcoming from Eqwe, it was decided to initiate the drawdown process as the SSL group had “locked in” funding arrangements, including the rate setting process, on the basis that payment would be made on 9 March 2021. As mentioned, the PPSR verification certificate was provided to Eqwe later that day on 9 March 2021 and the notice of assignment followed a few days later on 12 March 2021 Mr Thong deposed that if Mr Dumont had raised any concerns with him then he would have asked Eqwe to resolve those concerns and he would not have allowed the matter to be progressed further within Societe Generale. Mr Thong stated that he also would have taken steps to escalate the matters internally, if he considered the issue serious enough, to allow Societe Generale to consider its legal options.
1105 As mentioned, the Societe Generale Proceeding was not defended. Mr Thong’s evidence was not challenged. It was consistent with the contemporaneous documents. I accept it.
1106 Mr Dumont deposed in respect of the March 2021 transaction which he arranged to be paid to Forum Finance’s account that, had he known or suspected that any of his beliefs and views as to the authenticity and legitimacy of the offer notice, payment schedule or the certificate of acceptance of delivery were not correct, he would not have arranged for the payment to be made or, if it was in the process of being made, to place a stop on the payment until such issues had been resolved. Similarly, if he had become aware or suspicious about the authenticity or legitimacy of the relevant documents after the payment had been made, he would have taken steps to try to ensure that the bank that had received the payment from Societe Generale froze the funds and returned the money to Societe Generale.
1107 In relation to the PPSR verification statement and notice of assignments, Mr Dumont gave evidence that Societe Generale had made the March 2021 payment to Forum Finance without first being in possession of those documents because the acceptance date of the offer notice was 9 March 2021 (the date by which Societe Generale needed to make the payment to Forum Finance), and “because it was the first transaction SG [Societe Generale] wanted it to be as smooth as possible”.
1108 I accept Mr Dumont’s evidence.
I.31.4 Conclusion on Societe Generale Fraudulent Transactions
1109 On the same day that Forum Finance received funds from Societe Generale for each of the three transactions, Forum Finance transferred the full amounts of those payments to FGFS.
1110 At least four payments were made to Societe Generale ostensibly as payment of receivables due from customers in accordance with the Master Agreement. On 31 March 2021, 30 April 2021 and 28 May 2021, Societe Generale received payments of $84,000 each (being a total of $252,000) in connection with the March 2021 Transaction. On 28 May 2021, Societe Generale received the sum of $46,800 in connection with the second transaction. The payments made to Societe Generale were made by FGFS, not Veolia. The payments were made to give legitimacy to the transactions that had had been completed with Societe Generale. The payments were also intended to induce Societe Generale to continue accepting offer notices from Forum Finance and to make further payments to Forum Finance. The payments to Societe Generale ceased in June 2021 when the transactions being investigated and exposed as fraudulent.
1111 Based on the evidence described above, I find that Veolia did not enter into the three transactions the subject of the offer notices with Societe Generale, did not execute the transaction documents and the purported receivables did not exist.
1112 Applying the legal principles I have identified and factual findings I have made above, I now turn to address the liability of the respondents pursuant to the primary claims identified by each of the financiers in each of the proceedings.
1113 Across the three proceedings the claims are framed by reference to eight causes of action or counts. Six causes of action or counts are common to the three proceedings, although as mentioned the named respondents to each of the claims differs between the three proceedings.
1114 The six claims common to all three proceedings are as follows:
(1) Recipient Trust Claims (receipt of trust property/payment away);
(2) Knowing Receipt;
(3) Knowing Assistance;
(4) Breach of Contract;
(5) Tort of Deceit; and
(6) Misleading and Deceptive Conduct.
1115 In the Westpac and SMBC Proceedings there is a claim in tort for unlawful means conspiracy. The equivalent claim in the Societe Generale Proceeding was ultimately not pressed.
1116 In the SMBC Proceeding there is a claim for money had and received, which is not included in the claims made in the Westpac and Societe Generale Proceedings. Societe Generale also claimed for injurious falsehood and false or misleading representations but ultimately did not press these two claims.
1117 The relief claimed by the financiers includes proprietary and personal relief and ranges from declarations of trust, disclosure orders, orders that the entities account for the funds received, equitable, contractual, tortious and statutory damages. The position of the parties at the conclusion of the hearing was that if the financiers succeeded in any of their claims, it would be necessary to appoint a separate hearing following the delivery of reasons to address the potentially complicated issues that may arise in respect of relief including in respect of the availability of cumulative remedies. The position taken was because, amongst other things, there may be changes in bank balances and additional property realisations that ought be taken into account in framing any final relief.
1118 In their oral closing submissions, each of the financiers helpfully rationalised the multitude of ways in which their respective claims were framed. The effect was that the financiers each highlighted what they regarded as their primary claims, and that they were content to proceed on the basis that it would only be necessary to determine their secondary claims in the event that they did not succeed on their primary claims. The approach taken was consistent with the overarching purpose embodied in s 37M of the FCA Act. It resulted in an economical and efficient use of both private and public resources. The parties are to be commended for the manner in which they approached their final closing submissions and for the speed with which they adapted their claims to reflect the way in which the evidence fell out.
J.2.1 The recipient trust claims
1119 The first of the primary claims that fall for consideration are the recipient trust claims. The recipient trust claims are advanced as an alternative to, amongst other things, the knowing receipt and knowing assistance claims.
1120 The recipient trust claims derive from the principle in Black v S Freedman & Co [1910] HCA 58; (1910) 12 CLR 105 (Black v Freedman) at 110 (O’Connor J):
Where money has been stolen, it is trust money in the hands of the thief, and he cannot divest it of that character. If he pays it over to another person, then it may be followed into that other person’s hands. If, of course, that other person shows that it has come to him bonâ fide for valuable consideration, and without notice, it then may lose its character as trust money and cannot be recovered. But if it is handed over merely as a gift, it does not matter whether there is notice or not.
1121 The liability of a person who has received trust property transferred to them in breach of trust was described in Sze Tu v Lowe [2014] NSWCA 462; (2014) 89 NSWLR 317 at [143] (Gleeson JA) (citing Agip (Africa) Ltd v Jackson [1990] Ch 265) as follows:
He is liable as a constructive trustee if he received it with notice, actual or constructive, that it was trust property and that the transfer to him was a breach of trust; or if he received it without such notice but subsequently discovered the facts.
(Emphasis added).
See Fistar v Riverwood Legion and Community Club Ltd [2016] NSWCA 81; (2016) 91 NSWLR 732 at [36], [39] (Leeming JA, with whom Bathurst CJ and Sackville AJA agreed).
1122 In Heperu Pty Ltd v Belle [2009] NSWCA 252; (2009) 76 NSWLR 230 at [92] (Allsop P, as his Honour then was, Campbell JA and Handley AJA agreeing) described the principle arising from Black v Freedman as follows:
The well-known principle is that a person entirely innocent of a fraud who comes to know that he or she has received and still retains the proceeds of, or taken advantage of, a fraud to which he or she was not party, cannot knowingly seek to retain those proceeds or that advantage, without, in effect, becoming a party to that fraud and liable accordingly.
1123 Allsop P further stated (at [154]) that the innocent recipient’s liability is limited to the amount of the stolen funds (or their traceable proceeds) remaining in the hands of the innocent recipient at the time sufficient knowledge of the theft is obtained:
A similar result flows from the application of equitable doctrine. There is no impediment to concurrent remedies at law and in equity being available: Stephens Travel Service International (at 341). Black v S Freedman & Company is clear authority for the equitable obligation upon the innocent volunteer to restore to the plaintiff the fund identified and remaining (whether in original form or traceable product) in his or her hands. The equitable obligation arises from the later discovered position, not from wrongful conduct. Therefore, the extent of the personal equity involved, created by the circumstance in question, is the touching of the conscience of the volunteer recipient to deal with the property of another conformably with the interests of the owner, now discovered. The expression of view of O'Connor J as to constructive trust (as to which see the views of Spigelman CJ in Robb Evans that the characterisation is better expressed as resulting trust) should be seen in this light. To call the volunteer recipient a constructive trustee and to call upon him or her to account as a constructive trustee (because he or she upon discovery of the fund or asset belonging to another has become one) does not mean the volunteer comes under personal liabilities, independently of, or beyond, the obligation to restore the fund or asset and any attendant obligation. He or she does not, for instance, become liable to pay damages for the moneys received that led to the fund or asset being created, as if he or she were a knowing participant in the fraud.
1124 The financiers make three central submissions as to the relevant principles, which were not disputed by the active respondents.
1125 First, where a thief pays stolen money to a third party:
(1) The recipient holds the money (or its traceable proceeds) on trust for the true owner unless the recipient establishes that the recipient is a bona fide purchaser for value without notice or, subject to the honesty of the change of position, a change of position. The recipient is subject to a fiduciary obligation that requires them to preserve and not dissipate the funds: Heperu at [114] (Allsop P); Wambo Coal Pty Ltd v Ariff [2007] NSWSC 589; (2007) 63 ACSR 429 at [64] (White J).
(2) Subject to these two defences, receipt is sufficient to establish proprietary relief in relation to the stolen money and its traceable proceeds — the recipient holds the funds they have received on trust for the financiers and are obliged to account to them for those funds, including those funds paid away or those they caused or permitted to be paid away. No question of knowledge arises in circumstances where the available defences are not established.
(3) The trust is of an institutional rather than remedial character, and arises immediately:
(a) because the conscience of the thief is bound: Sze Tu at [147]-[149] and the cases cited therein (Gleeson JA, with whom Meagher and Barrett JJA agreed); and
(b) not when recognised by a court: Robb Evans v European Bank Limited [2004] NSWCA 82; (2004) 61 NSWLR 75 at [113] (Spigelman CJ, Handley and Santow JJA agreeing); Sze Tu at [148].
1126 Secondly, if the recipient received the property and obtained notice, actual or constructive, that it was trust property and that the transfer to the recipient was a breach of trust or if the recipient subsequently discovered that fact while still holding the property, an equitable obligation arises when the discovery is made for the recipient to account for the property: Sze Tu at [142] (Gleeson JA); Agip at 291 (Millett J); Heperu at [92], [163] (Allsop P). Baden category (4) knowledge, if established, is sufficient to establish knowledge of a breach of trust.
1127 Thirdly, where a trustee, who has with requisite knowledge or notice of the trust, in breach of trust paid the trust property away, the trustee is under an immediate duty to remedy the breach and reconstitute the trust fund: Re Dawson [1966] 2 NSWR 211 at 214, 216 (Street J); Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484 at [35] (Gleeson CJ, McHugh, Gummow, Kirby and Hayne JJ); Heperu at [154] (Allsop P). Where there is an obligation to reconstitute the trust fund and the property has been paid away, the remedy is equitable compensation by reason of the trustee's ongoing obligation to account: Maguire v Makaronis [1997] 188 CLR 449; (1997) 188 CLR 449 at 469 (Brennan CJ, Gaudron, McHugh and Gummow JJ); Australian Executor Trustee (SA) Ltd v Kerr [2021] NSWCA 5; (2021) 151 ACSR 204 at [95] (Gleeson JA). Money can be traced notwithstanding an inability of the follower to connect each link in the chain of accounts, requiring the use of common sense and reasonable inference, particularly where there is fraud involved and if there is a lack of explanation: Toksoz v Westpac Banking Corporation [2012] NSWCA 199; (2012) 289 ALR 577 at [8] (Allsop ACJ). Where the wrongdoer's money is mixed with the money of an innocent claimant, the claimant has a flexible choice in, for example, treating dissipated funds as the wrongdoer’s money: Heperu at [116] (Allsop P).
1128 The financiers submit that as none of the respondents plead the defences of bona fide purchaser for value without notice or honest change of position, the receipt of trust property claims are established upon proof of the fraud. The defences raised by Mr Tesoriero (and his related entities to whom his knowledge is properly attributed) and Mr Bouchahine are addressed in Section I. For present purposes, it suffices to note that none of the defences filed in the proceedings raise the defences of bona fide purchaser for value without notice or honest change of position.
1129 The point in time at which each of the respondents to the Black v Freedman claims is alleged to have obtained sufficient knowledge to attract liability is addressed in Section I.24. In broad terms, the financiers submit that the respondents had sufficient knowledge to attract liability at or about the time of receipt of the funds that derived from the fraudulent transactions. Mr Tesoriero denies knowledge sufficient to bind his conscience prior to June 2021. In closing submissions, Mr Tesoriero submitted that if Westpac failed to establish that he had the requisite knowledge at an earlier point in time, he would only be liable to account for property that was still in his hands as at the time Westpac instituted proceedings against him. Mr Bouchahine does not expressly make a submission in these terms but it follows that if Westpac failed to establish that he had the requisite knowledge at an earlier point in time, the same consequence would likely follow.
J.2.2 The knowing receipt claims
1130 The next of the primary claims are the knowing receipt claims, which derive from the first limb of Barnes v Addy (1874) LR 9 Ch App 244.
1131 Where trust property (or property to which a fiduciary duty attaches) has been misapplied by the trustee or fiduciary, a recipient of that property with the requisite knowledge at the time of receipt is chargeable with that trust property and on receipt holds it on trust for the true owner; Simmons v NSW Trustee and Guardian [2014] NSWCA 405; (2014) 17 BPR 33,717 at [86], [88] (Gleeson JA, Beazley P and Barrett JA agreeing); Farah at [112] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ); Grimaldi at [253]-[254], [555] (Finn, Stone and Perram JJ).
1132 The requisite knowledge is any of the first four categories of Baden knowledge; Grimaldi at [268]-[270] (Finn, Stone and Perram JJ); Simmons at [90] (Gleeson JA).
J.2.3 The knowing assistance claims
1133 The next primary claim is based on the second limb of Barnes v Addy.
1134 A person who assists a trustee or fiduciary with knowledge of a dishonest and fraudulent design on the part of the trustee or fiduciary is liable: Farah at [160] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).
1135 Liability under this limb will also be established if any of the first four categories of Baden knowledge are made out: Farah at [174]–[178]; Turner at [106].
1136 The relevant principles may be summarised as follows:
(1) A party must have knowingly assisted in a dishonest and fraudulent design on the part of the party owing the fiduciary duties: Farah at [111]-[112] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).
(2) The principle extends to breaches of trust and breaches of fiduciary duties that are dishonest and fraudulent: Farah at [179] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).
(3) The requisite knowledge that the party must have is either:
(a) actual knowledge;
(b) wilfully shutting one’s eyes to the obvious;
(c) wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make; or
(d) knowledge of circumstances which would indicate the facts to an honest and reasonable person: Farah at [174]-[178] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).
(4) Where the role or actions of the third party is to induce or procure a breach of trust or breach of fiduciary duty, then that is sufficient to establish liability: Pittmore Pty Ltd v Chan [2020] NSWCA 344; (2020) 104 NSWLR 62 at [152]-[161] (Leeming JA, Bell P and Brereton JA agreeing).
(5) Where the party is the alter ego or “nominee” of the fiduciary/trustee, or acts in concert to secure a mutual benefit, then the party is jointly and severally liable with the fiduciary: Grimaldi at [556], [558] (Finn, Stone and Perram JJ).
1137 In this context, the financiers submit that Mr Papas was directly involved and implicated in the fraud perpetrated against each of the financiers and accordingly had the requisite knowledge. Further, applying the rules of attribution identified in Section H.4.2Mr Papas’ knowledge can be attributed to the entities of which Mr Papas was a director, including the Jointly Owned Entities, which include Forum Finance and FGFS. The financiers submit that Mr Tesoriero’s knowledge is properly attributed to the corporate entities of which Mr Tesoriero is a director (where Mr Papas’ knowledge is not already attributed), Again, as mentioned, Mr Tesoriero is defending the claims that Westpac press against him, principally on the basis of denying that he has the requisite knowledge. The defence mounted by the Tesoriero Entities in respect of knowledge, where pressed, was derivative of Mr Tesoriero’s knowledge defence.
J.3 Consideration – Westpac’s primary claims for relief
1138 Westpac advanced the following as its primary claims:
(1) As against Forum Finance, a recipient trust claim;
(2) As against Mr Papas, a recipient trust claim, a knowing receipt claim and a knowing assistance claim;
(3) As against FGFS, a recipient trust claim, a knowing receipt claim and a knowing assistance claim;
(4) As against Mr Tesoriero a recipient trust claim, a knowing receipt claim and a knowing assistance claim;
(5) As against Mr Bouchahine a recipient trust claim, a knowing receipt claim and a knowing assistance claim;
(6) As against Ms Agostino a recipient trust claim, a knowing receipt claim and a knowing assistance claim;
(7) As against all but one of the other corporate respondents, a recipient trust claim, a knowing receipt claim and a knowing assistance claim;
(8) As against Theion Ike, a recipient trust claim only.
1139 My findings on the whole of the evidence relevant to Forum’s dealings with Westpac are addressed in detail in Section I.27. I am satisfied that Westpac has established that each of the transactions detailed in its s 50 fraudulent transaction summary were part of the overarching fraudulent scheme. I am satisfied that Westpac has established that by no later than the first of the WBC fraudulent transactions that Mr Papas had devised a scheme involving Forum Finance to obtain money dishonestly and fraudulently from Westpac to which it was not entitled. Westpac has established that the funds advanced to the Primary Recipients by WBC and WNZL were obtained by fraud and impressed with a trust from the time the funds were advanced.
1140 Mr Papas was the architect of the scheme. The scheme was premeditated and carefully planned by Mr Papas. The evidence establishes that he was involved in putting the scheme into operation and that he benefitted from it. My findings in relation to Mr Papas and his role are addressed in Section I, but particularly in Section I.1, I.2 and I.18.
1141 Mr Papas created or caused to be created the Fraudulent Transaction Documents that are particularised in the s 50 summary. The fraudulent documents purported to record transactions that were a fiction and of which the customers had no knowledge and did not enter into. Each of the customer witnesses, gave unchallenged evidence that the signatures on the fraudulent documents were not theirs and that they did not send relevant emails. As was demonstrated by the evidence relating to the sample transactions (Transaction 1A, 1B, Transaction 2 and Transaction 4), Mr Papas was involved in sending emails to Mr Price of Eqwe and Mr Sheeran of Eqwe forwarding forged documents purportedly signed by Ms Brar of Veolia, Mr Smith of ALH and Mr Parikh of Coles, the first two of which were purportedly witnessed by Mr Papas.
1142 The s 50 summary demonstrated that the same modus operandi revealed by the sample transactions in relation to WBC and WNZL analysed in Sections I.26 to I.28 was employed for each of the impugned transactions.
1143 The investigations by the liquidators addressed in Section I.27 demonstrated that the equipment referred to in offers to sell the relevant receivables did not exist; no invoices were issued to customers, for the equipment; no payment was received by a Forum company from a customer in respect of the equipment leases; and FGFS recorded the liability for monthly payments associated with the equipment leases on its own balance sheet. Having regard to the repetition of substantially the same modus operandi in relation to each of the financiers, the evidence of the analysis of the fraudulent leases led in the SMBC Proceeding supports my finding that the leased equipment in Westpac was also bogus. Further support for this inference is gained from, amongst other things, the customer evidence and the excel workbooks.
1144 I am satisfied that Mr Papas’ involvement in the preparation of the fraudulent documents and that he ultimately presented the fraudulent documents to Eqwe demonstrates that the fraudulent signatures on the documents were procured by Mr Papas and with his knowledge. I am also satisfied that Mr Papas put the fraudulent documents forward with the intention that they would be relied on by Westpac and that it would advance funds on the basis of them.
J.3.1 Claims against Forum Finance
1145 Westpac relied on the fraudulent documents and the representations made in them and paid funds to Forum Finance and Iugis NZ under the First and Second Forum Agreements. The funds so advanced were subject to fiduciary obligations from the time they were advanced.
1146 Forum Finance paid the money received from WBC to companies within the Consolidated Group or companies related to Mr Papas or Mr Tesoriero.
1147 Iugis NZ paid the money received from WNZL to companies within the Consolidated Group or companies related to Mr Papas or Mr Tesoriero.
1148 Mr Papas had actual knowledge of the fraud. He knew that Forum Finance had no legitimate claim to the stolen money. Mr Papas’ knowledge is properly attributed to Forum Finance because he was a director of the company and Forum Finance benefitted from the fraud. Forum Finance held the money it received from WBC on trust for WBC through the imposition of a Black v Freedman trust. It is obliged to account for the funds including those paid away.
1149 Mr Papas was the architect of the fraud against Westpac. He held the money received by Forum Finance on trust for WBC and the money received from Iugis NZ on trust for WNZL through the imposition of a Black v Freedman trust. He is obliged to account for the funds, including those paid away.
1150 Mr Papas knowingly assisted Forum Finance to disburse the funds received by it, in breach of trust. He is liable to pay equitable compensation.
1151 Mr Papas knowingly received $2,193,130 of the funds paid by WBC and $848,724 of the funds paid by WNZL. He is liable to account to WBC and WNZL and to pay equitable compensation.
1152 Mr Papas’ knowledge is also properly attributed to FGFS because he was a director of the company and FGFS benefitted from the fraud. FGFS held the money it received from Forum Finance on trust for WBC and the money it received from Iugis NZ on trust for WNZL through the imposition of a Black v Freedman trust. It is obliged to account for the funds including those paid away.
1153 FGFS knowingly assisted Forum Finance and Iugis NZ to disburse the funds received by it, in breach of trust. FGFS is liable to pay equitable compensation.
1154 FGFS received $253,766,556 from Forum Finance and NZD $44,097,969 from Iugis NZ, knowing that the money was paid in breach of trust. FGFS is obliged to account for the funds and to pay equitable compensation.
J.3.4 Claims against Mr Tesoriero
1155 For the reasons given, I am satisfied that Mr Tesoriero had actual knowledge of the fraud from the inception of the arrangements with Westpac and SMBC and I have rejected each of the defences he put forward.
1156 Mr Tesoriero received funds from FGFS that he knew were stolen from Westpac. He held the money that he received on trust for WBC and WNZL through the imposition of a Black v Freedman trust. He is obliged to account for the funds including those paid away.
1157 Mr Tesoriero knowingly assisted Forum Finance, Iugis NZ and FGFS to disburse the funds received from Westpac in breach of trust. He is liable to pay equitable compensation.
1158 Mr Tesoriero received $209,450 of Westpac’s money from FGFS knowing that the money was being paid in breach of trust. He is obliged to account for the funds and to pay equitable compensation.
J.3.5 Claims against Mr Bouchahine
1159 For the reasons given, I am satisfied that Mr Bouchahine had actual knowledge of the fraud since the early stages of fraud and at least by the time that he commenced to make cloaking payments. I have rejected the defences relied on by Mr Bouchahine.
1160 Mr Bouchahine received funds that he knew had been stolen from Westpac. He held the money that he received on trust for WBC and WNZL through the imposition of a Black v Freedman trust. He is obliged to account for the funds including those paid away.
1161 Mr Bouchahine knowingly assisted Forum Finance, Iugis NZ, FGFS, Mr Papas and Mr Tesoriero to disburse the funds received from Westpac in breach of trust or in breach of fiduciary duty. He is liable to pay equitable compensation.
1162 Mr Bouchahine received $81,612 of Westpac’s money knowing that the money was being paid in breach of trust. He is obliged to account for the funds and to pay equitable compensation.
1163
J.3.6 Claims against Ms Agostino
1164 For the reasons given, I am satisfied that Ms Agostino had actual knowledge of the fraud and assisted Mr Papas to prepare fraudulent documents from about September 2018 onwards. By that time, she was aware and had been involved in addressing the Maia crisis. She held a senior position within the equipment lease financing part of the Forum business and was thoroughly familiar with it. She continued to assist Mr Papas by providing false insurance certificates of currency in July 2020. Notwithstanding that she was represented in the proceedings for about 7 months, she did not file any evidence or appear at the final hearing. She was the domestic partner of Mr Papas and absconded to Greece shortly after he did.
1165 Ms Agostino received $231,870 from the funds stolen from Westpac. As a person with knowledge of the fraud she held those funds on trust for Westpac WNZL through the imposition of a Black v Freedman trust. She is obliged to account for the funds including those paid away.
1166 Ms Agostino knowingly assisted Forum Finance and Iugis NZ to breach the fiduciary duties they owed to Westpac by producing fraudulent documents, sending them to Eqwe and by receiving the stolen funds. She is obliged to pay equitable compensation.
1167 Ms Agostino received funds from Westpac that she knew had been paid to her in breach of trust. She is obliged to account for the funds received by her and to pay equitable compensation.
J.3.7 Claims against corporate respondents
1168 The knowledge of Mr Papas is also attributable to the companies within the Consolidated Group because Mr Papas was a director of each and they each benefitted from the fraud. The companies received the following funds from Westpac:
(1) FG - $120,88,761;
(2) Forum Enviro - $15,606,244;
(3) Forum Enviro (Aust) - $99,170,586;
(4) Iugis - $14,275,515;
(5) FGOC - $7,668,502.
1169 Each of the Consolidated Group, knew through Mr Papas that the funds it received had been stolen from Westpac and that it held those funds on trust for WBC and WNZL on trust through the imposition of a Black v Freedman trust. Each company is obliged to account for the funds received by it, including those paid away.
1170 The companies in the Consolidated Group knowingly assisted Mr Papas, Forum Finance, Iugis NZ and FGFS to disburse the money received from WBC and WNZL in breach of trust and are liable to pay equitable compensation.
1171 The knowledge of Mr Papas is attributable to the companies within the Jointly Owned Entities because Mr Papas was a director of each and each company benefitted from the fraud. The companies received the following funds from Westpac:
(1) 64-66 Berkeley Street - $752,414;
(2) 14 James Street - $2,462,818;
(3) 5 Bulkara Street - $3,000,717;
(4) 6 Bulkara Street- $3,104,434; and
(5) 26 Edmonstone Road - $1,981,284.
1172 Each of the Jointly Owned Entities, knew through Mr Papas that the funds it received had been stolen. Accordingly, each of the Jointly Owned Entities from Westpac and that it held those funds on trust for relevantly WBC or WNZL on trust through the imposition of a Black v Freedman trust. Each company is obliged to account for the funds received by it, including those paid away.
1173 The Jointly Owned Entities knowingly assisted in the distribution of the money received from WBC and WNZL in breach of trust and are liable to pay equitable compensation.
1174 The knowledge of Mr Tesoriero is attributable to the Tesoriero Entities because he was a director of each company and each company benefitted from the fraud. The companies received the following funds from Westpac:
(1) 4 Cowslip Street - $271,389;
(2) 23 Margaret Street - $638,433;
(3) 55 Nolan Street - $132,126;
(4) 14 Kirwin Road- $251,392;
(5) 89 Betka Road - $143,993;
(6) Canner – $143,745;
(7) 9 Gregory Street – $5,173;
(8) 123 High Street - $63,428;
(9) 9 Main Street - $129,606;
(10) 160 Murray Valley - $200,337;
(11) 31 Ellerman Street - $125,393; and
(12) 1160 Glen Huntly Road - $942,639.
1175 Each of the Tesoriero Entities knew through Mr Tesoriero that the funds it received had been stolen from Westpac. Accordingly, each of the Tesoriero Entities held those funds on trust for relevantly WBC or WNZL on trust through the imposition of a Black v Freedman trust. Each company is obliged to account for the funds received by it, including those paid away.
1176 The Tesoriero Entities knowingly assisted in the distribution of the money received from WBC and WNZL in breach of trust and are liable to pay equitable compensation.
1177 The knowledge of Mr Papas is attributable to the Other Papas Entities because he was a director of each company and each company benefitted from the fraud. The companies received the following funds from Westpac:
(1) Intrashield - $1,176,394;
(2) Spartan - $1,133,226; and
(3) Palante - $2,452,403.
1178 Each of the Other Papas Entities knew through Mr Papas that the funds it received had been stolen from Westpac. Accordingly, each of these companies held the funds it received on trust for WBC and WNZL through the imposition of a Black v Freedman trust. Each company is obliged to account for the funds received by it, including those paid away.
1179 The Other Papas Entities knowingly assisted in the distribution of the money received from WBC and WNZL in breach of trust and are liable to pay equitable compensation.
J.3.8 Claims against Theion Ike
1180 Theion Ike received $99,142 from the funds paid by WBC and $32,989 from the funds paid by WNZL. It received the money as a volunteer or was on notice that the funds were held on trust for another and is liable to account for those funds or to pay equitable compensation.
J.4 Consideration – SMBC’s primary claims
1181 SMBC advanced the following as its primary claims:
(1) As against Mr Papas, a recipient trust claim, and a knowing assistance claim;
(2) As against Forum Enviro, a recipient trust claim, a knowing receipt claim and a knowing assistance claim;
(3) As against Forum Enviro (Aust), a recipient trust claim and a knowing receipt claim;
(4) As against FGFS, a recipient trust claim and a knowing assistance claim;
(5) As against the Other Papas-Related Entities, a recipient trust claim, a knowing receipt claim and a knowing assistance claim;
(6) As against the Tesoriero Entities, a recipient trust claim, a knowing receipt claim and a knowing assistance claim.
1182 As addressed in Section D, none of the respondents in the SMBC proceeding actively defended the claims against them. Mr Papas and the Other Papas-Related Entities (incorporated outside Australia) were not represented at the hearing. Each of the Other Papas-Related Entities (incorporated in Australia) and the Tesoriero Entities are in liquidation.
1183 There is substantial overlap in the respondents in the SMBC proceedings and the Westpac proceedings. There are four corporate respondents sued by SMBC that are not sued by Westpac. They are Forum Fleet, Imagetec FS, Imagetec Solutions and Iugis Waste. The only individual who SMBC sues is Mr Papas. SMBC did not sue Mr Tesoriero but his knowledge is relevant by application of the rules of attribution to SMBC’s claims against the corporate respondents of which Mr Papas was not a director.
1184 My findings on the whole of the evidence relevant to Forum’s dealings with SBMC are addressed in detail in Section I.28. I am satisfied that SMBC has established that each of the transactions detailed in its s 50 fraudulent transaction summary were part of the overarching fraudulent scheme. I am satisfied that SMBC has established that by no later than 6 August 2018, Mr Papas had devised a scheme involving Forum Enviro (Aust) and Forum Enviro to obtain money dishonestly and fraudulently from SMBC to which they were not entitled.
1185 Mr Papas was the architect of the scheme. The scheme was premeditated and carefully planned by Mr Papas. The evidence establishes that he was involved in putting the scheme into operation and that he benefitted from it. My findings in relation to Mr Papas and his role are addressed in Section I, but particularly in Section I.1, I.2 and I.18.
1186 Mr Papas created or caused to be created false and fraudulent transaction documents that are particularised in the s 50 summary. The fraudulent documents purported to record transactions that were a fiction and of which Veolia had no knowledge of and did not enter into. Each of Ms Brar, Mr Kozlovic, Mr Galliard and Mr Conlon of Veolia gave unchallenged evidence that the signatures on the fraudulent documents were not theirs and that they did not send relevant emails. In respect of the 2018 MRASA, the emails passing between Mr Papas and the representatives of Flexirent demonstrate his involvement in the distribution of the fraudulent documents. In respect of the 2020 MRASA, the emails passing between Mr Papas and the representatives of SMBC demonstrate his involvement in the distribution of the fraudulent documents. In addition, Mr Papas witnessed the purported signatures of Ms Brar on each of the 23 contractual documents, which were not signed by her.
1187 The evidence of the investigations by the liquidators addressed in Section I.30 demonstrated that:
(1) the equipment referred to in the TLAs and the TLA schedules did not exist;
(2) no invoices were issued to Veolia for the equipment;
(3) no payment was received by a Forum company from Veolia in respect of the equipment leases; and
(4) FGFS recorded the liability for monthly payments associated with the equipment leases on its own balance sheet.
1188 I am satisfied that Mr Papas’ involvement in the preparation of the fraudulent documents and that he ultimately presented the fraudulent documents to Flexirent or SMBC demonstrates that the fraudulent signatures on the documents were procured by Mr Papas and with his knowledge. I am also satisfied that Mr Papas put the fraudulent documents forward with the intention that they would be relied on by SMBC and that it would advance funds on the basis of them.
J.4.2 Claims against Forum Enviro and Forum Enviro (Aus)
1189 SMBC relied on the fraudulent documents and the representations made in them and paid funds to Flexirent under the 2018 MRASA and to Forum Enviro (Aust) under the 2020 MRASA.
1190 Forum Enviro and Forum Enviro (Aust) paid the money received from Flexirent and SMBC to companies within the Consolidated Group or companies related to Mr Papas and/or Mr Tesoriero.
1191 Mr Papas had actual knowledge of the fraud. He held the money received by Forum Enviro and Forum Enviro (Aust) on trust for SMBC through the imposition of a Black v Freedman trust. He is obliged to account for the funds, including those paid away.
1192 Mr Papas knew that Forum Enviro and Forum Enviro (Aust) had no legitimate claim to the money and that the payments away from Forum Enviro and Forum Enviro (Aust) were being made in breach of trust. Mr Papas knowingly assisted Forum Enviro and Forum Enviro (Aust) to pay the stolen funds received from SMBC to FGFS, Other Papas-Related Entities and Tesoriero Entities. Mr Papas received the sum of $284,743 of SMBC’s money. He knew that the funds were received in breach of trust. He is liable to account to SMBC.
1193 Mr Papas’ knowledge of the fraud scheme is properly attributed to Forum Enviro and Forum Enviro (Aust). He was a director of each company. He clearly acted as the senior executive of both companies. It was Mr Papas who authorised Mr Bouchahine to make the transfers that caused the tainted funds to flow in the manner that he directed. Both Forum Enviro and Forum Enviro (Aust) benefitted from the fraud. Forum Enviro received $29,709,714 of SMBC’s money via Flexirent. Forum Enviro (Aust) received $83,993,909 directly from SMBC.
1194 Once it is accepted that Mr Papas’ knowledge of the fraud is attributed to them, it follows that Forum Enviro and Forum Enviro (Aust) knew that the funds received were stolen and that they held the money on trust for SMBC through the imposition of a Black v Freedman trust. Forum Enviro and Forum Enviro (Aust) are obliged to account for the funds received by them, including those paid away.
1195 Each of Forum Enviro and Forum Enviro (Aust) received the money with the knowledge that it was stolen and each is liable to account to SMBC or to pay equitable compensation.
1196 Each of Forum Enviro and Forum Enviro (Aust) disbursed the money received by them for their own benefit and for the benefit of third parties with the knowledge that the funds were being paid out in breach of trust, and each is liable to pay equitable compensation.
1197 FGFS received into its bank account $79,900,308 of the money paid by SMBC. As with Forum Enviro and Forum Enviro (Aust), the knowledge of Mr Papas as a director of FGFS is attributed to the company. It follows that FGFS knew that the funds received by it were stolen and that it held the money on trust for SMBC through the imposition of a Black v Freedman trust. FGFS is obliged to account for the funds received by it, including those paid away.
1198 FGFS received and disbursed the money received by it for its own benefit and for the benefit of third parties with the knowledge that the funds were being paid out in breach of trust, and it is liable to pay equitable compensation.
J.4.4 Claims against Other Papas-Related Entities
1199 Mr Papas was also a director of the remaining Other Papas-Related Entities sued by SMBC. The knowledge of Mr Papas as a director is attributed to each company. Each of the Papas-Related Entities knew that the funds received by it were stolen and that each held the money on trust for SMBC through the imposition of a Black v Freedman trust. They are each obliged to account for the funds, including those paid away.
1200 Each of the Other Papas-Related Entities received and/or disbursed the money received for its own benefit and for the benefit of third parties with the knowledge that the funds were being paid out in breach of trust, and each is liable to pay equitable compensation.
J.4.5 Claims against Tesoriero Entities
1201 Mr Tesoriero was a director of the Tesoriero Entities. For the reasons given, I am satisfied that Mr Tesoriero had actual knowledge of the fraud. The knowledge of Mr Tesoriero as a director is attributed to each company. Each of the Tesoriero Entities knew that the funds received were stolen and that they each held the money on trust for SMBC through the imposition of a Black v Freedman trust. Each is obliged to account for the funds, including those paid away.
1202 Each of the Tesoriero Entities received and/or disbursed the money received by for their own benefit and for the benefit of third parties with the knowledge that the funds were being paid out in breach of trust, and each is liable to pay equitable compensation.
1203 SMBC reserved its right to make further submissions as to the final relief after consideration of the Court’s finding on liability. It is unnecessary to make orders for final relief at this stage of the proceedings.
J.5 Consideration – Societe Generale’s primary claims
1204 Societe Generale advanced the following as its primary claims:
(1) As against Forum Finance, a recipient trust claim;
(2) As against Mr Papas, a knowing assistance claim; and
(3) As against FGFS, a knowing assistance claim.
J.5.1 Claims against Forum Finance
1205 Mr Papas had actual knowledge of the fraud that he devised. Mr Papas was a director of Forum Finance. His knowledge is attributable to Forum Finance. Forum Finance received the stolen funds from Societe Generale and was required to hold those funds on behalf of Societe Generale through the imposition of a Black v Freedman trust. It is obliged to account for the funds, including those paid away.
1206 When Forum Finance received the payments from Societe Generale, it immediately transferred them to FGFS. FGFS then paid the funds out as directed by Mr Papas, and subject to Mr Papas’ approval, Mr Tesoriero. Mr Papas was a director of FGFS and his knowledge of the fraud is attributable to FGFS. FGFS knowingly assisted Forum Finance, Mr Papas and Mr Tesoriero to pay the stolen money out of Forum Finance in breach of trust.
1207 Forum Finance held the stolen money received from Societe Generale on trust and owed a fiduciary duty to preserve the funds and not dissipate them. With actual knowledge of the fraud, Mr Papas assisted FGFS to act in breach of trust by directing the payments of the stolen money from Forum Finance to FGFS, and from FGFS to Mr Papas and his associated entities, and it is liable to pay equitable compensation.
1208 For these reasons, I am satisfied that each of the financiers has comprehensively established the respondents’ liability in respect of the primary claims. The defences raised by Mr Tesoriero and Mr Bouchahine, being the only two individual respondents who actively defended the proceedings, were limited to seeking to resist a finding that they each had knowledge of the fraud. They have failed in that endeavour. On the basis of the exposition of the contemporaneous records and the evidence as a whole, I am satisfied that they each had actual knowledge of the fraud perpetrated against each of the financiers from early in the period when the fraud was effected.
1209 The parties seek to be heard separately on relief. Accordingly, I will make orders for a case management hearing to timetable the preparation for, and hearing in respect of, the appropriate relief in each of the proceedings.
1210 I certify that the preceding one thousand, two hundred and nine (1209) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Cheeseman. |
Associate:
Annexure B Westpac intended structure of the Scheme
Annexure C Westpac comparison of the intended structure and the fraudulent Scheme
Annexure D SMBC intended structure of the scheme under the 2018 MRASA
Annexure E SMBC intended structure of the scheme under the 2020 MRASA
Annexure F Societe Generale intended documentary arrangements and the actual flow of money between the parties
Annexure G Flow of Westpac funds to the respondents
Annexure H Flow of SMBC funds to the respondents
Annexure I Amended summary of payment to, or on behalf of, respondents
Annexure J Revised summary of Payments, to or on behalf of each Respondent (Receipts Table)
Annexure K Active parties end of hearing
Annexure L Two page extract from Mr Papas’ original bound notebook
Annexure M Principal Entities, Individuals and Properties (not exhaustive)
Annexure B– Westpac intended structure of the scheme
Annexure C– Westpac comparison of the intended structure and the fraudulent scheme
Annexure D – SMBC intended structure of the scheme under the 2018 MRASA
Annexure E – SMBC intended structure of the scheme under the 2020 MRASA
Annexure F – Societe Generale intended documentary arrangements and the actual flow of money between the parties
Annexure G – Flow of Westpac funds to the respondents
Annexure H – Flow of SMBC funds to the respondents
Annexure I – Amended summary of payment to, or on behalf of, respondents
Annexure J – Revised summary of Payments, to or on behalf of each Respondent (Receipts Table)
Annexure K – Active parties end of hearing
Common Respondents | ||||
Name | Defined term | Westpac NSD616/2021 | SMBC NSD681/2021 | Societe Generale NSD642/2021 |
Forum Finance Pty Limited (in liquidation) (receivers appointed) ACN 153 301 172 | Forum Finance | 1R - Respondent | 6R - Sixth Respondent | 1R - Respondent |
Forum Group Financial Services Pty Ltd (in liquidation) ACN 623 033 705 | FGFS | 4R - Fourth Respondent | 4R - Fourth Respondent | 3R - Third Respondent |
Papadimitriou, Basile | 2R - Second Respondent | 2R - Second Respondent | 2R - Second Respondent | |
Remaining Respondents - Individuals | ||||
Surname, Firstname | Defined term | Westpac NSD616/2021 | SMBC NSD681/2021 | Societe Generale NSD642/2021 |
Agostino, Louisa | 47R - Forty Seventh Respondent | — | — | |
Bouchahine, Moussa (Tony) | 46R - Forty Sixth Respondent | — | — | |
Tesoriero, Vincenzo Frank | 3R - Third Respondent | — | — | |
Remaining Respondents - Corporations | ||||
Full Corporation Name | Defined term | Westpac NSD616/2021 | SMBC NSD681/2021 | Societe Generale NSD642/2021 |
1160 Glen Huntly Road Pty Ltd ACN 639 447 984 | 1160 Glen Huntly Road | 14R - Fourteenth Respondent | — | — |
123 High Street Taradale Pty Ltd (in liquidation) ACN 639 872 512 | 123 High Street | 17R - Seventeenth Respondent | — | — |
14 James Street Pty Ltd (in Liquidation) ACN 638 449 206 | 14 James Street | 9R - Ninth Respondent | — | — |
14 Kirwin Road Morwell Pty Ltd (in liquidation) ACN 641 402 093 | 14 Kirwin Road | 15R - Fifteenth Respondent | — | — |
160 Murray Valley Hwy Lake Boga Pty Ltd (in liquidation) ACN 641 392 921 | 160 Murray Valley | 18R - Eighteenth Respondent | — | — |
193 Carlisle Street Enterprises Pty Ltd (in liquidation) ACN 612 615 237 | 193 Carlisle Street | 40R - Fortieth Respondent | — | — |
23 Margaret Street Pty Ltd (in liquidation) (ACN 623 715 373) | 23 Margaret Street | 13R - Thirteenth Respondent | 23R - Twenty Third Respondent | — |
26 Edmonstone Road Pty Ltd (in liquidation) ACN 622 944 129 | 26 Edmonstone Road | 10R - Tenth Respondent | 20R - Twentieth Respondent | — |
275 High Street Golden Square Pty Ltd (in liquidation) ACN 639 870 545 | 275 High Street | 26R - Twenty Sixth Respondent | — | — |
286 Carlisle Street Pty Ltd (in liquidation) ACN 610 042 343 | 286 Carlisle Street | 25R - Twenty Fifth Respondent | 24R - Twenty Fourth Respondent | — |
31 Ellerman Street Dimboola Pty Ltd (in liquidation) ACN 641 392 887 | 31 Ellerman Street | 19R - Nineteenth Respondent | — | — |
4 Cowslip Street Violet Town Pty Ltd (in liquidation) ACN 639 872 352 | 4 Cowslip Street | 20R - Twentieth Respondent | — | — |
5 Bulkara Street Pty Ltd (in liquidation) ACN 630 982 160 | 5 Bulkara Street | 11R - Eleventh Respondent | 21R - Twenty First Respondent | — |
55 Nolan Street Maryborough Pty Ltd (in liquidation) ACN 641 392 912 | 55 Nolan Street | 21R - Twenty First Respondent | — | — |
6 Bulkara Street Pty Ltd (in liquidation) ACN 639 734 473 | 6 Bulkara Street | 12R - Twelfth Respondent | 22R - Twenty Second Respondent | — |
64-66 Berkeley St Hawthorn Pty Ltd (in liquidation) (ACN 643 838 662) | 64-66 Berkeley Street | 8R - Eighth Respondent | 25R - Twenty Fifth Respondent | — |
8-12 Natalia Ave Oakleigh Pty Ltd (in liquidation) ACN 643 838 626 | 8-12 Natalia Avenue | 41R - Forty First Respondent | 26R – Twenty Sixth Respondent | — |
89 Betka Road Mallacoota Pty Ltd (in liquidation) ACN 641 393 179 | 89 Betka Road | 22R - Twenty Second Respondent | — | — |
9 Gregory Street Ouyen Pty Ltd (in liquidation) ACN 641 392 707 | 9 Gregory Street | 23R - Twenty Third Respondent | — | — |
9 Main Street Derrinallum Pty Ltd (in liquidation) ACN 639 872 736 | 9 Main Street | 24R - Twenty Fourth Respondent | — | — |
Aramia Holdings Pty Ltd (in liquidation) ACN 114 958 717 | Aramia | — | 28R - Twenty Eighth Respondent | — |
Aromatika Fyta Tsai Olympou Theion Ike | Theion IKE | 49R - Forty Ninth Respondent | — | — |
Canner Investments Pty Ltd (in liquidation) ACN 624 176 049 | Canner | 16R - Sixteenth Respondent | — | — |
D&D Group O.E | D&D Group | 48R - Forty Eighth Respondent By closing claims not pressed | — | — |
Forum Enviro (Aust) Pty Ltd (in liquidation) ACN 607 484 364 | Forum Enviro (Aust) | 7R - Seventh Respondent | 1R - Respondent | — |
Forum Enviro Pty Ltd (in liquidation) ACN 168 709 840 | Forum Enviro | 6R - Sixth Respondent | 3R - Third Respondent | — |
Forum Fleet Pty Ltd (in liquidation) ACN 155 440 994 | Forum Fleet | — | 8R - Eighth Respondent | — |
Forum Group Pty Ltd (Receivers Appointed) (in liquidation) ACN 153 336 997 | FG | 5R - Fifth Respondent | 5R - Fifth Respondent | — |
Imagetec Financial Services Pty Ltd (in liquidation) ACN 111 978 182 | Imagetec FS | — | 9R - Ninth Respondent | — |
Imagetec Solutions Australia Pty Ltd (in liquidation) ACN 074 715 718 | Imagetec Solutions | — | 10R - Tenth Respondent | — |
Intrashield Pty Ltd (in liquidation) ACN 133 426 534 | Intrashield | 37R - Thirty Seventh Respondent | 11R - Eleventh Respondent | — |
Iugis (UK) Limited (in liquidation) (UK Company No. 10745974) | Iugis (UK) | 32R - Thirty Second Respondent | 16R - Sixteenth Respondent | — |
Iugis Energy SA | Iugis Energy Greece | 43R - Forty Third Respondent | 18R - Eighteenth Respondent | — |
Iugis Finance Limited (Company Number 11124046) | Iugis Finance UK | 35R - Thirty Fifth Respondent By closing claims not pressed | — | — |
Iugis Global Financial Services Limited (Company Number 11785331) | Iugis GFS UK | 34R - Thirty Fourth Respondent By closing claims not pressed | — | — |
Iugis Hellas Ike | Iugis Greece | 42R - Forty Second Respondent | 17R - Seventeenth Respondent By closing claims not pressed | — |
Iugis Holdings Limited (UK Company No. 1123437) | Iugis Holdings UK | 33R - Thirty Third Respondent By closing claims not pressed | 15R - Fifteenth Respondent By closing claims not pressed | — |
Iugis Pty Ltd (in liquidation) ACN 632 882 243 | Iugis | 31R - Thirty First Respondent | 13R - Thirteenth Respondent | — |
Iugis Waste Solutions Pty Ltd (in liquidation) ACN 647 212 299 | Iugis Waste | — | 14R - Fourteenth Respondent | — |
Mangusta (Vic) Pty Ltd ACN 631 520 682 | Mangusta | 39R - Thirty Ninth Respondent | — | — |
Mazcon Investments Hellas Ike | Mazcon | 27R - Twenty Seventh Respondent | 19R - Nineteenth Respondent | — |
Palante Pty Ltd (in liquidation) ACN 135 344 151 | Palante | 28R - Twenty Eighth Respondent | 27R – Twenty Seventh Respondent | — |
Spartan Consulting Group Pty Ltd (in liquidation) ACN 168 989 544 | Spartan | 36R - Thirty Sixth Respondent | 12R - Twelfth Respondent | — |
Tesoriero Investment Group Pty Ltd (in liquidation) ACN 161 088 115
| TIG | 38R - Thirty Eighth Respondent | — | — |
The Forum Group of Companies Pty Ltd (in liquidation) ACN 151 964 626 | FGOC | 30R - Thirtieth Respondent | 7R - Seventh Respondent | — |
Annexure L – Two page extract from Mr Papas’ original bound notebook
Annexure M – Principal Entities, Individuals and Properties (not exhaustive)
Name | Description | Respondent Category | |
1 | 10 James Street, Clayton South VIC 3169 | Real Property | |
2 | 1160 Glen Huntly Road Pty Ltd ACN 639 447 984 | 14R – Fourteenth Respondent – Westpac Proceeding | Tesoriero Entity |
3 | 1160 Glen Huntly Road, Glen Huntly VIC 3163 | Real Property | |
4 | 12 Hartington Street, Elsternwick VIC 3185 | Real Property | |
5 | 12 James Street, Clayton South VIC 3169 | Real Property | |
6 | 123 High Street Taradale Pty Ltd (in liquidation) ACN 639 872 512 | 17R – Seventeenth Respondent – Westpac Proceeding | Tesoriero Entity |
7 | 124 High Street, Taradale VIC 3447 | Real Property | |
8 | 14 James Street Pty Ltd (in liquidation) ACN 638 449 206 | 9R – Ninth Respondent – Westpac Proceeding | Jointly Owned Entity |
9 | 14 James Street, Clayton South VIC 3169 | Property | |
10 | 14 Kirwin Road Morwell Pty Ltd (in liquidation) ACN 641 402 093 | 15R – Fifteenth Respondent – Westpac Proceeding | Tesoriero Entity |
11 | 14 Kirwin Road, Morwell VIC 3840 | Real Property | |
12 | 15 Main Street, Derrinallum VIC 3325 | Real Property | |
13 | 16 James Street, Clayton South VIC 3169 | Real Property | |
14 | 160 Murray Valley Highway, Lake Boga VIC 3584 | Real Property | |
15 | 160 Murray Valley Hwy Lake Boga Pty Ltd (in liquidation) ACN 641 392 921 | 18R – Eighteenth Respondent – Westpac Proceeding | Tesoriero Entity |
16 | 18 James Street, Clayton South VIC 3169 | Real Property | |
17 | 193 Carlisle Street Enterprises Pty Ltd (in liquidation) ACN 612 615 237 | 40R – Fortieth Respondent – Westpac Proceeding | Tesoriero Entity |
18 | 2 Cowslip Street, Violet Town VIC 3669 | Real Property | |
19 | 23 Margaret Street Pty Ltd (in liquidation) (ACN 623 715 373) | 13R – Thirteenth Respondent – Westpac Proceeding 23R – Twenty Third Respondent – SMBC Proceeding | Tesoriero Entity |
20 | 23 Margaret Street, Rozelle NSW 2039 | Real Property | |
21 | 2-4 Atherton Road, Oakleigh VIC 3166 | Real Property | |
22 | 26 Edmondstone Road, Bowen Hills QLD 4006 | Real Property | |
23 | 275 High Street Golden Square Pty Ltd (in liquidation) ACN 639 870 545 | 26R – Twenty Sixth Respondent – Westpac Proceeding | Tesoriero Entity |
24 | 286 Carlisle Street Pty Ltd (in liquidation) ACN 610 042 343
| 25R – Twenty Fifth Respondent – Westpac Proceeding 24R – Twenty Fourth Respondent – SMBC Proceeding | Tesoriero Entity |
25 | 305/48 and 306/48 Blenheim Street, Balaclava VIC 3185 | Real Property | |
26 | 31 Ellerman Street Dimboola Pty Ltd (in liquidation) ACN 641 392 887 | 19R – Nineteenth Respondent – Westpac Proceeding | Tesoriero Entity |
27 | 31 Ellerman Street Dimboola VIC 3414 | Real Property | |
28 | 4 Cowslip Street Violet Town Pty Ltd (in liquidation) ACN 639 872 352 | 20R – Twentieth Respondent – Westpac Proceeding | Tesoriero Entity |
29 | 5 Bulkara Street Pty Ltd (in liquidation) ACN 630 982 160 | 11R – Eleventh Respondent – Westpac Proceeding 21R – Twenty First Respondent – SMBC Proceeding | Jointly Owned Entity |
30 | 5 Bulkara Street, Wagstaffe 2257 | Real Property | |
31 | 55 Nolan Street Maryborough Pty Ltd (in liquidation) ACN 641 392 912 | 21R – Twenty First Respondent – Westpac Proceeding | Tesoriero Entity |
32 | 55 Nolan Street, Maryborough VIC 3465 | Real Property | |
33 | 6 Bulkara Street Pty Ltd (in liquidation) ACN 639 734 473 | 12R – Twelfth Respondent – Westpac Proceeding 22R – Twenty Second Respondent – SMBC Proceeding | Jointly Owned Entity |
34 | 6 Bulkara Street, Wagstaffe 2257 | Property | Jointly Owned Real Property |
35 | 64-66 Berkeley St Hawthorn Pty Ltd (in liquidation) (ACN 643 838 662) (64-66 Berkeley Street) | 8R – Eighth Respondent – Westpac Proceeding 25R – Twenty Fifth Respondent – SMBC Proceeding | Jointly Owned Entity |
36 | 64-66 Berkeley Street, Hawthorn VIC 3122 | Real Property | |
37 | 8 Olive Street, Clayton South VIC 3169 | Real Property | |
38 | 8-12 Natalia Ave Oakleigh Pty Ltd (in liquidation) ACN 643 838 626 (8-12 Natalia Avenue) | 41R – Forty First Respondent – Westpac Proceeding 26R – Twenty Sixth Respondent – SMBC Proceeding | Tesoriero Entity |
39 | 8-12 Natalia Avenue, Oakleigh VIC 3167 | Real Property | |
40 | 89 Betka Road Mallacoota Pty Ltd (in liquidation) ACN 641 393 179 | 22R – Twenty Second Respondent – Westpac Proceeding | Tesoriero Entity |
41 | 89 Betka Road, Mallacoota VIC 3892 | Real Property | |
42 | 9 Gregory Street Ouyen Pty Ltd (in liquidation) ACN 641 392 707 | 23R – Twenty Third Respondent – Westpac Proceeding | Tesoriero Entity |
43 | 9 Gregory Street, Ouyen VIC 3490 | Real Property | |
44 | 9 Main Street Derrinallum Pty Ltd (in liquidation) ACN 639 872 736 | 24R – Twenty Fourth Respondent – Westpac Proceeding | Tesoriero Entity |
45 | 9-13 Main Street, Derrinallum VIC 3325 | Real Property | |
46 | A Giamouridis P.C., with the distinctive title “GIAMOURIDIS INDUSTRIAL WORKSHOP” in the Greek Commercial Registry | 50R – Fiftieth Respondent – Westpac Proceeding | |
47 | Agostino, Louisa | 47R – Forty Seventh Respondent – Westpac Proceeding | |
48 | Allen, Paul | Liquidator | |
49 | ALLF Pty Ltd | Maia related company | |
50 | Anderson, Geoffrey | Director of Asset Finance, WIB | Westpac employee evidence |
51 | Aramia Holdings Pty Ltd (in liquidation) ACN 114 958 717 | 28R – Twenty Eighth Respondent – SMBC Proceeding | Other Papas-Related Entity |
52 | Aromatika Fyta Tsai Olympou Theion Ike | 49R – Forty Ninth Respondent – Westpac Proceeding | |
53 | Australian Leisure and Hospitality Group Pty Ltd (ALH) | Customer | Westpac customer evidence |
54 | BHD Leasing Pty Ltd ACN 154 478 707 (trading as BHO Finance) | ||
55 | BHO Funding Pty Ltd | BHO Finance related entity | |
56 | Blizzard, Daniel | CEO, Maia | |
57 | Bouchahine, Moussa (Tony) | 46R – Forty Sixth Respondent – Westpac Proceeding | |
58 | Bower, Neil | Senior Relationship Manager, Westpac Commercial Banking | |
59 | Brar, Gurpreet | CEO, Veolia India Former CFO, Veolia | Westpac, SMBC and Societe Generale customer evidence |
60 | Canner Investments Pty Ltd (in liquidation) ACN 624 176 049 | 16R – Sixteenth Respondent – Westpac Proceeding | Tesoriero Entity |
61 | Catholic Healthcare Limited ABN 69 064 946 318 (CHC) | Customer | Westpac customer evidence |
62 | Chapman, Trevor | Head of Credit Restructuring, WNZL | Westpac employee evidence |
63 | Cheal, Brett | Senior Director, Maia | |
64 | Coles Supermarkets Australia Pty Ltd | Customer | Westpac customer evidence |
65 | Conlon, Daniel | Managing Director and CEO, Veolia | SMBC customer evidence |
66 | Constantinidis, Eric | 44R – Forty Forth Respondent – Westpac Proceeding (discontinued) | |
67 | Croome, Jarvas | CEO, WesTrac | Westpac customer evidence |
68 | D&D Group O.E | 48R – Forty Eighth Respondent – Westpac Proceeding | |
69 | de Silva, Rohan | Senior Category Manager, Coles | Westpac customer evidence |
70 | Dobson, Roger | Partner, Jones Day | SMBC other evidence |
71 | Dumont, Nicolas | Chief Operating Officer, 29H (Private Banking Division), Societe Generale | Societe Generale employee evidence |
72 | 26 Edmonstone Road Pty Ltd (in liquidation) ACN 622 944 129 26 | 10R – Tenth Respondent – Westpac Proceeding 20R – Twentieth Respondent – SMBC Proceeding | |
73 | Eggermont, Lize | NMF | |
74 | Eliatamby, Marie-Lyse | General Counsel, Maia | |
75 | Eqwe Pty Ltd ACN 630 535 554 | Third party agent | |
76 | Eros Management Pty Ltd | Company wholly owned and controlled by Mr Papas | |
77 | Flanagan, Stacy | Financial Controller, CHC | Westpac customer evidence |
78 | Flexirent Capital Pty Ltd | Third party agent | |
79 | Forum Enviro (Aust) Pty Ltd (in liquidation) ACN 607 484 364 | 7R – Seventh Respondent – Westpac Proceeding 1R – Respondent – SMBC Proceeding | Consolidated Group Entity |
80 | Forum Enviro Pty Ltd (in liquidation) ACN 168 709 840 | 6R – Sixth Respondent – Westpac Proceeding 3R – Third Respondent – SMBC Proceeding | Consolidated Group Entity |
81 | Forum Finance Pty Limited (in liquidation) (receivers appointed) ACN 153 301 172 | 1R – Respondent – Westpac Proceeding 6R – Sixth Respondent – SMBC Proceeding 1R – Respondent – Societe Generale Proceeding | Consolidated Group Entity |
82 | Forum Fleet Pty Ltd (in liquidation) ACN 155 440 994 | 8R – Eighth Respondent – Westpac Proceeding | Other Papas-Related Entity |
83 | Forum Group Financial Services Pty Ltd (in liquidation) ACN 623 033 705 (FGFS) | 4R – Fourth Respondent – Westpac Proceeding 4R – Fourth Respondent – SMBC Proceeding 3R – Third Respondent – Societe Generale Proceeding | Jointly Owned Entity |
84 | Forum Group Pty Ltd (Receivers Appointed) (in liquidation) ACN 153 336 997 (FG) | 5R – Fifth Respondent – Westpac Proceeding 5R – Fifth Respondent – SMBC Proceeding | Consolidated Group Entity |
85 | Franklin, Glenn | Liquidator | |
86 | Fridman, Joseph | Director, Maia | |
87 | Gaillard, Julian | Company Secretary, Risk and Insurance, Veolia | SMBC customer evidence |
88 | Giamouridis, Anastasios | 29R – Twenty-Ninth Respondent – Westpac Proceeding (dismissed) | |
89 | Giugni, Paul | General Counsel, Scentre | Westpac customer evidence |
90 | Grenfell, Andrew | Liquidator | Westpac other evidence |
91 | Consolidated Group Entities | FGOC, Forum Finance, FG, Forum Enviro and Forum Enviro (Aust) | |
92 | Gupta, Chander | Senior Director, Finance, Maia | |
93 | Hopkins, Kris | Chief Operating Officer, HWLE | Westpac customer evidence |
94 | Hughes, Michael | Partner, MinterEllison | Westpac other evidence |
95 | HWL Ebsworth Lawyers (HWLE) | Customer | Westpac customer evidence |
96 | Imagetec Financial Services Pty Ltd (in liquidation) ACN 111 978 182 (Imagetec FS) | 9R – Ninth Respondent – SMBC Proceeding | Other Papas-Related Entity |
97 | Imagetec Solutions Australia Pty Ltd (in liquidation) ACN 074 715 718 | 10R – Tenth Respondent – SMBC Proceeding | Other Papas-Related Entity |
98 | Intrashield Pty Ltd (in liquidation) ACN 133 426 534 | 37R – Thirty Seventh Respondent – Westpac Proceeding 11R – Eleventh Respondent – SMBC Proceeding | Jointly Owned Entity |
99 | Ireland, Jason | Liquidator | SMBC other evidence |
100 | Iugis (NZ) Limited (in liquidation) NZBN 9429046666581 (Iugis NZ) | Formerly Orca Enviro Solutions NZ Limited | |
101 | Iugis (UK) Limited (in liquidation) (UK Company No. 10745974) | 32R – Thirty Second Respondent – Westpac Proceeding 16R – Sixteenth Respondent – SMBC Proceeding | Other Papas-Related Entity |
102 | Iugis AU | Collectively Forum Enviro (Aust), Forum Enviro, OES and Iugis | |
103 | Iugis Energy SA (Iugis Energy Greece) | 43R – Forty Third Respondent – Westpac Proceeding 18R – Eighteenth Respondent – SMBC Proceeding | Other Papas-Related Entity |
104 | Iugis Finance Limited (Iugis Finance UK) | 35R – Thirty Fifth Respondent – Westpac Proceeding | |
105 | Iugis Global Financial Services Limited (Company Number 11785331) (Iugis GFS UK) | 34R – Thirty Fourth Respondent – Westpac Proceeding | |
106 | Iugis Hellas Ike (Iugis Greece) | 42R – Forty Second Respondent – Westpac Proceeding 17R – Seventeenth Respondent – SMBC Proceeding (discontinued) | Other Papas-Related Entity |
107 | Iugis Holdings Limited (UK Company No. 1123437) (Iugis Holdings UK) | 33R – Thirty Third Respondent – Westpac Proceeding 15R – Fifteenth Respondent – SMBC Proceeding | |
108 | Iugis Pty Ltd (in liquidation) ACN 632 882 243 | 31R – Thirty First Respondent – Westpac Proceeding 13R – Thirteenth Respondent – SMBC Proceeding | Other Papas-Related Entity |
109 | Iugis Waste Solutions Pty Ltd (in liquidation) ACN 647 212 299 | 14R – Fourteenth Respondent – SMBC Proceeding | Other Papas-Related Entity |
110 | Johnstone, Kare | Liquidator, Iugis NZ | |
111 | Kozlovic, Lorenzo | Executive General Manager, Veolia Director, Veolia NZ | Westpac and SMBC customer evidence |
112 | Kumaragamage, Chandana | Head of Legal Technology, MinterEllison | Westpac other evidence |
113 | LeaseIt | Unregistered entity | |
114 | Macrovue Pty Ltd | Broker used by Mr Papas | |
115 | Maher, David | Managing Director, CHC | Westpac customer evidence |
116 | Maia Financial Pty Ltd | Formerly Alleasing Pty Ltd | |
117 | Mangusta (Vic) Pty Ltd ACN 631 520 682 | 39R – Thirty Ninth Respondent – Westpac Proceeding | Tesoriero Entity |
118 | Martinez, Juan | Managing Partner, HWLE | Westpac customer evidence |
119 | Mazcon Investments Hellas Ike | 27R – Twenty Seventh Respondent – Westpac Proceeding 19R – Nineteenth Respondent – SMBC Proceeding | Other Papas-Related Entity |
120 | McCoubrie, Darren | CFO, Forum Group | |
121 | Miles, Gregory | Chief Operating Officer, Scentre | Westpac customer evidence |
122 | Moreton, Brent | Director in the asset finance team, WNZL | Westpac employee evidence |
123 | Chin, Brandon | Accountant, FGFS | |
124 | Northern Managed Finance (NMF) | Third party agent | |
125 | Orca Enviro Systems Pty Limited (ACN 627 597 782) (OES) | ||
126 | Pacific Blue Tax Services Pty Ltd | Accountants | |
127 | Palante Pty Ltd (in liquidation) ACN 135 344 151 | 28R – Twenty Eighth Respondent – Westpac Proceeding 27R – Twenty Seventh Respondent – SMBC Proceeding | Other Papas-Related Entity |
128 | Papadimitriou, Basile | 2R – Second Respondent – Westpac Proceeding 2R – Second Respondent – SMBC Proceeding 2R – Second Respondent – Societe Generale Proceeding | |
129 | Papas, Tas | Mr Papas’ brother | |
130 | Parikh, Vinay | Procurement Manager, Coles | Westpac customer evidence |
131 | Phillips, Suzi | Mr Papas' executive assistant | |
132 | Pinker, David | Director, FGOC | |
133 | Preston, Jason | Liquidator | Westpac and Societe Generale other evidence |
134 | Price, Luke | Director, Eqwe | |
135 | Rollinson, Craig | Executive Director, Iugis | |
136 | Rossbach-Smith, Carly | Treasury Operations Manager, WesTrac | Westpac customer evidence |
137 | Scentre Group Limited | Customer | Westpac customer evidence |
138 | Sheeran, Mike | Director, Eqwe | |
139 | Sher, Gavin | Chief Financial and Operations Officer, Maia | |
140 | Smith, Trevor | National Food Manager, ALH | Westpac customer evidence |
141 | Spartan Consulting Group Pty Ltd (in liquidation) ACN 168 989 544 | 36R – Thirty Sixth Respondent – Westpac Proceeding 12R – Twelfth Respondent – SMBC Proceeding | Other Papas-Related Entity |
142 | Stack, Randyl | Head of Customer Lifecycle Management, Head of Operations, WIB | Westpac employee evidence |
143 | Stefanetti, Lou | Accountant, Pacific Blue Tax Services Pty Ltd | |
144 | Tesoriero Investment Group Pty Ltd (in liquidation) ACN 161 088 115 (TIG) | 38R – Thirty Eighth Respondent – Westpac Proceeding | Tesoriero Entity |
145 | Tesoriero, Giovanni (John) (Mr Tesoriero Snr) | 45R – Forty Fifth Respondent – Westpac Proceeding (settled) | |
146 | Tesoriero, Vincenzo Frank | 3R – Third Respondent – Westpac Proceeding | |
147 | The Forum Group of Companies Pty Ltd (in liquidation) ACN 151 964 626 (FGOC) | 30R – Thirtieth Respondent – Westpac Proceeding 7R – Seventh Respondent – SMBC Proceeding | Consolidated Group Entity |
148 | Thong, Gregory | Head of Corporate Coverage, Societe Generale | Societe Generale employee evidence |
149 | Timpany, Michael | Director, SMBC Sydney Branch | SMBC evidence |
150 | Triantafyllou, Louis | NMF | |
151 | Tsouskas, Harry | Broker | |
152 | Unit 9, 269-275 High Street, Golden Square, Bendigo VIC 3550 | Real Property | |
153 | Veolia Environmental Services (Australia) Pty Ltd | Customer | Westpac customer evidence |
154 | Veolia Environmental Services (NZ) Limited (Veolia NZ) | New Zealand customer | Westpac customer evidence |
155 | Verginis, Ellias | NMF | |
156 | Wang, Kathleen | Accountant, Forum Group | |
157 | Warehouse 1, 9 Parsons Street, Clayton South VIC 3169 | Real Property | |
158 | Warehouse 2, 9 Parsons Street, Clayton South VIC 3169 | Real Property | |
159 | Warehouse 3, 9 Parsons Street, Clayton South VIC 3169 | Real Property | |
160 | Westpac Banking Corporation (WBC) | First Applicant – Westpac Proceeding | |
161 | Westpac Institutional Bank (WIB) | A division of WBC | |
162 | Westpac New Zealand Limited (WNZL) | Second Applicant – Westpac Proceeding | |
163 | WesTrac Pty Limited | Customer | Westpac customer evidence |
NSD 616 of 2021 | |
FORUM GROUP FINANCIAL SERVICES PTY LTD (IN LIQUIDATION) ACN 623 033 705 | |
Fifth Respondent: | FORUM GROUP PTY LTD (RECEIVERS APPOINTED) (IN LIQUIDATION) ACN 153 336 997 |
Sixth Respondent: | FORUM ENVIRO PTY LTD (IN LIQUIDATION) ACN 168 709 840 |
Seventh Respondent: | FORUM ENVIRO (AUST) PTY LTD (IN LIQUIDATION) ACN 607 484 364 |
Eighth Respondent: | 64-66 BERKELEY ST HAWTHORN PTY LTD (IN LIQUIDATION) (ACN 643 838 662) |
Ninth Respondent: | 14 JAMES STREET PTY LTD (IN LIQUIDATION) ACN 638 449 206 |
Tenth Respondent: | 26 EDMONSTONE ROAD PTY LTD (IN LIQUIDATION) ACN 622 944 129 |
Eleventh Respondent: | 5 BULKARA STREET PTY LTD (IN LIQUIDATION) ACN 630 982 160 |
Twelfth Respondent: | 6 BULKARA STREET PTY LTD (IN LIQUIDATION) ACN 639 734 473 |
Thirteenth Respondent: | 23 MARGARET STREET PTY LTD (IN LIQUIDATION) (ACN 623 715 373) |
Fourteenth Respondent: | 1160 GLEN HUNTLY ROAD PTY LTD ACN 639 447 984 |
Fifteenth Respondent: | 14 KIRWIN ROAD MORWELL PTY LTD (IN LIQUIDATION) ACN 641 402 093 |
Sixteenth Respondent: | CANNER INVESTMENTS PTY LTD (IN LIQUIDATION) ACN 624 176 049 |
Seventeenth Respondent: | 123 HIGH STREET TARADALE PTY LTD (IN LIQUIDATION) ACN 639 872 512 |
Eighteenth Respondent: | 160 MURRAY VALLEY HWY LAKE BOGA PTY LTD (IN LIQUIDATION) ACN 641 392 921 |
Nineteenth Respondent: | 31 ELLERMAN STREET DIMBOOLA PTY LTD (IN LIQUIDATION) ACN 641 392 887 |
Twentieth Respondent: | 4 COWSLIP STREET VIOLET TOWN PTY LTD (IN LIQUIDATION) ACN 639 872 352 |
Twenty First Respondent: | 55 NOLAN STREET MARYBOROUGH PTY LTD (IN LIQUIDATION) ACN 641 392 912 |
Twenty Second Respondent: | 89 BETKA ROAD MALLACOOTA PTY LTD (IN LIQUIDATION) ACN 641 393 179 |
Twenty Third Respondent: | 9 GREGORY STREET OUYEN PTY LTD (IN LIQUIDATION) ACN 641 392 707 |
Twenty Fourth Respondent: | 9 MAIN STREET DERRINALLUM PTY LTD (IN LIQUIDATION) ACN 639 872 736 |
Twenty Fifth Respondent: | 286 CARLISLE STREET PTY LTD (IN LIQUIDATION) ACN 610 042 343 |
Twenty Sixth Respondent: | 275 HIGH STREET GOLDEN SQUARE PTY LTD (IN LIQUIDATION) ACN 639 870 545 |
Twenty Seventh Respondent: | MAZCON INVESTMENTS HELLAS IKE |
Twenty Eighth Respondent: | PALANTE PTY LTD (IN LIQUIDATION) ACN 135 344 151 |
Thirtieth Respondent: | THE FORUM GROUP OF COMPANIES PTY LTD (IN LIQUIDATION) ACN 151 964 626 |
Thirty First Respondent: | IUGIS PTY LTD (IN LIQUIDATION) ACN 632 882 243 |
Thirty Second Respondent: | IUGIS (UK) LIMITED (IN LIQUIDATION) (UK COMPANY NO. 10745974) |
Thirty Third Respondent: | IUGIS HOLDINGS LIMITED (UK COMPANY NO. 1123437) |
Thirty Fourth Respondent: | IUGIS GLOBAL FINANCIAL SERVICES LIMITED (COMPANY NUMBER 11785331) |
Thirty Fifth Respondent: | IUGIS FINANCE LIMITED (COMPANY NUMBER 11124046) |
Thirty Sixth Respondent: | SPARTAN CONSULTING GROUP PTY LTD (IN LIQUIDATION) ACN 168 989 544 |
Thirty Seventh Respondent: | INTRASHIELD PTY LTD (IN LIQUIDATION) ACN 133 426 534 |
Thirty Eighth Respondent: | TESORIERO INVESTMENT GROUP PTY LTD (IN LIQUIDATION) ACN 161 088 115 |
Thirty Ninth Respondent: | MANGUSTA (VIC) PTY LTD ACN 631 520 682 |
Fortieth Respondent: | 193 CARLISLE STREET ENTERPRISES PTY LTD (IN LIQUIDATION) ACN 612 615 237 |
Forty First Respondent: | 8-12 NATALIA AVE OAKLEIGH PTY LTD (IN LIQUIDATION) ACN 643 838 626 |
Forty Second Respondent: | IUGIS HELLAS IKE |
Forty Third Respondent: | IUGIS ENERGY SA |
Forty Sixth Respondent: | MOUSSA (TONY) BOUCHAHINE |
Forty Seventh Respondent: | LOUISA AGOSTINO |
Forty Eighth Respondent: | D&D GROUP O.E |
Forty Ninth Respondent: | AROMATIKA FYTA TSAI OLYMPOU THEION IKE |
NSD 681 of 2021 | ||
Respondents | ||
Fourth Respondent: | FORUM GROUP FINANCIAL SERVICES PTY LTD (IN LIQUIDATION) ACN 623 033 705 | |
Fifth Respondent: | FORUM GROUP PTY LTD (RECEIVERS APPOINTED) (IN LIQUIDATION) ACN 153 336 997 | |
Sixth Respondent: | FORUM FINANCE PTY LTD (IN LIQUIDATION) (RECEIVERS APPOINTED) ACN 153 301 172 | |
Seventh Respondent: | THE FORUM GROUP OF COMPANIES PTY LTD (IN LIQUIDATION) ACN 151 964 626 | |
Eighth Respondent: | FORUM FLEET PTY LTD (IN LIQUIDATION) ACN 155 440 994 | |
Ninth Respondent: | IMAGETEC FINANCIAL SERVICES PTY LTD (IN LIQUIDATION) ACN 111 978 182 | |
Tenth Respondent: | IMAGETEC SOLUTIONS AUSTRALIA PTY LTD (IN LIQUIDATION) ACN 074 715 718 | |
Eleventh Respondent: | INTRASHIELD PTY LTD (IN LIQUIDATION) ACN 133 426 534 | |
Twelfth Respondent: | SPARTAN CONSULTING GROUP PTY LTD (IN LIQUIDATION) ACN 168 989 544 | |
Thirteenth Respondent: | IUIGIS PTY LTD (IN LIQUIDATION) ACN 632 882 243 | |
Fourteenth Respondent: | IUGIS WASTE SOLUTIONS PTY LTD (IN LIQUIDATION) ACN 647 212 299 | |
Fifteenth Respondent: | IUIGIS HOLDINGS LIMITED (UK COMPANY NO. 1123437) | |
Sixteenth Respondent: | IUGIS (UK) LIMITED (IN LIQUIDATION) (UK COMPANY NO. 10745974) | |
Seventeenth Respondent: | IUGIS HELLAS IKE (REGISTERED IN THE HELLENIC REPUBLIC) | |
Eighteenth Respondent: | IUGIS ENERGY SA (REGISTERED IN THE HELLENIC REPUBLIC) | |
Nineteenth Respondent: | MAZCON INVESTMENTS HELLAS IKE (REGISTERED IN THE HELLENIC REPUBLIC) | |
Twentieth Respondent: | 26 EDMONSTONE ROAD PTY LTD (IN LIQUIDATION) ACN 622 944 129 | |
Twenty First Respondent: | 5 BULKARA STREET PTY LTD (IN LIQUIDATION) ACN 630 982 160 | |
Twenty Second Respondent: | 6 BULKARA STREET PTY LTD (IN LIQUIDATION) ACN 639 734 473 | |
Twenty Third Respondent: | 23 MARGARET STREET PTY LTD (IN LIQUIDATION) (ACN 623 715 373) | |
Twenty Fourth Respondent: | 286 CARLISLE STREET PTY LTD (IN LIQUIDATION) (ACN 610 042 343) | |
Twenty Fifth Respondent: | 64-66 BERKELEY ST HAWTHORN PTY LTD (IN LIQUIDATION) (ACN 643 838 662) | |
Twenty Sixth Respondent: | 8-12 NATALIA AVE OAKLEIGH PTY LTD (IN LIQUIDATION) (ACN 643 838 626) | |
Twenty Seventh Respondent: | PALANTE PTY LTD (IN LIQUIDATION) (ACN 135 344 151) | |
Twenty Eighth Respondent: | ARAMIA HOLDINGS PTY LTD (IN LIQUIDATION) (ACN 114 958 717) | |
