Powell v Aymkone Pty Limited [2009] NSWSC 103

New South Wales Supreme Court

CITATION : Powell v Aymkone Pty Limited [2009] NSWSC 103

HEARING DATE(S) : 12-13 February 2009, 18-20 February 2009

JUDGMENT DATE : 4 March 2009

JURISDICTION : Equity

JUDGMENT OF : Bryson AJ at 1

DECISION : Order: Give judgment for the first and second defendants with costs.

CATCHWORDS : TRUSTS and TRUSTEES – Aymkone, Licensed Securities Dealer, received US$310,000 with instructions to invest which identified true owners as Camm and Therrien – reference to Therrien was fictitious – true owner was plaintiff Powell and moneys were impressed with trust for Powell – all funds were paid out on Camm's instructions – Powell claimed he initiated investment by telling Pooley (principal of Aymkone) on the telephone that Powell was sending the money and limiting the way it was to be invested – on the facts, there was no telephone call to Pooley, Aymkone had no notice of the trust for Powell and was not accountable to him. Proceedings dismissed.

Ernest Harry Powell (Plaintiff) PARTIES : Aymkone Pty Limited (First Defendant) John Cleeve Pooley (Second Defendant)

FILE NUMBER(S) : SC 5233/2004

COUNSEL : Garry Bigmore QC, Henry Aizen (Plaintiff) Adam Bell SC, Anthony McInerney (Defendants)

SOLICITORS : Maitland Lawyers (Plaintiff) Foulsham & Geddes (Defendants)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

BRYSON AJ

Wednesday 4 March 2009

5233/04 ERNEST HARRY POWELL v AYMKONE PTY LIMITED JUDGMENT 1 HIS HONOUR: The plaintiff Mr Powell claims equitable compensation in respect of the defendants' dealings with AUD$483,393.11, proceeds on exchange of US$310,000.00 which Mr Powell caused to be sent to Aymkone's bank account in Sydney from the Bank of America in California. A large mass of evidence deals with the purposes of the payment and the terms on which Aymkone Pty Ltd the first defendant was to deal with it. There is no doubt that the fund was held by Aymkone as a trustee. The issues relate to the identity of the beneficial owner and the terms of the trust by which Aymkone was bound. 2 Mr Powell's case relates to the liability of Aymkone and of Mr Pooley the second defendant, as its principal and the person acting in its affairs, to pay compensation for breaches of trust in dealing with the money in a way which, for practical purposes, entirely dispersed it. The claim is not a proprietorial claim to an identifiable fund. If the fund still existed Mr Powell could prove that his money could be traced into the fund and Mr Powell would be the owner of it in equity. The facts and the claim take an altogether different form because there now is no fund and the plaintiff seeks to impose liability on Aymkone for breach of trust. The terms of the trust known to Aymkone establish what Aymkone as trustee was authorised to do and what acts would be breach of trust by Aymkone, and also establish the identity of the beneficial owners to whom Aymkone's duties as trustee were owed. 3 Mr Powell's claim is that the terms of the trust and his identity as beneficial owner were established in a telephone conversation which he had with Mr Pooley. The defendants' case is that the terms of the trust and the identity of the beneficial owner were established by communications, principally a telephone conversation, between Mr Pooley and Mr Camm on or about 2 November 1999. 4 Mr Powell is a United States Citizen. Until 1999 Mr Powell and his affairs had no significant connection with Australia. He retired in 1999 after a working life as a carpenter and conducting business in the construction industry in California. About the time he retired he sold an apartment building and a Cessna aircraft he owned, bringing a net return of approximately US$350,000.00, which he wished to invest. Mr Powell had business dealings relating to his Cessna with Mr Edward Therrien, a director of Brents International Inc. In Mr Powell's account of the facts, he was in Mr Thessien's office and heard Mr Therrien talking on the telephone to Mr Gary Stirling Camm, who was in Australia. Mr Camm's business interests included interests in aircraft and this brought him into contact with Mr Therrien. Mr Powell says that he overheard Mr Therrien talking to Mr Camm about shares in a company in Australia called Cellnet Telecommunications Group Limited, and Mr Therrien told Mr Powell that Mr Camm had told him that Cellnet shares would increase rapidly in value and that Mr Camm could get an inside allocation of shares. Although the events were not proved in detail it appears that a float or Initial Public Offering of Cellnet shares took place late in 1999, about November. Mr Powell had several telephone conversations with Mr Camm about investing in Cellnet shares; he gives the date as September 1999. 5 Mr Powell had had no significant dealings in shares: his life experience had been in an altogether different direction. He is not sophisticated in business, he did not have tertiary education and he is not highly articulate. He is rather deaf. It should not be taken when Mr Powell uses words which bear on commercial dealings that he is aware that they have particular meanings; he is not of a precise cast of mind. He had disadvantages in giving evidence. He is not familiar with courtroom situations either in California or Australia, the vocabulary is unfamiliar to him and he is unused to the relatively precise use of language lawyers try to make in courts. He is almost 75 years of age. Mr Powell has been retired for almost 10 years and did not appear to me to be completely well. His evidence was interrupted on the second hearing day when he seemed to me to be unable to bring his full attention to bear, and he received some hospital treatment that day. 6 In appraising Mr Powell and his evidence on the credit issue which is central to this decision I keep these circumstances in mind. 7 Early in November 1999 Mr Powell sent US$310,000.00 to the cheque account of Aymkone at the ANZ Bank in Sydney. Mr Powell knew particulars of Aymkone's bank account because he had seen a copy of a fax message from Mr Camm to Mr Therrien in which particulars of the bank account were set out. Mr Powell says that Mr Pooley gave him the same particulars of the bank account in the course of their telephone conversation, and this gave Mr Powell some assurance. 8 Mr Powell had his money on deposit with a bank in California which did not handle international transactions. Mr Powell obtained a bank cheque, called a Cashier's Check in the United States, from his bank and gave it to Mr Therrien: Mr Therrien used Brents International's account with the Bank of America to transmit the money to Aymkone's bank account in Sydney. For this reason banking records which refer to movement of the money show it as having been remitted by Brents International. The transmission from the Bank of America took place on 8 November 1999 and the money arrived in Aymkone's bank account on what in Sydney was 9 November 1999. After exchange to Australian currency, the amount received in Aymkone's ANZ cheque account was AUD$483,393.11. 9 In issue in these proceedings is whether Mr Powell's intentions and the arrangements made before and at the time the money was sent created a trust for Mr Powell of which Aymkone was trustee. Mr Powell alleges and founds his case on the allegation that he caused the money to be transmitted in pursuance of an arrangement which he made with Mr Pooley, the principal of Aymkone, in a telephone conversation. Mr Pooley's case is shortly to the effect that the arrangements which Mr Pooley made relating to receiving the money and dealing with it were made only with Mr Camm, that he did not have a telephone conversation with Mr Powell or speak with him or communicate with him in any way, and that he did not know of the existence or interest of Mr Powell until after dealings with the fund had ended. 10 In 1999 Aymkone carried on business as a Securities Dealer and was licensed by Australian Securities and Investments Commission as a Securities Dealer. Aymkone had been in this business since 1988 and continued until about November 2000 when Mr Pooley surrendered its licence to ASIC. Mr Pooley was qualified as an accountant and graduated in Accounting in 1970 from the University of Technology, Sydney. He worked for about 10 years as an accountant with a public company, then worked until about 1989 in stockbroking firms. He worked in their Fixed Interest Departments, trading in Commonwealth Bonds and overseas financial securities. After working with Jacksons Stockbrokers from about 1980 to 1987 Mr Pooley worked as the head of the Fixed Interest Department of Pembrokes Securities until Pembrokes went into liquidation in 1989. Mr Pooley came to know Mr Camm when Mr Pooley worked for Jacksons Stockbrokers. Mr Camm was a customer who dealt in financial securities, and had the assistance of Jacksons Stockbrokers in capital raising projects. Mr Camm dealt with Commonwealth Bonds in cash, and would bring suitcases containing large amounts of money into the office. Mr Pooley's business association with Mr Camm ended when he left Jacksons in 1987. 11 After leaving Pembrokes Mr Pooley and Mr Ian Mann, who also worked with him at Jacksons Stockbrokers and Pembrokes Securities, acquired Aymkone to carry on businesses in fixed interest dealings on behalf of clients. Later Mr Graeme Riley, whom they knew when they all worked at Jacksons, came into Aymkone and all three were directors. Aymkone carried on business under its Securities Dealer's licence, which enabled Aymkone to operate fixed interest accounts, trust accounts and cash management and managed funds accounts for clients. Aymkone did not ever hold a Stockbroker's licence, and did not ever trade in equity stocks for or on behalf of clients. Mr Pooley has never traded in equity stocks on behalf of clients during his whole career. Mr Mann left Aymkone in 1993 and Mr Riley left in 1998. Mr Pooley remained as director and was responsible for all trading and business transactions of Aymkone after Mr Riley left. Aymkone had about 100 clients and Mr Pooley was busy. Mr Pooley had other business interests apart from Aymkone. 12 Mr Pooley's evidence is that about 2 November 1999 he received a telephone call from Mr Camm. He had not done any security dealing business or related business for Mr Camm since he left Jacksons in 1987. Mr Pooley's case is that he made arrangements with Mr Camm, on or about 2 November 1999, which established the terms on which Aymkone held the funds. According to the defendants' case the arrangements between Mr Pooley and Mr Camm established the terms of the trust and identified the beneficial owners of the trust property. 13 Mr Pooley gave evidence that these were the terms of his telephone conversation with Mr Camm in paragraph 20 of his principal affidavit: On or about to November 1999, I received a telephone call from Camm in which he said to me words to the effect: I have some international funds that I want you to manage. I am proposing to deal in shares because the market is good for that right now. I'd like you to be responsible for managing the money on my instructions. Cam also said to me words to the effect: Edward Therrien owes me money. He is not prepared to repay me at the moment but we have agreed that he will pay the money into a nominated bank account on behalf of both of us and I will give you instructions to invest the money. He and I can both make some money out of it. Therrien will repay what is owed to me from the investment of the money. The money will be approximately US$ 300,000. It will be transferred from an international bank account into your account. It is then to be put on deposit in an account with ANZ Trustees. The funds in the account are to be used to purchase shares. I will give you instructions to buy and sell shares and also when to sell. You will deposit the proceeds of the sales of shares into the account. I replied with words to the effect that: OK just let me know when the funds arrive and what you want to do and I can arrange it. I will charge a management and administration fee of 1.25% on all amounts disbursed from the account. Camm then said words to the effect: That's fine. Any written instructions that I give you to transfer money to my account have to be countersigned by Edward Therrien. For all other transactions, Therrien's confirmation isn't required. 14 Mr Pooley sent Mr Camm a fax message on 3 November 1999 which gave Mr Camm details of Aymkone's bank account. Mr Pooley referred to Mr Camm as possibly having principals (in the plural). 15 Mr Camm sent a message to Mr Therrien on 4 November 1999: I have discussed the matter with John Pooley who is a licensed investment broker, you can thus handle the funds and is bound by convention and law. Please remit Ernies funds to the nominated account: Aymkone Pty Ltd ANZ Bank BSB#: 012 002 ACC#: 2154 89704. There is just not enough time to activate accounts via HKG BVI, although we should continue with this as that is where the funds have to go. Please also instruct John that he can release $5,000 USD from the remitted amount which I understand to be $250,000 USD ($5,000 out for you). You can give John any instructions you wish to and Ernie' money is safe. 16 Mr Camm referred to the countersigning procedure in a fax message to Mr Pooley on 4 November 1999: Funds in excess of $300,000 USD will be transmitted to the nominated account broker via Bank of America tomorrow.: